MW Petco anticipates another sales drop this year. Its stock is up anyway.

By Bill Peters

CEO announces cost cuts and other changes, saying chain's retail fundamentals 'needed overhauling'

Pet-supplies retailer Petco Health & Wellness Co. on Wednesday forecast another year of falling sales, but said it expects double-digit growth in an adjusted profit metric this year and outlined longer-term plans to cut costs and change its product assortment.

Shares jumped 9.8% after hours.

Petco $(WOOF)$ said it expects revenue for its full fiscal year, set to run through January 2026, to be down by "low single digits" year over year. New Chief Executive Joel Anderson, during Petco's earnings call, said shoppers remain "discerning" as they navigate higher prices.

But the company said it expects adjusted Ebitda - or earnings before interest, taxes, depreciation, amortization and other exclusions - to land between $375 million to $390 million, representing double-digit percentage growth.

During Petco's fourth quarter, sales fell around 7% year over year to $1.552 billion, just shy of the $1.556 billion that Wall Street analysts expected. On a GAAP basis, Petco lost 5 cents a share, worse than the 2 cents forecast by analysts.

Anderson has said he wants to simplify Petco's product selection, as consumers hunt for cheaper alternatives or otherwise stay selective, and lean into its faster-growing pet-care services, like grooming and vet facilities.

On Wednesday, he said the company had been taking steps to lower product costs, including negotiating with suppliers. He also said stores were clearing more shelf space for brands that sold better and were focusing its promotions on items that have higher profit margins. Starting at the end of this year, he said, the company would be testing ways to start growing sales.

While pet ownership has become more common, prices for care have risen, as private equity rolls up more of the industry, and retailers and vet clinics try to offset higher wages. While customer growth helped quarterly results for online pet retailer Chewy Inc. $(CHWY)$, TD Cowen analyst Robert Moskow, in a note on Tuesday, said a "deceleration in household penetration growth with low- and middle-income consumers" had weighed on demand at fresh pet-food maker Freshpet Inc. (FRPT).

Anderson also said Petco was trying to get back to the basics of running a retail chain.

"Quite frankly, our foundational practices were not those of a successful consumer business and needed overhauling," he said.

-Bill Peters

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March 26, 2025 18:59 ET (22:59 GMT)

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