WOOF - Earnings call transcript Q3 2025 | Petco Health and Wellness Company, Inc.

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Operator

Good afternoon, and welcome to the Petco Third Quarter 2024 Earnings Conference Call. [Operator Instructions]. Please note, this event is being recorded.

I would now like to turn the conference over to Lisa Stark, Senior Director of Communications. Please go ahead.

Unknown Executive

you Petco's thank Earnings Quarter and Call. Conference afternoon, for Third joining XXXX Good

the there summarizing earnings available to addition In release, on website to is our at results. ir.petco.com, our download presentation a

Officer; with call Financial Joel Chief Petco's today On and the LaRose, me Brian Anderson, are Petco's Executive Officer. Chief

to remind cause I'd risks out materially subject this to include differ number that of call, actual statements we These Before they uncertainties materials everyone forward-looking are begin, will uncertainties in and which could that and results like to statements. and such on make certain earnings from filings. our a SEC risks set those

release, we measures. addition, these found measures today's call, certain earnings filings. to be Reconciliations and will presentation In SEC of financial non-GAAP can on our refer in

today's Q&A during ask question call, And to you please follow-up. and one of finally, we the portion one keep that

me let that, Joel. to With it turn over

Joel Anderson

for Thank thank afternoon, everyone, Good and you today. joining you, us Lisa.

as of results quarter actions taking third Our retail environment to to and cost are take strengthen dynamic fundamentals we beginning expectations came effectively hold. the are out our slightly ahead navigated a drive consumer and our we in more

billion, basis progress management services. consumables driven X%, margin expanded in services driven Gross improvements and was XXX Revenue by million. on EBITDA $X.XX points was $XX.X and up XX.X% cost to and by product Adjusted margin.

do, hosting improving our pet our to quarter, time support right increase significant results sessions alongside I'm teammates associates the amount our to a distribution small and working at our we work listening win. visiting more meeting we as our the organization. centers group path centers. the much with position are spent of that centers is to on across there care Petco While our I Throughout conviction to

for have dedication witnessed bring our and people the the our passion they to I've serving pets customers. firsthand

discuss long-term developing ourselves commitment organization On we're the to sustainable last plans call, will the I to Today, rally exciting behind performance drive our holding improvement. to I on outlined call. it's trajectory business of to our while and our to operational plans entire areas of financial the returning to on path our profitable resetting growth. improvement opportunities, and see share specific the Importantly, accountable drive

Our on merchandising, efficiency each, on specific and me across X focused initiatives update are our an to examples. currently customers areas: business. you servicing critical our with driving provide Allow including

for support improving team, our take merchandise to greatest thank steps First, as opportunity the employer to this our profitability. Petco for remains along take to I'd merchandising us we the partner. make and and near-term their moment collaboration better vendor partners necessary with strengthen merchant like retailer, a to

categories supplies a assortment customer well them offering. on to for for focus in aligned both review completed areas customers' SKUs assortment us and certain include reducing as have SKUs as the space several opportunities identified demand more support for Key to more across make faster-turning to of shelves to it detailed In this, optimizing process. enhance be We're decision-making we creating shop simplify our our and of easier and consumables closely us. with our with

several of relationships. our order met can we I've our with how addition, improve in In learn directly one-on-one to vendors

product when market competitive in products. for drive they're be new offer We're sharpening their they we As to meet have us in and to our more to that processes for. the remain approach spend, where them implemented with judicious to resets to We've Petco. exciting outcomes to consumers continue pricing and looking value financial timely allow the want also deliver

the pricing designed with example To We grooming program resources cat of ownership. well parents Family the recent our for this to is and and and Welcome merchandising and training gaps reviews as teams promo vet, partnership of our and the dog vendors, implemented date, first-time with put guidance, pet launch our robust we An processes provide in pet guardrails, as savings expert assessments. key importance action new work place in services. more stronger our to our of essentials on pricing in Program, established given of

win the observed to drive way in pet care across From spent to retail entire several across customers Second, generate be our our in online which our reinvested care and service we environment, our centers, improve that today's my pet time must working we profitability. in footprint, platforms. centers, will and the strengthen the consistency into opportunities greater customer can experience savings services I

less to model of to several better improvements we the serve complexity our with productivity. stores. partners leading the way their more driving overall time and and staff and store back of time allows that where teams making store. standards spend to managers, We've extends me for reducing our in meaningful store the customers for a tasking, tasks This customers. time new to And we're our to where bringing Let our them examples leadership, up more administrative set are responsibilities spend on general share labor our in

order our to see in Additionally, pet potential. significant the centers is in I standardize online fulfillment particular, leveraging process area care automation one

in strength Vetco for clinics. bed driver services, our differentiator offering both remains X% Finally, growth Petco. and across Services key was with revenue a up mobile and hospitals

and a growing team fleet margin is in of utilization to support focused hospital improvement customers can mature, for we structural timely demand to hospitals vet manner. our services meet our our on ensure continues As our accelerating the

impact for partners inform top a customer as engage leveraging more selling patterns, line efficiencies. on data are opportunities while we're and we're share. better drive bottom them, we purchasing to creating with And understand their vet ultimately and greater simultaneously driving having wallet our our initiatives greater how direct These

differentiated the and our merchandising relationships we're business we continue to key our the we're improve vendor QX, efficiencies merchandising, negotiations, In to bend we driving across action offering. execution. with greater and third cost Within strengthen commercial our commitment, curve. the outcome Turning pleased to taking to completed vendor as

providing and in shipping. needs maximize distribution performance with closely the improvements and greater In partners, In hospital split into we're center we're of our efficiency supply productivity. multiyear shipments, reduce to to individual incremental improve speed labor us and renegotiating and visibility per level, shipment contracts each the required chain, reducing staffing cost hospital that the driving our measuring at of shipping

significant our efforts. believe opportunity the supported to there improve We are staffed to of action fleet professionalize we're procurement profitability marketing is the existing merchandising taking remain hospitals ensuring and and by team. through And

conducted a We're large-scale seeing pleased requested outcomes a the and RFPs selection so broad engagement procurement the far. to of contract we're partners. start, indirect and As across medium we negotiations with

our initiatives well cost our prior tracking are Overall, underway expectations. against and

just fundamentals initiatives are fundamentally of greater accountability work impact opportunity unlock enduring and to expected savings. and have an consistently This These people designed to culture, we way change to to the aren't redefinition value. on Importantly, our to retail is onetime these of transparency. leading think areas identify long-term and

servicing shaping our will care these and around initiatives experience services, centers, Chief success of merchandising, the and integrated and created the efficiency, hiring Revenue named estate developing leaders customers potential. the Joe full oversee Petco's added our areas role critical direction help will our We for customer real us growth. success of customer executives. charge that critical contribute our driving ensure the of I'm new of X organization. Joe pleased the that we've strategies with realize capabilities. driving business, Further key recent improving our newly X the Officer, revenue pet is and to Leadership to across in a Venezia, X including

for Petco through the Dan role, maintaining In our transformation Officer. still Calista but our fiscal accountability and take building Dan improving early will underscore we actions growth. momentum be hold, top structural us as through we're this ourselves as ongoing internal cost to Strategy for It's our hires growth. play our are responsible has our beginning days, need XXXX. build positioning priority we get profitability right, into Chief for These and also setting while out joined ourselves to and Transformation offense up capabilities fundamentals for positioning to

you our their passion and alongside that in today sets ever for is our can parents days, Before more have raw Petco. trajectory. than and been role on us over Having spent and how enthusiasm with The This associates the I'm excited with in me here leave confident close, at been knowledge, I makes potential I I apart industry. simply certainty pets the else the conviction improving time XXX this. and our I say me working expertise for showed anything in unlike of lives their me let

on Brian? With financial that, to over provide more to and Brian performance details our guidance.

Brian LaRose

everyone. good Joel, Thanks, and afternoon,

for thanks my for extend Petco to to customers. our want to our their continued delivering partners I dedication First,

demonstrates execution and Our operational results third deliver improved of expectations. quarter ahead to us enabling performance our financial

Supplies X%. X% down and points noncore disposed and X% ongoing X% a is improved up Other, quarter, year-over-year in recently businesses the this soft with basis vet basis. Services up by wholesale down remained grooming. by which net our hospitals, specifically delivered strength X% animal XXX sequentially revenue For mobile consumables driven growth. $X.XX X%, were billion, category, grew sales on was year-over-year. Breaking companion percentage but in roughly and at up comparable clinics Services of comprised services,

million, year-over-year. XX.X%, points Moving services XXX the was year. cost progress margin. and on $XXX X% nearly in quarter down gross up profit million, Gross P&L. X% was Gross up for from SG&A product year, basis was prior increasing the $XXX management margin by driven from improvements prior

step-up XX driven in-store As labor store in primarily in commitment with XX.X%, a the basis our reflecting nearly expectations customer percentage our of was sales, experience. and by SG&A improving to planned rate our up points, line

these SG&A into increased We quarter. fourth continue expect the costs to

$XX.X year-over-year. of adjusted the negative in, EBITDA negative $X.XX points was million XX EPS $X.XX EBITDA All up year. with in rate share margin per adjusted to almost compared prior Adjusted basis an X.X%, was

quarter to $XXX within for controlled of million, at inclusive effectively strong as shape. rates which, the along balance are at stock in were the third sheet. $XXX of million inventories Merchandise million equivalents to our availability excellent Turning end we $XXX CapEx credit facility. $XX Liquidity in our inventory, remains the line in $XX CapEx the on with year-over-year, million cash revolving and down was year-over-year XXXX. of Year-to-date, our million in and approximately million guidance down reduce $XXX quarter, cash

a negative million, deliver supported flow part inventory track $XX firmly disciplined improvement through ongoing And meaningful as remain we on lower for cash free was XXXX. approach to year-over-year positive our flow inventory levels fiscal cash achieved of by Free management.

China, to Mexico goods Before Canada. from on of moving and me guidance, tariffs address announcement imported on recent the potential let

have we We source vendors immaterial which we us impact where do directly Mexico and to from not few expect a negatively. Canada,

to to outlined, believe we products, our imported we overall lower be exposure a have level business. to relative and currently China, of retail, meaningful the as not proposals Regarding broader would

and to the from them to U.S. Asia any products they source do not we primarily Rather, Mexico from Mexico, important products the clear exported with long-term an or Petco their in suppliers or to directly sourced them. leader directly products Petco continuing based for pet remains Mexico from Specific source growth. in drive Mexico. from import select profitable in strategic partner market specialty us,

I'll now turn outlook. to

XXXX a included As and week. Petco's additional year full an fiscal fourth reminder, quarter

of fiscal $XX For effort. $XX of the inclusive billion, XXXX, associated we And million of fourth million $X.XX between which transformation third-party fees of expect between minimum quarter and million, to with $XX in EPS EBITDA consulting $X.XX. our approximately revenue a is adjusted adjusted $X.XX

approximately Additionally, of million, our against expense expenditures. XXX for million forward rate full of the impacts hedges of estimated and of fully $XXX capital year, average the we weighted diluted inclusive the shares net curve, interest expect million $XXX

sets the XXXX. seeing solid year made us in XXXX we the a of as by into build heading business. encouraged we're first to X months back, momentum changes The we've finish improvement for up we're the meaningful the throughout Stepping structural

your for take that, you your happy be we'll to time. with Thank And questions.

Operator

[Operator Instructions].

first Gajrawala come comes Jefferies. Kaumil with The from question

Kaumil Gajrawala

What same-store you've of would a base. first I lot you cost newer cost question, where be levering target can sales made side. on start progress a this guess the figure the off

Joel Anderson

accountability that I to something Thank a add so give we think leave is your question. Brian, It's are and of of DNA change. lower that on term the about I question to our now is, right our and question, if longer to not But structural is permanently. taking March we're costs you and my you Look, going that's number as want A elements for to you structural we focus longer embedded change asking, to transparency. think the our said, some term. you think about now think for thoughts want drive we Obviously, of in base the as because much permanent even I'll in in anything. lot it right focused costs onetime. that relates you're the as should is we out

Brian LaRose

Yes. I to add would just that.

we some that that about improved in-store Simultaneously, now We've a If experience the seen the X customer as out that. that customer in experience well labor making we've again, look we for improve manifest GMs step-up of the in you actually the the investments SG&A, in partners row at needed improving actions costs sure in simplifying to through experience. store stores. X, structure, and an sort to We've quarters as done experience. talked have of G&A the in SG&A store, and for reduce our taken tasks we that customer in make

Operator

question RBC comes Shemesh with from Steve next The Capital.

Steven Shemesh

Great.

companion ask to Just discretionary animals segment. supplies on the and and more

So still elaborate trend any or just the all from underlying but subsegments insight just is on specific Wondering to that's subsegments? generally if glean negative, doing can that, there. -- if if improving better you there's

Joel Anderson

Yes. discretionary. Look, I about think you're asking

really it, important, about in more Petco business, think you is I at as broader the think which look I two-pronged. it's

a all new been. just that's focus in implemented system. We're stock. management where inventory about a that's huge being utilization. really ours of have and has And a improving shelf consumables large We business, We

them then a both right sides to really sequential get But to we've and basis And really discretionary of We'll at driving being the as improvement. on we're buying. and discretionary, newness, you're business but impulse better relates about XXX right, innovation, trend getting focused it that, really seen continue all point is right.

Steven Shemesh

it. a maybe just Got follow-up. Helpful. And as

trending an pretty stabilized? talking on Curious adoption know of has you if are right it if in you I What get has not, to a with And data quarters direction. are adoption that been for now the of maybe inflection looking One in the market. what seeing your competitors ahead is for few for spotty. guys there? aligns the

Joel Anderson

seeing. Yes. is it Petco, relates bit short as looking at is we're But The term, to Look, rather I differently. it think in everybody a and little is the market flat what in throughout don't the and for I to really our that XXXX, market order that, on a we we're better in get better. to self-help by rely mean, have business situation getting

improves, just and the stronger. we control, the as so profit and even market success like need you're upside, makes that's growth the cake And talking what's on about, drive operational us I focused our really if look, and improvement, icing don't to on We're said. market industry the near-term in

Operator

question next from And with comes Basham the Seth Securities. Wedbush

Unknown Analyst

McCartney Matt Basham. on Seth This is for

Just we it product mix? going if talk and tweak wondering should think could whether pricing about pricing positive the impact in as the negative forward you how was about your you quarter, or

Brian LaRose

typically impact and tell rational, overall you Yes. Thanks for will of both from overall environment, talk the promotional pricing. the the I'll question, standpoint pricing I Matt. on We that about environment. don't comment the a been environment a has

Unknown Analyst

just Great. the and what the margin could I was this services then there quarter? improvement drove if you wondering talk about

Brian LaRose

a of Yes, things. couple

talk margin. I'll gross overall First, in

improvement our that gross against basis points, was you at If margin look mix us. of year-over-year going with XXX

an margin The last CA and number that a was X% a the services margin quarter. of So the Number versus throughout hold ecosystem. of taking although that's of drivers still seeing X actions It X% the number gross about, that function mix you gross supplies negative talked year-over-year. down was improvement cost one, and a improvement cost were, our improvement biggest X things. company and for was

would First and maturation be hospital. work team doing and of there the vet going the all the foremost great is hospital that by hospitals

And existing ample the as remarks, improve the his vet fleet. believe opportunity of we in to prepared profitability have Joel we indicated,

our in continuation Eco the Mobile be of strength would Second business.

the we with a continue strong is top then also drags in So for utilization improvement. incremental Vetco business. all to business Mobile along the margin that us. volume line business, remains Grooming it's and that increase and actually And And

Operator

Lasser with The next Michael question UBS. comes from

Michael Lasser

is it focus on come to retail initial in Joel, priority cut in, So fundamentals. costs, your like seems

addressable because in to market sales for that, have could are of If much the is you that the market business know, size address how reinvest an how growth here. drive that you And this be some there? we players with opportunity sustainable competitive all to to would a So same-store very looking savings great. reinvigorated as much is who to of b, a, are going

Joel Anderson

out good need business. when certainly, have we'll think the that is we're cost how permanent get business, at the now, time this to to more it, Michael. Michael, about look more none not thinking at Look, that that's voice. line we to that's we we right has see the And and reinvested to start to phase point what about out taking be things your of like think reinvest in kind drive hear to growth. time, this marketing at right significant still at focus onetime reinvest. Michael, top of costs cost-out wave But but and down opportunities We is of I now nature, in it's at to in second a of out. we're we're as stuff in real just we stuff, our It's point taking that

Operator

next with question Zaccone Citi. the And comes from Steven

Unknown Analyst

This question is to performance first the has Steve. for My to thus in XQ? for implied any holiday trended [ revenue business Sara relative XQ ] on call-outs are is for there how And far the growth? outlook

Joel Anderson

Look, I'm a stuff. you quarter, and mean nice pleased the the is see that's clearly not of QX inter-quarter sequential by improvement our in improvement. get into guide. from can the reflected the with to guide, trends kind and start going of I We're

into kind think the where now. tracking that's we've got we're for And half of here. back the quarter so momentum And I of going

Unknown Analyst

to do the category, from And like you the then think customers my growth Petco? have XXXX regain you share with follow-up reengage market in term, in medium to about and as aside the do specific drivers in what is, ability how the better see

Joel Anderson

for passion my as March that on everybody decision excited am here associates, we've how embraced get sense hopefully, specific this more I next growth us Well, back you far saw made around into extremely -- than to time. and from and in to and outlay getting 'XX just is in progress we my as join my away to turning hopefully, remarks, what numbers and certainly the but in of you has prepared we'll sets then retail beyond. remarks business as you short took And way disciplines, and for our my The everything, us tone year, in period ever from Petco. up look, I bullish I'm the that

Operator

And Forbes with Guggenheim. the next question from comes Steve

Julio Marquez

for an efficiency Marquez on on is Julia wanted about This Steve I touch Forbes. to opportunity enhancements. for hospitals

need for on I a some think mentioned staffing, merchandising you side. full-time the improvement maybe

on color and lift. and merchandising anticipated you can there maybe provide So staffing the any

And to the vet margin and then finally, get the maybe scaling there. and any way the for to guess, maybe contextualize I say clinics

Joel Anderson

utilization Yes. If hospital of job the lot I in us our us cetera, hospitals. earlier who just your has we've done heard profitability, question better operations about cetera. progress Stephen, a great delivering better of of a year staffing, Look, you this and year. et rates, team right, made leads et was terms joined invest this helping

the it and grow. making is were progress So making this in up XX% vets and in our the certainly last sales really we're fantastic, progress I quarter with Vetco there overall. with pleased hospitals we're resulted to mean and continuing hospitals

Is there a second I part to that there. on missed question

Julio Marquez

the margin Is the to more the are the there? and maybe scaling like it an thinking end merchandising you for state Merchandise hospital bed how on longer-term... guys get business just and think like there intermediate opportunities about maybe

Joel Anderson

better recommendations the connecting in at get back merchandising into can Rx. a better. our our we It's just getting and the grooming Look, getting it's there, still and on -- us to us on vets that's product something Yes. the stores at better I piece, and think infancy we're the

is. there there margins, peak close we're ultimate much goal still ultimate improvement As so on far as what there's the nowhere of the margin that the to just

improve our Our and to hospitals as infancy, rather go their still we'll utilization continue rates are up. in

Operator

question Wells Fadem next the comes with And from Fargo. Zach

Unknown Analyst

[ David Lane Zach. on is for This ]

guess I the gross around write-down? you inventory think how any lapping path basis improvement So potential And provide of QX XXX glide there we is can should from point margin about the of outside here? color

Brian LaRose

the we of encouraged your rest Thanks you will for get to I QX. margin. year what saw We're guiding we're question. in on by gross for not the going tell into

drivers that's mix mentioned the Number earlier, in services beginning improvement against take I the As to And again, us. improvement was X cost business. the fundamental with year-over-year. going Number were there X is in actions X whole. the

see those So we the and those but company. Joel take operate in actions fundamental about being DNA starting -- not are nature, we run talked how to and to being onetime our

that, So to forward. we're going not though, anything beyond give

Unknown Analyst

it. Got

That's helpful. then go oh, And Okay. ahead. -- sorry,

Joel Anderson

Go ahead, David.

Unknown Analyst

companion Okay. broader animal Can X% of talk the you market? about decline context the services in in in the

Brian LaRose

I would way. contextualize it this

as of Just We're for not actions actions think passively we're self-help cost market are categories. we we waiting market mode earlier, the are we are taking -- when in the animal. room market, performs X assortment of how in said for us recover And of in X for a the about to The categories. the actions. here. supplies companion in those those regardless Part overall. improvement And in see we lot

Operator

The next question Simeon Morgan Gutman comes Stanley. with from

Lauren Ng

This I about Ng to wanted consumables Gutman. QX. the for is improvement ask Lauren in Simeon

owners, Just to new seeing pet customers Are our this you was if know ticket-driven. coming. curious

on improvement any Just color there? the

Joel Anderson

about was getting I questions is better ago. about Look, utilization management competitively. consumable and being QX. I the that's shelf And being combination just a something at inventory And flowing of priced then about place fully couple business It's in a in system team our stock. it's in think all better is of new inventory, now that Yes. talked

So better all QX. in are we're those actions happen show sales, start starting that's you to and in up to taking saw what

Brian LaRose

that, XX% thing us. fresh to to That one year-over-year strong that's add quarter. for and in just the would be continues not frozen up really I was

continues strong. that So to be

Operator

comes from of with Kendall next Bank the America. Toscano And question

Kendall Toscano

to better terms how on but what I early, So been has they've it wanted back there's and and response be vendors in your may to talked you the from from about update still curious just just before And go if to been suppliers. negotiating efforts merchandising receptive -- opportunities your any there?

Joel Anderson

them transparency and the I'm as been -- about The openness vendors pleased our really we've of I just as joint I they have talking with successful there done. have had personally the Look, commented we discussions discussions progress plans well vendor for our met with actually really in my with think partners, much myself. need Thanks question, some merch really our what prepared all for need the we And remarks. Kendall. I key received. Yes. build is and to and that our teams XXXX, to merchant as what business have specifically

Kendall Toscano

Got it.

on the I had those the curious just another there's you're early positive but that still vet curious on to the year and for to since and any when question returning Another of of future, may one kind hospitals update rolling was -- if foreseeable time be ask, you're thinking potentially that. about line this on out

Joel Anderson

also key co-owned. vet growth are hospitals us. as our vet us a are key The Yes. pet they're And all driver for hospitals for differentiator a

growth out driver us. the a be, to for next you growth as far be expect continue what for but to lay will as we that that for do specific get in year As detail March we'll into we

Brian LaRose

to to opportunity the going company Kendall, not free flow we that position just in back wanted to projects that's And make believe so the strategic, and a I this in those ROI made strength high it's medium balance the we not open sheet, of was strengthen sure don't forward. can because invest long-term our get decision and not handful add, because year we would cash generate was a short, we continue because

Operator

conference turn the to Lisa over concludes closing to would Stark This like I any for remarks. back session. our question-and-answer

Unknown Executive

call. you. concludes your earnings and Thank for you for questions. time That today's your Thank

Operator

conference presentation. has Thank The for today's concluded. now you attending

may You disconnect. now

Petco Health and Wellness (WOOF) 5 Dec 242025 Q3 Earnings call transcript