Petco closes FY2025 with lower sales, stronger profit

CURRENT FULL VERSION: Petco is ending fiscal 2025 in a different position than it started it: smaller on the top line, but stronger on profit and cash flow. In its March 11, 2026 earnings release, the retailer reported $6.0 billion in full-year net sales, down 2.5% year over year, while adjusted EBITDA rose 21.3% to $408.2 million, operating income increased to $120.4 million, and net income turned positive at $9.1 million. Management framed the year as a reset, saying it rebuilt the company’s economic model and moved away from unprofitable sales, setting up what it calls the next phase of growth. (corporate.petco.com)

That backdrop matters because Petco has spent the past year trying to stabilize a business that had been under pressure from softer discretionary spending, uneven demand across categories, and the challenge of balancing retail traffic with margin protection. Earlier 2025 quarterly updates already showed the pattern: sales were still slipping, but operating income and adjusted EBITDA were improving as the company tightened costs and sharpened its assortment. By year-end, inventory was down 9.7% against a 2.5% sales decline, operating cash flow had risen 76.8% to $314.1 million, and the company had reduced its leverage ratio to 3.0x from 4.2x. (corporate.petco.com)

The new strategy, branded “Reach for the Sky,” is aimed at getting back to sustainable top-line growth in fiscal 2026. Petco’s plan includes adding more than 1,000 freezer units over the course of 2026 to expand fresh food, increasing product newness throughout the year instead of relying on one large annual reset, and building up owned brands, which management said currently account for about 20% of sales and carry stronger margins than national brands. The company’s fiscal 2026 guidance calls for net sales ranging from flat to up 1.5%, adjusted EBITDA of $415 million to $430 million, and roughly 15 to 20 net store closures. (corporate.petco.com)

Veterinary and other services remain central to that plan, but the emphasis has shifted from unit growth to better performance in the existing fleet. On the earnings call, Petco said services, including vet hospitals, vaccination clinics, grooming, and dog training, were a strong performer in 2025. Management said the company paused new vet hospital construction last year, optimized a significant number of its approximately 300 hospitals, and plans to focus in 2026 on improving productivity at roughly 25 underutilized locations that remain. Petco said it expects to start growing its hospital base again in 2027, while adding technology later in 2026 and into 2027 to support cross-selling and drive more trips and higher spend per customer. (fool.com)

Industry reaction in the available coverage has focused less on the sales decline itself and more on the quality of the turnaround. GlobalPETS highlighted the strategic pullback from unprofitable revenue and the stronger profitability metrics, while investor-oriented coverage pointed to margin expansion, stronger free cash flow, and lower leverage as signs that management’s reset is gaining traction. That isn’t the same as broad-based growth yet, but it does suggest Petco has bought itself more time to invest in categories and services it sees as differentiators. (globalpetindustry.com)

Why it matters: For veterinary professionals, Petco’s results reinforce that large pet retailers still view veterinary care as more than an add-on. Management explicitly described the vet business as a “key growth engine” and part of a broader effort to become a full-service provider for pet parents, with retail traffic, medical care, prescriptions, grooming, and nutrition working together. That has implications for recruiting, referral patterns, and local competition, especially in markets where Petco already has embedded hospitals. At the same time, the decision to delay broader hospital expansion until 2027 suggests the company recognizes the operational realities of veterinary care: productivity, staffing, and customer conversion have to work before footprint growth does. (fool.com)

There’s also a broader competitive angle. While Petco is prioritizing margin repair and measured service growth in the U.S., other pet retail players are still posting stronger top-line momentum in their own markets. In Brazil, Petz and Cobasi finished 2025 with combined revenue growth of 8.8% before beginning operations as the merged group União Pet. Petz reported R$4.3 billion in sales, up 7.9%, and Cobasi reported R$3.6 billion, up 9.9%. Both store and online channels contributed, with physical-store sales up 7.3% and digital commerce up 11.7%, bringing digital to 40.9% of total sales. Services also accelerated in the fourth quarter, rising 10% at Petz and 22% at Cobasi, while same-store sales grew 8% and 6.2%, respectively. (globalpetindustry.com)

That comparison is not one-to-one, but it is useful. Like Petco, the Brazilian retailers are also leaning on private label and operational discipline, not just footprint growth. GlobalPETS reported that adjusted net income for the combined group rose 50.4% to R$242.1 million, helped by stronger private-label performance and a balance between growth and margin. Cobasi said its Joy dry pet food launch helped private label grow 37% year over year to 7.6% of sales, while Petz’s private-label business grew 26%. The merged group also halved investment in new stores and hospitals during 2025, directing more resources toward operational continuity and improvements to existing locations, even though it still opened 15 units and ended the year with 521 stores. In other words, Petco is not alone in emphasizing productivity and existing-asset performance before pushing harder on expansion. (globalpetindustry.com)

For veterinary professionals, that wider context matters because it suggests a broader retail-health trend: services remain strategically important, but expansion is becoming more selective and more tied to proof of operational efficiency. In Brazil, Petz and Cobasi are entering 2026 focused on integration and synergy capture as a unified company; in the U.S., Petco is trying to convert a repaired margin structure into sustainable growth. Different markets, but a similar message for clinicians and practice leaders: large pet retail operators still want veterinary and adjacent services in the mix, yet they are increasingly demanding better productivity from the assets they already have before adding more. (globalpetindustry.com; fool.com)

What to watch: The key questions now are whether Petco can translate services productivity gains into positive comps during fiscal 2026, whether its fresh food and owned-brand push lifts traffic without eroding margins, and whether the company can credibly restart veterinary hospital expansion in 2027 after a year focused on fixing underperforming sites. It is also worth watching how that strategy stacks up against peers pursuing their own blend of digital growth, private-label expansion, and selective investment in existing stores and hospitals, including the newly merged União Pet in Brazil. (corporate.petco.com; globalpetindustry.com)