Petco ends FY2025 with lower sales, but keeps vet growth in play

CURRENT FULL VERSION: Petco finished fiscal 2025 with a familiar top-line challenge and a clearer profitability story. The company reported $6.0 billion in net sales for the year ended January 31, 2026, down 2.5% from fiscal 2024, but also posted a sharp improvement in earnings quality: adjusted EBITDA rose 21.3% to $408.2 million, operating income increased to $120.4 million from $7.1 million, and net income turned positive at $9.1 million after a $101.8 million loss the year before. Management’s message was straightforward: 2025 was about stepping away from unprofitable sales and rebuilding the economic model before pushing harder on growth. (corporate.petco.com)

That framing matters because Petco has spent the past two years trying to recover from margin pressure, uneven execution, and investor skepticism around whether its integrated retail-and-services model could deliver durable returns. In fiscal 2024, the company was still reporting steep revenue declines and losses, even as new CEO Joel Anderson pointed to early progress on retail fundamentals. By March 2026, Petco was able to show more tangible financial repair, including free cash flow of $187.0 million, up from $49.7 million, and a reduction in net debt to adjusted EBITDA to 3.0x from 4.2x. The company also said it voluntarily paid down $95 million of debt and refinanced maturities out to 2031, giving it more flexibility for the next phase. (ir.petco.com)

The next phase is what Petco is calling “Reach for the Sky,” a 2026 strategy centered on four pillars: product newness, owned and national-brand differentiation, services, and integrated omnichannel. On the earnings call, Anderson said fresh food is one of the biggest immediate opportunities, with more than 1,000 additional freezer units planned over the course of 2026 starting in the first quarter. He also said Petco expects roughly 25 new brands or flavors this year, more frequent product drops, and a stronger focus on seven core private-label lines. Owned brands currently account for about 20% of sales, according to management’s remarks on the call. (fool.com)

For veterinary professionals, the services piece is the most relevant. Petco said wholly owned services, including veterinary hospitals and grooming, remain a core part of its differentiation strategy. Management said about 20% of the chain currently hosts veterinary locations, and that 2026 will focus on improving productivity in the existing network rather than aggressive near-term unit growth. According to the earnings call transcript, broader expansion is expected to start in 2027 after optimization work is completed. That’s a more measured stance than the rapid service-led growth narrative Petco leaned on in earlier years, but it also suggests the company still views veterinary care as central to long-term customer retention and cross-category spending. (fool.com)

That more selective approach is not unique to Petco. In Brazil, newly merged pet retail leaders Petz and Cobasi reported combined 2025 revenue growth of 8.8%, with Petz up 7.9% to R$4.3 billion and Cobasi up 9.9% to R$3.6 billion in their final standalone results before integration under União Pet. Both physical stores and digital channels contributed, with brick-and-mortar sales up 7.3% and digital commerce up 11.7%, bringing digital to 40.9% of total sales. The companies also reported accelerating service growth in the fourth quarter, up 10% at Petz and 22% at Cobasi, alongside same-store sales growth of 8% and 6.2%, respectively. (GlobalPETS)

The comparison is useful because it highlights where large-format pet retailers are still finding momentum: services, digital integration, and owned brands. The Brazilian group posted adjusted net income of R$242.1 million, up 50.4% year over year, and credited part of that improvement to private-label progress and a better balance between growth and margin. Cobasi said its Joy private-label dry food launch helped that segment grow 37% and reach 7.6% of total sales, while Petz’s private-label business grew 26%. At the same time, the merged companies cut investment in new stores and hospitals roughly in half during 2025, directing more resources toward operational continuity and improving existing stores. Even so, they opened 15 units and ended the year with 521 stores, while preparing to capture an estimated R$200 million to R$330 million in merger synergies over five years. (GlobalPETS)

Industry reaction has reflected that tension between better financial discipline and the still-unproven growth story. Coverage following the results highlighted stronger operating margins, improved cash generation, and lower leverage, while also noting that Petco is still guiding only flat to up 1.5% net sales growth for fiscal 2026. Analysts and market commentary have generally characterized the turnaround as real, but incomplete, with execution on merchandise innovation, services productivity, and store traffic likely to determine whether top-line recovery follows the margin gains. (tipranks.com)

Why it matters: For veterinary teams, Petco’s results are a reminder that corporate appetite for veterinary expansion is increasingly tied to productivity, not just footprint. If management is serious about optimizing existing hospitals, vaccination clinics, grooming, and adjacent services before adding more locations, that could mean greater scrutiny on visit volumes, labor utilization, attachment to pharmacy or nutrition sales, and the role of veterinary care in driving repeat store traffic. It also reinforces a broader industry point: large pet retailers still see care delivery as strategically valuable, but they’re under pressure to prove that the model works economically in a tighter consumer environment. The Petz-Cobasi results point in the same direction: services and private label can support growth and margin, but expansion capital is being deployed more cautiously, with more emphasis on integration and productivity in the existing base. (globalpetindustry.com; GlobalPETS)

What to watch: The near-term test is whether Petco can deliver the inflection it has promised in fiscal 2026, with guidance calling for flat to 1.5% sales growth, positive comparable sales, adjusted EBITDA of $415 million to $430 million, and 15 to 20 net store closures. For the veterinary side of the business, the key question is whether improved productivity in the current hospital base translates into resumed expansion in 2027, or whether veterinary services remain strategically important but capital-constrained. A second question is whether Petco can generate enough momentum from fresh food, owned brands, and omnichannel execution to mirror the kind of service-led, digital-supported growth other major pet retailers are still producing. (corporate.petco.com)