Petco ends FY2025 with lower sales, but stronger profitability

CURRENT FULL VERSION: Petco closed fiscal 2025 with another year of sales contraction, but a much stronger profit profile, giving the company a clearer argument that its turnaround is moving from cost repair to selective growth. In results released March 11, 2026, Petco reported full-year net sales of $6.0 billion, down 2.5% from fiscal 2024, while adjusted EBITDA increased 21.3% to $408.2 million. Operating income improved to $120.4 million from $7.1 million, and the company posted net income of $9.1 million after a $101.8 million loss the year before. (corporate.petco.com)

That outcome follows more than a year of deliberate retrenchment. Across 2025, Petco repeatedly told investors it was closing stores, tightening promotions, improving ecommerce execution, and pulling back from low-quality revenue. In its second-quarter filing, the company said lower sales reflected lower transaction volume, a smaller pet care center base, and “a greater focus on profitability and margin,” while also citing efforts to optimize its veterinary hospital footprint. By year-end, Petco had closed a net seven stores in the fourth quarter and finished fiscal 2025 with 1,382 stores. (ir.petco.com)

The fourth quarter showed the same pattern. Net sales fell 2.4% to about $1.5 billion, but gross margin improved 37 basis points to 38.3%, operating income rose 83.2% to $31.9 million, and adjusted EBITDA increased 10.6% to $106.3 million. CFO Sabrina Simmons told investors, as reported by GlobalPETS, that the sales decline reflected Petco’s strategy to “move away from unprofitable sales.” The company also said it reduced its leverage ratio to 3.0x from 4.2x, giving it more financial flexibility heading into fiscal 2026. (corporate.petco.com)

What comes next is Petco’s “Reach for the Sky” phase, which management is presenting as a growth plan built on categories where it believes it can differentiate. According to earnings-call coverage, the strategy includes adding more than 1,000 incremental freezers to expand fresh food, pushing product newness, growing owned brands, and scaling services such as grooming, training, and veterinary care. Anderson also said the company’s 2026 outlook assumes a return to positive comparable sales. That is a notable shift from the language used through most of 2025, when the focus was largely on stabilizing margins and cash flow. (fool.com)

For veterinary professionals, Petco’s services strategy matters because the company continues to treat veterinary care as a traffic driver and retention tool, not just an ancillary offering. Petco says its veterinary network includes full-service Vetco Total Care hospitals inside stores, plus Vetco vaccination clinics that operate at a much wider footprint. Its corporate veterinary-services page describes hospitals offering preventive care, diagnostics, dentistry, and outpatient surgery, while vaccination clinics focus on routine preventive services. That mix gives Petco multiple ways to bring pet parents into stores, support recurring care, and connect clinical services with retail sales. (corporate.petco.com)

The tension is that Petco appears to be emphasizing optimization over aggressive veterinary buildout, at least for now. In its 2025 second-quarter filing, the company pointed to momentum in services and said that was driven in part by customer acquisition and retention investments, as well as efforts to optimize the existing veterinary hospital footprint. That wording suggests a more disciplined approach than simple unit expansion, likely reflecting the same profitability lens now shaping the broader business. For clinics, suppliers, and practice groups watching the retail-vet channel, that could mean deeper focus on productivity, utilization, and cross-selling within current locations rather than a rapid national rollout of new hospitals. (ir.petco.com)

Industry context makes the strategy easier to understand. While Petco’s U.S. retail business contracted in 2025, other pet retailers continued to post growth in markets where scale, private label, and omnichannel execution are improving. GlobalPETS reported that Brazil’s Petz and Cobasi, which merged in December to form União Pet, delivered combined revenue growth of 8.8% in 2025, with Petz up 7.9% to R$4.3 billion and Cobasi up 9.9% to R$3.6 billion. Physical-store sales grew 7.3%, digital commerce rose 11.7% and reached 40.9% of total sales, and both companies accelerated services in the fourth quarter, with service revenue up 10% at Petz and 22% at Cobasi. Same-store sales also remained positive, growing 8% at Petz and 6.2% at Cobasi. (globalpetindustry.com)

Profitability improved there too, but with a different growth profile than Petco’s. The combined Brazilian group posted adjusted net income of R$242.1 million, up 50.4% year over year, helped by what the company described as strong progress in private-label brands and a balance between growth and margin. Cobasi said its Joy private-label dry food launch helped that segment grow 37% and reach 7.6% of sales, while Petz’s private-label business grew 26%. At the same time, the group halved investments in new stores and hospitals during 2025, prioritizing operational continuity and upgrades to existing stores even as it opened 15 units and ended the year with 521 stores. (globalpetindustry.com)

That comparison does not make the businesses directly analogous, but it does reinforce the broader playbook emerging across pet retail: tighter capital allocation, stronger private-label economics, omnichannel growth, and services as a differentiator. Petco is now trying to find its own version of that formula, with fresh food, owned brands, and services positioned as the engines that can restore top-line growth without returning to lower-margin sales. (globalpetindustry.com)

Why it matters: For veterinary teams, Petco’s results are a reminder that corporate veterinary care is increasingly being judged on its role in a broader consumer ecosystem. If Petco can use hospitals and vaccine clinics to increase visit frequency, strengthen loyalty, and lift basket size in consumables, veterinary services become more central to retail strategy, not less. The Petz-Cobasi results add another signal: retailers are still investing in services, but often with more discipline around capital spending and a stronger emphasis on private label, digital reach, and store productivity. That could affect hiring, pricing, service mix, partnership models, and competitive pressure in markets where Petco hospitals or clinics overlap with independent practices. (corporate.petco.com)

What to watch: The key question for 2026 is whether Petco can turn its margin recovery into sustained traffic growth, especially as it invests in fresh food infrastructure, owned brands, and service capacity while keeping a tight grip on profitability and store productivity. It is also worth watching whether veterinary services become a bigger growth lever through better utilization of existing hospitals and clinics, rather than broad footprint expansion. (fool.com)