Petco ends FY2025 with lower sales, doubles down on services
Petco ended fiscal 2025 with a familiar retail tension: weaker sales, but much stronger earnings. The company reported $6.0 billion in full-year net sales for the year ended January 31, 2026, down 2.5% from fiscal 2024, after what management described as a strategic retreat from unprofitable sales. At the same time, operating income improved to $120.4 million from $7.1 million, net income turned positive at $9.1 million, and adjusted EBITDA rose 21.3% to $408.2 million, ahead of the company’s outlook. (corporate.petco.com)
The results mark the latest phase in Petco’s turnaround effort under CEO Joel Anderson. In its fiscal 2024 reporting, the company had already signaled a willingness to accept lower revenue while closing underperforming locations and rebuilding margins; it reported about 25 net pet care center closures in FY2024 and guided to another round of closures in FY2025. That strategy carried into FY2025 and now into FY2026, when Petco says it expects flat to 1.5% sales growth and about 15 to 20 net store closures. (ir.petco.com)
Fourth-quarter results showed the same pattern. Net sales declined 2.4% to $1.52 billion, and comparable sales fell 1.6%, but gross margin improved 37 basis points to 38.3%. Operating income increased 83.2% to $31.9 million, and adjusted EBITDA rose 10.6% to $106.3 million. In other words, Petco’s reset is still sacrificing some volume, but the company is showing that the model can produce materially better profitability than it did a year ago. (corporate.petco.com)
What changes next is the growth playbook. Petco’s new “Reach for the Sky” strategy is centered on four pillars: consumables innovation, services, store productivity, and integrated omnichannel. Management said the consumables push will include more than 1,000 additional freezer units rolling out over 2026 to support fresh food, plus a faster cadence of new brands and flavors and more owned-brand expansion. The company is also betting that better digital tools and loyalty efforts can increase wallet share among existing customers, including the many dog shoppers who still don’t buy food from Petco. That emphasis on owned brands and omnichannel is notable beyond Petco alone. In Brazil, newly merged retailers Petz and Cobasi said private label helped drive profit growth in 2025, while digital sales grew 11.7% and reached 40.9% of total sales, underscoring how pet retailers in multiple markets are trying to pair margin-friendly assortment with stronger cross-channel engagement. (fool.com, globalpets.com)
For veterinary professionals, the services piece stands out. On the earnings call, management said owned services, including veterinary hospitals and grooming, are being optimized for higher productivity, and that veterinary operations currently reach about 20% of the chain, or roughly 300 stores. Executives described services as a core point of differentiation and said customers who engage across more than one channel or service generate much higher spend. That framing matters because it shows Petco still sees veterinary care not as a side business, but as a strategic traffic driver tied to retail, loyalty, and lifetime value. The international backdrop points in a similar direction: Petz and Cobasi both reported accelerating service growth in the fourth quarter of 2025, up 10% and 22% respectively, even as the combined group cut back investment in new stores and hospitals and redirected more resources to integration and improving existing locations. (fool.com, globalpets.com)
There wasn’t much outside expert veterinary commentary immediately available in primary reporting, but the broader market reaction has focused on the same tradeoff Petco is trying to manage: stronger operating discipline now, with the risk that sales stabilization still has to be proven. That seems fair. The company’s own guidance assumes a return to positive comps in 2026, but management also acknowledged that much of Phase III is only beginning to reach customers and that benefits should build through the year. That makes FY2026 less a victory lap than a test of whether a leaner Petco can reignite demand without giving back margin gains. It also comes as other pet retailers are showing that growth is still possible in the category: Petz and Cobasi posted combined 2025 revenue growth of 8.8% and a 50.4% increase in adjusted net income before beginning full post-merger integration under the new União Pet structure. (corporate.petco.com, globalpets.com)
Why it matters: For veterinary teams, Petco’s strategy is a reminder that corporate pet retail still views clinical and preventive services as growth infrastructure. If Petco follows through, veterinary hospitals, vaccination clinics, and grooming aren’t just add-ons for pet parents, they’re central to how the company plans to drive repeat visits, cross-category spending, and differentiation from mass and online competitors. That could affect recruitment, local competition, referral dynamics, and how preventive care is packaged inside retail ecosystems. At the same time, ongoing store closures and a cautious consumer backdrop may limit how quickly that expansion translates into new clinical capacity. And with other large pet retailers globally also emphasizing services, private label, and digital integration, the competitive model Petco is pursuing looks less like an outlier and more like a broader industry playbook. (fool.com, globalpets.com)
What to watch: The next key markers are whether Petco delivers the positive comps implied in its FY2026 outlook, how quickly fresh food and owned-brand investments lift traffic, and whether the company begins expanding veterinary capacity beyond the roughly 300 stores management highlighted, with broader services expansion not expected to meaningfully accelerate until 2027. It will also be worth watching whether Petco can match the stronger top-line momentum some international peers are reporting while preserving the margin gains it has worked to rebuild. (corporate.petco.com, globalpets.com)