Petco ends FY2025 with lower sales, doubles down on vet services

CURRENT FULL VERSION: Petco ended fiscal 2025 with lower sales, but stronger profits, as the retailer completed a yearlong pullback from lower-quality revenue and moved into what management is calling its next growth chapter. 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 rose 21.3% to $408.2 million and operating income climbed to $120.4 million from $7.1 million a year earlier. Executives framed the tradeoff as intentional: fix the economics first, then push for sustainable top-line growth. (corporate.petco.com)

That marks a notable shift from the company’s posture over the past year. Petco spent much of fiscal 2025 tightening promotions, closing underperforming stores, improving inventory discipline, and trying to reduce leverage in a pet retail market pressured by softer discretionary spending and heavier competition. The strategy helped cash from operations rise 76.8% to $314.1 million, while free cash flow nearly quadrupled to $187.0 million. Petco also reduced its leverage ratio to 3.0x by year-end, down from 4.2x at the start of the year, according to the company. (corporate.petco.com)

Now the company says it is entering phase three of its turnaround, under the banner “Reach for the Sky.” The plan emphasizes product newness, fresh and frozen pet food, owned-brand expansion, and services. Management said Petco will add more than 1,000 freezer units beginning in the first quarter of fiscal 2026 to expand fresh food distribution. On the services side, executives highlighted wholly owned veterinary care, grooming, and training as a competitive advantage, with about 20% of the chain currently hosting veterinary locations and future expansion expected to begin in 2027, according to the earnings call transcript. (fool.com)

The veterinary footprint is already substantial. In its latest annual report, Petco said that as of January 31, 2026, it had approximately 300 full-service veterinary hospitals in its network and operated about 1,600 Vetco clinics on a weekly basis. The company argues that embedding hospitals inside pet care centers creates structural advantages over stand-alone providers, including added basket opportunities and shared customer data across merchandise and services. It also said fiscal 2026 plans include further integration of data between services and stores to improve recommendations, marketing effectiveness, and long-term customer value. (sec.gov)

Industry and market commentary has largely focused on the same tension: sales remain soft, but the underlying business looks more stable than it did a year ago. Coverage of the earnings call described management as cautiously optimistic, pointing to margin recovery, lower debt, and services as one of the clearest differentiators in a crowded pet retail field. Some analyst-oriented summaries also noted that Petco’s 2026 guidance implies only modest sales recovery, suggesting investors still need proof that the company can convert operational gains into sustained traffic and comparable-sales growth. That’s an inference from the guidance and commentary, rather than a direct company statement. (tipranks.com)

There’s also a broader industry angle. While Petco retrenched to improve margins, other pet retail players have continued to chase growth through store expansion, digital channels, and private-label development. GlobalPETS recently reported that Brazil’s Petz and Cobasi posted combined revenue growth of 8.8% in 2025 before fully combining under União Pet. Petz sales rose 7.9% to R$4.3 billion and Cobasi’s increased 9.9% to R$3.6 billion, with fourth-quarter growth at both chains also running in the high single digits. Both physical stores and e-commerce contributed, but digital grew faster at 11.7% and reached 40.9% of total sales. Services also accelerated in the fourth quarter, up 10% at Petz and 22% at Cobasi, while same-store sales grew 8% and 6.2%, respectively. The merged group’s adjusted net income rose 50.4% year over year to R$242.1 million, helped by private-label momentum, logistics efficiencies, and what the company described as a balance between growth and margin. Cobasi said its Joy dry food launch helped private label grow 37% and reach 7.6% of sales, while Petz’s private-label business grew 26%. Even after halving investments in new stores and hospitals during 2025 and divesting 26 São Paulo stores as a merger condition, the companies ended the year with 521 stores and said 2026 would begin a new chapter as a unified company focused on integration and synergy capture. That does not make Brazil a direct proxy for the U.S. market, but it does reinforce the same strategic themes showing up at Petco: scale, owned brands, omnichannel execution, and services remain central to how large pet retailers are trying to grow. (globalpetindustry.com)

Why it matters: For veterinary professionals, Petco’s results reinforce that corporate pet retailers still see care delivery, especially preventive and routine services, as central to their long-term strategy, not just an add-on to product sales. That matters because Petco’s model blends hospitals, vaccination clinics, grooming, training, food, pharmacy-related categories, and membership tools into one ecosystem aimed at keeping pet parents inside a single care-and-commerce loop. For independent clinics and regional groups, the competitive issue may be less about matching Petco’s scale than about sharpening differentiation: continuity of care, medical complexity, staff relationships, local trust, and workflow that doesn’t depend on retail traffic. At the same time, Petco’s emphasis on productivity suggests the company will be under pressure to prove that veterinary services can drive both clinical access and financial return. The comparison with Petz and Cobasi adds another useful signal: large pet retailers are still investing around services and private brands even when they moderate store and hospital expansion, which may keep pressure on smaller operators to be clear about what they do better and why clients should stay. (sec.gov; globalpetindustry.com)

What to watch: Over the next several quarters, watch three things: whether fresh food expansion drives measurable traffic, whether veterinary and grooming productivity improves without sacrificing service quality, and whether Petco can deliver the flat-to-up-1.5% sales outlook it gave for fiscal 2026 while still closing 15 to 20 net stores. It is also worth watching whether Petco’s more disciplined reset can produce enough momentum to compete with larger pet retail models that are still showing growth through digital penetration, private-label gains, service expansion, and post-merger integration. If those pieces move together, Petco’s strategic pullback may look less like contraction and more like a reset before renewed competition for pet parent loyalty. (corporate.petco.com; globalpetindustry.com)