Petco ends FY2025 with lower sales, shifts focus to profitable growth

CURRENT FULL VERSION: Petco ended fiscal 2025 with lower sales, but materially better profitability, underscoring a strategy shift that favors margin and operational discipline over chasing every dollar of revenue. In results released March 11, 2026, the company reported full-year net sales of $6.0 billion, down 2.5% year over year, while adjusted EBITDA rose 21.3% to $408.2 million and operating income climbed to $120.4 million from $7.1 million the year before. Management framed the year as a reset period and said Petco is now moving into a new growth phase under its “Reach for the Sky” plan. (corporate.petco.com)

That shift follows a difficult stretch for the pet specialty retailer, which has spent the past year rebuilding margins, reducing leverage, and tightening its operating model. Petco said it lowered its leverage ratio to 3.0x by year-end 2025 from 4.2x at the start of the year, grew cash to $256.7 million after paying down $95 million in debt, and refinanced its debt in February 2026 to extend maturities to 2031. Inventory also fell 9.7%, faster than the sales decline, another sign that management has been prioritizing discipline over pure top-line growth. (corporate.petco.com)

The company’s fourth-quarter numbers showed the same pattern. Net sales fell 2.4% to about $1.52 billion, but operating income rose 83.2% to $31.9 million and adjusted EBITDA increased 10.6% to $106.3 million. For 2026, Petco is guiding to flat to 1.5% net sales growth and adjusted EBITDA of $415 million to $430 million. The operational blueprint behind that forecast centers on expanding fresh pet food, increasing product innovation and “newness,” and pushing owned-brand penetration. Trade coverage of the earnings call reported that Petco plans to add more than 1,000 freezer units starting in the first quarter of 2026 to support a broader fresh-food assortment. (corporate.petco.com)

Services are a key part of that next phase, but the emphasis appears measured. Petco and trade reports tied to the earnings call pointed to veterinary hospitals, vaccination clinics, and grooming as growth pillars, while also indicating that 2026 will focus heavily on productivity in existing service locations. According to earnings-call coverage, roughly 20% of Petco’s store base currently includes veterinary locations, and new hospital expansion is expected to restart in 2027 rather than this year. That suggests management sees more near-term value in improving utilization, basket size, and integration across retail and care services than in a rapid physical rollout. (fool.com)

Industry reaction has largely framed the results as evidence that Petco’s turnaround is gaining traction, even if revenue growth remains elusive. Several market and trade write-ups highlighted the same tension: margins, cash flow, and debt metrics are moving in the right direction, but sales are still under pressure and the company is closing stores rather than expanding its footprint broadly. Petco itself said it closed seven net stores in fiscal 2025 and expects 15 to 20 net closures in 2026. (corporate.petco.com)

Why it matters: For veterinary professionals, Petco’s strategy matters because it reinforces how major pet retailers are trying to make care services a more integrated part of the consumer journey. If Petco can improve throughput and attachment in its existing hospitals and clinics, that could strengthen retail-clinic competition in preventive care, nutrition guidance, and repeat visits. It may also increase pressure on independent practices in overlapping trade areas, especially where Petco can connect food, pharmacy, grooming, loyalty, and routine veterinary care in one ecosystem. At the same time, the lack of aggressive near-term hospital expansion suggests the company is still proving the economics of its current model before scaling further. (fool.com)

For the broader industry, the story is also a reminder that pet retail growth is no longer uniform across markets. While Petco reported a sales decline in the U.S., Brazil’s Petz and Cobasi reported combined fiscal 2025 revenue growth of 8.8% before their integration under União Pet, helped by store expansion, digital channels, services, and private-label growth. Petz sales rose 7.9% to R$4.3 billion and Cobasi sales increased 9.9% to R$3.6 billion, while fourth-quarter revenue also remained solid for both chains. Physical-store sales across the combined business grew 7.3% and digital commerce rose 11.7%, bringing digital to 40.9% of total sales. Service revenue accelerated in the fourth quarter, up 10% at Petz and 22% at Cobasi, and same-store sales grew 8% and 6.2%, respectively. The group’s adjusted net income rose 50.4% to R$242.1 million, supported in part by private-label momentum: Cobasi said its Joy dry food launch helped private label grow 37% year over year to 7.6% of sales, while Petz’s private-label business grew 26%. Even there, though, the playbook was not pure expansion at any cost. The companies halved investments in new stores and hospitals in 2025, redirected resources toward operational continuity and improving existing stores, and still ended the year with 521 locations after opening 15 units and agreeing to divest 26 São Paulo stores as a merger condition. That contrast doesn’t make the businesses directly comparable, but it does suggest category demand remains intact in some markets even as U.S. specialty players work through a more margin-focused reset. (globalpetindustry.com)

These were the final standalone results for Petz and Cobasi before operating as a unified company. Management said 2026 will mark the start of a new chapter under União Pet, with integration underway and a revised five-year synergy target of R$200 million. That adds another point of contrast with Petco: both stories involve operational discipline and a focus on extracting more from existing assets, but one is doing so from a base of declining sales and store closures, while the other is combining growth, services, digital penetration, and merger synergies. (globalpetindustry.com)

What to watch: The next key markers will be whether Petco returns to positive comparable sales in fiscal 2026, how quickly fresh-food expansion lifts traffic and spend, and whether service productivity improves enough to support a broader veterinary growth push in 2027. In a wider industry context, it is also worth watching whether U.S. specialty retailers can regain growth without sacrificing margin, as international peers show that digital mix, private label, and services can still support expansion when executed well. (corporate.petco.com; globalpetindustry.com)