Petco Health and Wellness NASDAQ: WOOF reported a return to positive comparable sales in the first quarter of fiscal 2026, with management saying early results support the company’s “Reach for the Sky” strategy focused on product improvements, services growth, store experience and omnichannel execution.
Chief Executive Officer Joel Anderson said the company’s first-quarter performance “provide[s] an encouraging early validation” of the strategy, noting that Petco delivered a positive comp for the quarter while expanding profitability and outperforming its quarterly outlook for both top-line results and adjusted EBITDA.
“We were particularly pleased to see the improvement in our consumables business, while our differentiated services business once again delivered strong results and continues to be a growth engine for us,” Anderson said.
Comparable sales turn positive
Chief Financial Officer Sabrina Simmons said net sales rose 0.2% year over year to $1.5 billion. Comparable sales increased 0.7%, marking Petco’s return to positive comp growth. Simmons said the gap between comp sales and total sales reflected store closures, including 16 net closures in 2025 and four net closures in the first quarter. Petco ended the quarter with 1,378 U.S. stores.
Gross profit was $574.4 million, and gross margin expanded 21 basis points to 38.4%. Selling, general and administrative expenses were $549.8 million, or 36.7% of net sales, improving by $3.8 million from a year earlier. Simmons said the expense improvement was driven by declines in general and administrative costs despite marketing investments tied to omnichannel initiatives.
Operating profit rose 50.5% year over year to $24.6 million, while adjusted EBITDA increased 8.8% to $97.3 million.
On the balance sheet, ending inventory declined 1.9% year over year, following a 5.2% decline in the prior year. Petco ended the quarter with $167 million in cash, up about $33 million from the prior-year quarter. Free cash flow was an outflow of $69 million, which Simmons said reflected seasonality, higher capital expenditures and planned inventory investments to support growth.
Total liquidity was $654.4 million, while total debt was $1.48 billion, down more than $100 million from the year-ago period. Simmons said the company remains focused on reducing its leverage ratio to two times.
Product strategy emphasizes cat, fresh food and newness
Anderson said Petco is in the early stages of evolving its product mix but is already seeing evidence that new merchandise is resonating with customers. He highlighted outperformance in the cat category, saying Petco had anticipated increased demand and invested to position itself as a destination for cat owners.
Cat-related product additions are expected to expand in the second quarter, including furniture, beds, bowls and novelty items such as cat trees. Anderson also said Petco continues to lead in fresh and frozen pet food, adding incremental freezer capacity during the quarter to support momentum in the category.
“We have positioned Petco as a premier destination for pet nutrition, which we believe will serve us well as the pet humanization trend continues to pick up speed,” Anderson said.
Petco also saw strength in seasonal categories. Anderson said flea and tick had its strongest start to the season in five years, partly helped by weather patterns, and cited the company’s ability to capture sales across over-the-counter products, veterinary services and grooming packages. The company’s “Gardening with Your Pet” launch also performed above expectations, with live house plants performing well.
Looking ahead, Anderson said Petco is leaning into customer trends such as high-protein diets, new treats for dogs and cats, and supplements for areas including hip and joint care, liver health and holistic care. The company also relaunched its Well & Good grooming private-label brand with new formulas and packaging.
Services remain a growth engine
Management emphasized Petco’s services business as a key differentiator, including veterinary hospitals, clinics, grooming and training. Anderson said grooming remains a “strong annuity business” and noted the company expanded care reminders into its app late in the first quarter to encourage repeat visits.
Petco also introduced a puppy-dog grooming package in the first quarter and plans to offer it throughout the year. In the second quarter, the company is rolling out Well & Good grooming products and a Disney Stitch grooming package.
On the veterinary side, Anderson said Petco is seeing improving productivity across its hospital footprint and remains on track to optimize about 25 significantly underutilized hospitals this year. The company expects to resume veterinary hospital expansion in 2027.
Anderson said “doctor days,” a measure combining additional veterinarian hiring and more hours per doctor, continue to improve. He also described cross-selling between clinics and stores as a major opportunity, citing strong performance in veterinary diet products during the quarter.
Omnichannel and loyalty initiatives advance
Anderson said Petco improved digital traffic by reducing friction in the online checkout process. Omnichannel sales grew despite lapping what management described as unprofitable sales from the prior year. Buy online, pick up in store, or BOPUS, was up strongly year over year.
The company also plans to relaunch its loyalty program later in the quarter under the name Petco Perks. Anderson said the pilot showed that simplifying the program and making it more customer-friendly had a significant impact. The program will include personalized offers based on factors such as shopping frequency and customer lifetime value.
In stores, Anderson said Petco is working to build basket size through cross-selling and customer engagement. As an example, groomers are being given access to customer data, such as food purchase history, to support more personalized recommendations.
Full-year outlook reaffirmed
Petco reaffirmed its fiscal 2026 outlook, expecting net sales to be flat to up 1.5% from last year and adjusted EBITDA of $415 million to $430 million. For the second quarter, Simmons said the company is comfortable with current consensus estimates for net sales, implying growth of about 0.3%, and expects adjusted EBITDA of $110 million to $112 million.
Simmons said Petco now expects fuel prices to remain near current levels for the rest of the year, while its outlook includes the benefit of a tariff refund received in May. She said the refund represents only a portion of IEEPA tariffs paid through February 2026 and that guidance assumes no additional tariff refunds beyond those received to date.
During the question-and-answer session, Anderson said Petco saw sequential improvement across consumables, supplies and companion animals, and services. He said market share declines had moderated significantly, though the company had not yet begun gaining market share.
Asked about consumer behavior, Anderson said Petco did not see material differences across income demographics or notable changes in customer behavior during the quarter. Simmons added that Petco does not plan pricing changes in reaction to any single event, saying the company continuously reviews pricing with a “customer first” lens.
“The Q1 served as an initial proof point of our inflection to growth,” Anderson said. “While the broader macro environment remains dynamic, we remain hyper-focused on controlling what we can control.”
About Petco Health and Wellness NASDAQ: WOOF
Petco Health and Wellness Company, Inc NASDAQ: WOOF is a leading U.S. pet specialty retailer focused on delivering products, services and solutions that improve the health and well-being of pets. The company operates a network of retail locations that provide high-quality pet food, supplies and accessories, along with a growing digital platform that supports online ordering, subscription delivery and telehealth consultations for pets.
In addition to its retail offerings, Petco has built a full suite of in-store and virtual services, including grooming, training, dog daycare and veterinary care.
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