Analyst Kendall Toscano of Bank of America Securities reiterated a Sell rating on Petco Health and Wellness Company, boosting the price target to $2.75.
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Kendall Toscano’s rating is based on several factors impacting Petco Health and Wellness Company’s financial performance. Despite reporting a second-quarter adjusted EBITDA that exceeded expectations, Petco experienced a decline in net sales and comparable store sales, partly due to store closures and a decrease in sales of consumables and supplies. Although there was some strength in service sales, the overall sales trend remains weak.
Additionally, Toscano noted that while Petco is making progress in cost management and improving gross margins, there are ongoing pressures from declining same-store sales and potential market share erosion. The competitive landscape, with consumers increasingly favoring online and broadline retailers, poses a long-term risk to Petco’s market position. These factors contribute to the Sell rating, as the company faces challenges in reversing sales declines and maintaining profitability.