Petco Health and Wellness Company (WOOF) AI Stock Analysis

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Petco Health and Wellness Company

(NASDAQ:WOOF)

Rating:46Neutral

Price Target:

$2.50

▼(-3.85%Downside)

Petco's overall score is primarily impacted by its financial challenges, including declining revenue and high leverage. While the company has shown some profitability growth and operational efficiencies, technical indicators suggest bearish market sentiment. The valuation remains unattractive due to negative earnings and lack of dividends.

Positive Factors

Financial Performance

Petco reported F1Q adj. EBITDA of $89.4mn, which was ahead of consensus expectations.

Margin Management

Gross margin of 38.2% was supported by margin management efforts, including merchandising and better management of markdowns and promotions.

Profitability Strategy

Profitability is being prioritized over sales, which seems prudent given WOOF's leverage and provides financial flexibility in the future.

Negative Factors

Financial Flexibility

WOOF's leverage of ~4.1x limits financial flexibility and likely prolongs the reinvestments needed to stimulate growth and improve market share positioning.

Market Share Risk

There is a continued same-store sales softness in the near term as well as longer-term risk that market share erosion could continue.

Petco Health and Wellness Company (WOOF) vs. SPDR S&P 500 ETF (SPY)

Market Cap

$733.74M

Dividend YieldN/A

Average Volume (3M)4.56M

Price to Earnings (P/E)―

Beta (1Y)1.47

Revenue Growth-2.37%

EPS Growth95.07%

CountryUS

Employees29,000

SectorConsumer Cyclical

Sector Strength57

IndustrySpecialty Retail

Share Statistics

EPS (TTM)<0.01

Shares Outstanding241,197,070

10 Day Avg. Volume7,441,181

30 Day Avg. Volume4,564,296

Financial Highlights & Ratios

PEG Ratio1.02

Price to Book (P/B)13.64

Price to Sales (P/S)0.00

P/FCF Ratio-165.21

Enterprise Value/Market Cap16.78

Enterprise Value/Revenue0.50

Enterprise Value/Gross Profit5.30

Enterprise Value/Ebitda-7.40

Forecast

1Y Price Target

$3.73

Price Target Upside43.46% Upside

Rating ConsensusHold

Number of Analyst Covering11

Petco Health and Wellness Company Business Overview & Revenue Model

Company DescriptionPetco Health and Wellness Company, Inc., operating under the ticker symbol WOOF, is a leading retailer in the pet care industry. It offers a comprehensive range of products and services designed to improve the lives of pets and their owners. The company's offerings include premium pet food, supplies, grooming, and veterinary services. Petco operates through an extensive network of retail locations across the United States, as well as an e-commerce platform, providing customers with convenient access to a wide variety of pet-related products and expert services.

How the Company Makes MoneyPetco Health and Wellness Company generates revenue through multiple streams. The primary source of income is the sale of pet food, supplies, and accessories, which are available both in-store and online. In addition to retail sales, Petco earns income from its grooming services, veterinary care, and training sessions offered at its physical locations. The company also benefits from various partnerships with pet product manufacturers and service providers, enhancing its product offerings and customer reach. These revenue streams are supported by a strong brand presence and a loyal customer base, driving consistent earnings for the company.

Petco Health and Wellness Company Key Performance Indicators (KPIs)

Any

Revenue by Segment

Revenue by Segment
Breaks down revenue from different business segments, highlighting which areas drive growth and profitability, and indicating strategic focus and market positioning.

Chart InsightsPetco's Consumables segment shows resilience with a steady upward trend, while Supplies and Companion Animals face persistent declines. Services and Other experienced a sharp spike in late 2023, possibly due to data error, but otherwise maintain moderate growth. The earnings call highlights strategic efforts to stabilize profitability and expand services, despite a projected revenue decline in 2025. Store closures and increased SG&A costs pose challenges, but leadership changes and a focus on operational efficiencies aim to drive long-term growth and improve margins.

Data provided by:

Main Street Data

Petco Health and Wellness Company Earnings Call Summary

Earnings Call Date:Jun 05, 2025

(Q1-2025)

% Change Since: -28.18%|

Next Earnings Date:Aug 21, 2025

Earnings Call Sentiment Neutral

Petco demonstrated strong profitability growth and operational efficiency, despite facing challenges with declining sales and tariff exposure. The company is focusing on improving its retail fundamentals and leveraging operational efficiencies, particularly in its services segment, to offset sales declines. The overall outlook remains cautiously optimistic as the company transitions towards growth initiatives.

Q1-2025 Updates

Positive Updates

Profitability Overperformance

Petco delivered top-line results in line with expectations and over-delivered on profitability goals. Adjusted EBITDA increased by $13.8 million to $89.4 million, expanding 105 basis points to 6% of sales.

Gross Margin Expansion

Gross margin rate expanded by over 30 basis points to 38.2%, with improvements across both product and services business.

Operational Efficiencies

Achieved more than 180 basis points of expense leverage, excluding last year's one-time costs, leveraged approximately 160 basis points.

Service Segment Growth

Services remain the fastest-growing area, contributing to gross margin expansion with improvements in grooming and vet operations.

Strong Cash Position

Ended the quarter with a cash balance of $139 million, an improvement of $48 million compared to last year.

Negative Updates

Decline in Comparable Sales

Comparable sales were down 1.3%, with net sales down 2.3%, driven by net store closures in 2024 and Q1 2025.

Impact of Tariffs

Exposure to tariffs slightly increased from 5% to about 7% due to expanded lists of impacted countries.

Consumables Sales Decline

Consumables sales inflected negatively, contributing to overall sales decline, though this was in line with expectations.

Company Guidance

During the Petco First Quarter 2025 Earnings Conference Call, Petco's leadership emphasized their successful execution of profitability goals, despite a top-line performance in line with expectations. They reported a 1.3% decline in comparable sales and a 2.3% decrease in net sales, largely attributed to store closures. However, they achieved a gross margin expansion of over 30 basis points, reaching 38.2%, and delivered more than 180 basis points of expense leverage. Operating profit increased by $33 million, while adjusted EBITDA rose by $13.8 million to $89.4 million, expanding 105 basis points to 6% of sales. The company's primary focus remains on improving retail fundamentals and financial performance, with a full-year outlook that forecasts net sales to decline by low-single digits, adjusted EBITDA in the range of $375 million to $390 million, and capital expenditures of approximately $125 million to $130 million. They are implementing strategies for merchandise optimization and operational efficiencies to sustain profitability, with plans for a new membership program in 2026, aiming to enhance customer engagement and loyalty.

Petco Health and Wellness Company Financial Statement Overview

Summary

Petco faces challenges with negative net income and high leverage, impacting profitability and financial stability. However, positive operating cash flows provide a foundation for potential recovery. Strategic focus on improving margins and reducing debt could enhance overall financial performance.

Income Statement

Negative

Petco Health and Wellness Company has shown fluctuating revenue patterns, with a recent decline in total revenue. The gross profit margin remains relatively stable, but the net profit margin is negative due to consistent net losses. EBIT and EBITDA margins have also deteriorated, which indicates challenges in operational efficiency and profitability.

Balance Sheet

Neutral

The balance sheet reveals a high debt-to-equity ratio, indicating significant leverage. The return on equity is negative, reflecting consistent net losses, while the equity ratio has decreased, showing reduced financial stability. These factors suggest financial risk but also potential for improvement if liabilities are managed effectively.

Cash Flow

Neutral

Operating cash flow has been positive, indicating some capacity to generate cash from core operations. However, free cash flow has been inconsistent, with recent improvements. The operating cash flow to net income ratio is relatively strong, but the free cash flow to net income ratio suggests volatility. Attention to cash management could enhance financial health.

Mar 2025	Mar 2024	Mar 2023	Mar 2022	Mar 2021
Breakdown
Income Statement		Total Revenue
6.12B	6.26B	6.04B	5.81B	4.92B
	Gross Profit
2.32B	2.35B	2.43B	2.43B	2.11B
	EBIT
7.05M	-1.18B	225.56M	266.07M	194.42M
	EBITDA
7.05M	-971.83M	407.75M	452.22M	352.36M
	Net Income Common Stockholders
-101.82M	-1.28B	90.80M	164.42M	-26.48M
Balance Sheet		Cash, Cash Equivalents and Short-Term Investments
165.76M	125.43M	201.90M	211.60M	111.40M
	Total Assets
5.19B	5.36B	6.61B	6.50B	6.08B
	Total Debt
2.94B	3.04B	3.13B	3.05B	3.00B
	Net Debt
2.77B	2.92B	2.93B	2.84B	2.89B
	Total Liabilities
4.08B	4.18B	4.23B	4.24B	4.02B
	Stockholders Equity
1.11B	1.18B	2.38B	2.27B	2.07B
Cash Flow		Free Cash Flow
49.68M	-9.88M	67.98M	119.11M	109.06M
	Operating Cash Flow
177.67M	215.72M	346.00M	358.21M	268.62M
	Investing Cash Flow
-123.90M	-207.44M	-320.32M	-237.08M	-157.19M
	Financing Cash Flow
-8.75M	-85.35M	-33.84M	-18.78M	-146.61M

Petco Health and Wellness Company Technical Analysis

Technical Analysis Sentiment

Negative

Last Price2.60

Price Trends

50DMA

3.20

Negative

100DMA

3.07

Negative

200DMA

3.69

Negative

Market Momentum

MACD

-0.17

Positive

RSI

29.48

Positive

STOCH

2.66

Positive

Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For WOOF, the sentiment is Negative. The current price of 2.6 is below the 20-day moving average (MA) of 3.32, below the 50-day MA of 3.20, and below the 200-day MA of 3.69, indicating a bearish trend. The MACD of -0.17 indicates Positive momentum. The RSI at 29.48 is Positive, neither overbought nor oversold. The STOCH value of 2.66 is Positive, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Negative sentiment for WOOF.

Petco Health and Wellness Company Risk Analysis

Petco Health and Wellness Company disclosed 67 risk factors in its most recent earnings report. Petco Health and Wellness Company reported the most risks in the "Finance & Corporate" category.

Finance & Corporate - Financial and accounting risks. Risks related to the execution of corporate activity and strategy

Latest Risks Added 0 New Risks

Petco Health and Wellness Company Peers Comparison

Overall Rating

UnderperformOutperform

Sector (62)

Financial Indicators

Name	Overall Rating	Market Cap	P/E Ratio	ROE	Dividend Yield	Revenue Growth	EPS Growth
EBAY	77 Outperform	$35.90B	18.61	36.48%	1.50%	2.04%	-15.61%
CHWY	75 Outperform	$17.10B	46.67	76.24%	―	7.64%	369.79%
BBY	71 Outperform	$15.35B	17.76	30.21%	5.24%	-3.23%	-28.11%
GPC	69 Neutral	$17.11B	20.25	19.19%	3.37%	1.99%	-32.18%
Sector *	62 Neutral	$6.90B	11.05	2.80%	4.27%	2.67%	-24.92%
GME	51 Neutral	$12.77B	48.01	6.62%	―	-25.30%	479.26%
WOOF	46 Neutral	$733.74M	―	-5.90%	―	-2.37%	95.07%

* Consumer Cyclical Sector Average

Performance Comparison

WOOF

Petco Health and Wellness Company

2.47

-0.99

-28.61%

BBY

Best Buy Co

69.60

-17.82

-20.38%

EBAY

eBay

77.36

25.13

48.11%

GME

GameStop

22.14

-3.08

-12.21%

GPC

Genuine Parts Company

119.68

-15.84

-11.69%

CHWY

Chewy

41.67

18.86

82.68%

Petco Health and Wellness Company Corporate Events

Business Operations and StrategyFinancial Disclosures

Petco Reports Q1 2025 Financial Results Amid Sales Dip

Neutral

Jun 5, 2025

On June 5, 2025, Petco Health and Wellness Company reported its financial results for the first quarter of 2025, revealing a 2.3% decrease in net sales to $1.5 billion compared to the previous year, yet achieving an improved operating income of $16.4 million. Despite a slight decline in comparable sales, the company expanded its gross profit margin and improved its GAAP net loss, while reaffirming its fiscal 2025 net sales and earnings outlook. Petco’s CEO highlighted the company’s strategic focus on strengthening retail fundamentals and achieving sustainable growth, with the current market conditions accelerating these efforts.

The most recent analyst rating on (WOOF) stock is a Hold with a $3.25 price target. To see the full list of analyst forecasts on Petco Health and Wellness Company stock, see the WOOF Stock Forecast page.

Executive/Board ChangesShareholder Meetings

Petco Board Member Christy Lake Resigns

Neutral

May 23, 2025

On May 19, 2025, Christy Lake resigned from Petco Health and Wellness Company‘s Board of Directors and its compensation committee, effective after the 2025 Annual Meeting of Stockholders. Her resignation was not due to any disagreement with the company. Following her resignation, the Board decided to reduce its size to 10 directors.

The most recent analyst rating on (WOOF) stock is a Hold with a $5.00 price target. To see the full list of analyst forecasts on Petco Health and Wellness Company stock, see the WOOF Stock Forecast page.

Business Operations and StrategyFinancial Disclosures

Petco Reports Decrease in Revenue, Improves Cash Flow

Neutral

Mar 26, 2025

Petco Health and Wellness Company reported its financial results for the fourth quarter and full year 2024, showing a decrease in net revenue and gross profit compared to the previous year. Despite these declines, the company reduced its GAAP net loss significantly and improved its free cash flow. CEO Joel Anderson expressed confidence in the new leadership team’s ability to drive double-digit adjusted EBITDA growth in 2025, positioning the company for sustainable profitable growth.

Glossary

BuyA stock rated as a "Buy" is expected to perform better than the overall market or a specific benchmark over the near-to-medium term. This rating suggests the stock is likely to deliver higher returns compared to other stocks in the same sector or market index. Note: This is not investment advice; please consult a financial advisor before making investment decisions.

HoldA stock rated as a "Hold" is expected to perform in line with the overall market or a specific benchmark. This rating indicates that the stock is neither particularly compelling nor unfavorable for investment. Note: This is not investment advice; please consult a financial advisor before making investment decisions.

SellA stock rated as a "Sell" is expected to perform worse than the overall market or a specific benchmark over the near-to-medium term. This rating suggests the stock may deliver lower returns compared to other stocks in the same sector or market index. Note: This is not investment advice; please consult a financial advisor before making investment decisions.

Disclaimer

This AI Analyst Stock Report is automatically generated by our AI systems using advanced algorithms and publicly available financial, technical, and market data. While the information provided aims to be accurate and insightful, it is intended for informational purposes only and should not be considered financial advice. Any content created by an AI (Artificial Intelligence) system may contain inaccuracies and/or contain errors. Investing in stocks carries inherent risks, and past performance is not indicative of future results. This report does not account for your personal financial circumstances, objectives, or risk tolerance. Always conduct your own research or consult with a qualified financial advisor before making investment decisions. The analysis and recommendations provided are based on historical and current data and may not fully reflect future market conditions or unexpected developments. Neither the creators of this report nor its affiliated entities guarantee the accuracy, completeness, or reliability of the information presented. Use this report at your own discretion and risk.