Shares of Petco Health and Wellness Company (NASDAQ:WOOF) surged more than 16% in premarket trading Friday following the release of stronger-than-expected second-quarter results and an upgraded full-year outlook, even as sales showed a slight decline.
The pet retailer reported adjusted earnings per share of $0.05 for its fiscal Q2, surpassing analyst expectations of $0.01. Revenue came in at $1.5 billion, marginally above the $1.49 billion consensus, though down 2.3% from the same period last year. Comparable sales fell 1.4% year-on-year.
Despite weaker sales, Petco’s profitability metrics showed notable improvement. Gross profit margin expanded by roughly 120 basis points, reaching 39.3% of net sales. Operating income rose $40.6 million to $43.0 million, and adjusted EBITDA increased $30.3 million to $113.9 million, well above guidance of $92-$94 million.
“For the second quarter we once again delivered against our commitments, enabling us to raise our earnings outlook for the full year,” said Joel Anderson, Petco’s Chief Executive Officer.
“The first half of this year established a solid foundation for our transformation as we continued to strengthen our economic model and improve retail operating fundamentals.”
Looking ahead, the company raised its FY25 adjusted EBITDA guidance to a range of $385 million to $395 million, up from the previous $375 million to $390 million. The new midpoint of $390 million surpasses the analyst consensus of $384.6 million.
“2Q’s strong adj-EBITDA performance (>20% beat) prompted an upward revision to FY25 guidance,” said Baird analyst Peter S. Benedict.
While comparable sales remain negative, Petco “continues to over-deliver on its profit improvement plans while preserving flexibility to reinvest in the business as it sets the stage for Phase 3 (returning to growth),” Benedict added.
He noted that the near-term revenue outlook is challenging due to tougher Q3 comparisons, but raised his price target to $4.00, roughly 6x FY26 adjusted EBITDA. The analyst added that there is “further re-rating/upside potential should the business generate positive comps in FY26.”
For Q3, the company anticipates adjusted EBITDA between $92 million and $94 million, above the consensus estimate of $86.9 million. Petco confirmed its capital expenditure plan of $125 million to $130 million for the year.
Petco Health and Wellness Company stock price
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