Petco Earnings Highlight Profit Gains

Petco earnings showed margin expansion and reduced leverage when the company reported fourth-quarter and full-year 2025 results on March 11, 2026, lifting profitability and prompting an analyst upgrade while management forecast flat-to-modest sales growth for fiscal 2026.

Profitability and Balance Sheet Improvement

Petco said in a press release that fiscal 2025 adjusted EBITDA, a proxy for operating profit, rose 21.3% year over year to $408.2 million, exceeding its outlook. CEO Joel Anderson said, "In fiscal 2025, we strengthened our leadership team and rebuilt the foundation of our economic model, enabling us to exceed our profitability goals."

Full-year net sales totaled $5.961 billion, down 2.5% year over year, with comparable sales declining 1.6%. Gross profit fell 0.8% to $2.3 billion, but gross margin expanded 66 basis points to 38.7%. Operating income rose to $120.4 million from $7.1 million the prior year, lifting the operating margin 190 basis points to 2.0% and contributing to net income of $9.1 million after a loss the previous year.

Cash from operations strengthened 76.8% to $314.1 million, and the company ended the year with $256.7 million in cash, up $91 million. Inventory declined 9.7%, and management completed a voluntary $95 million debt paydown that lowered leverage to 3.0 times from 4.2 times.

Guidance and Growth Strategy

Petco’s fiscal 2026 guidance calls for net sales to be flat to up 1.5% year over year and adjusted EBITDA between $415 million and $430 million. The company expects net interest expense near $125 million, capital expenditures around $140 million, depreciation and amortization of about $200 million, and net store closures of 15 to 20 locations. This outlook assumes execution of its growth pillars.

For the first quarter ending in April, Petco projects net sales down 1% to flat year over year and adjusted EBITDA of $92 million to $94 million.

In the fourth quarter, net sales declined 2.4% year over year to $1.515 billion, with comparable sales down 1.6%. Gross profit fell 1.4% to $580.8 million, while gross margin widened 37 basis points to 38.3%. Operating income rose 83.2% to $31.9 million, lifting the operating margin to 2.1%. The quarter showed a net loss of $2.6 million, or diluted EPS of negative $0.01, while adjusted EBITDA increased 10.6% to $106.3 million, above the company’s outlook.

Management highlighted services, including dog grooming and training, alongside fresh food and owned brands as key growth drivers. The company ended the fiscal year with 1,382 stores, a net decline of seven.

Following the results, Jefferies upgraded Petco’s stock to Buy on March 12, 2026, citing the company’s turnaround as complete.