SAN DIEGO — Amidst drops in revenue in the fourth quarter and 2024 full year, Petco Health and Wellness Company, Inc. continues to focus on improving profitability by optimizing its product assortment and closing underperforming retail locations. The company shared this and more in its latest financial results released on March 26. 

Net revenue for the fourth quarter ended Feb. 1 was reported at $1.6 billion, a decrease of 7.3% year-over-year. Comparable net sales increased 0.5%. Gross profit was $589.3 million, a 2.8% decrease compared to $606.3 million in the prior year. Adjusted EBITDA was $96.1 million, a drop from $105.3 million last year. 

The retailer also reported a GAAP net loss of $13.8 million, compared to a net loss of $22.6 million in the prior year.

“Our results in the fourth quarter demonstrate the progress we've made to return Petco to retail operating excellence,” said Joel Anderson, chief executive officer of Petco. “While there is more work ahead, I am confident our new leadership team is well-positioned to build on this early momentum, deliver double-digit adjusted EBITDA improvement in 2025 and set the business up for sustainable profitable growth.”

Net revenue for Petco’s consumables segment, which includes pet nutrition products, dropped 6% year-over-year in the fourth quarter, reaching $781 million, but grew 3% on a two-year basis. The retailer continues to see strength in the fresh and frozen categories. 

“Fresh/frozen, relative to the industry, is still one of the faster growers,” Anderson shared during Petco’s earnings call on March 26. “It’s an area we’ve been in for a long time, invested in, and it’s an area you should see us continue to expand in. I feel really strong about our fresh/frozen capabilities, and that will be another potential growth lever for us down the road as we explore that further.”

To help further advance its business, the retailer is currently optimizing its offerings by focusing on top sellers, Anderson shared.

“In today’s more challenging economic and consumer environment, we recognize the consumer remains discerning, and it is critical that we always have the right products at the right price,” he said. “To that end, we conducted a detailed review of our product assortment and are optimizing it to more closely align to consumer demand and preferences. Specifically, we are allocating more of our focus in shelf space to top-selling brands and high-velocity SKUs across categories. 

“We’re in the middle of a big reset that’s going to happen here and a big optimization of our overall consumables,” Anderson added. “But I don't see any limit to some new ideas. We talked about fresh/frozen, the cat business is really strong, and we’ll get more specific as we move on down the year. But this has really been focused on redeveloping relationships with the vendor community.”

Net revenue for the full year ended Feb. 1 was reported at $6.1 billion, a 2.2% decrease year-over-year. Comparable net sales increased 0.3%. Gross profit was $2.3 billion, a decrease of 1.3% compared to $2.4 billion in the prior year. Adjusted EBITDA was $336.5 million, a drop from $401.1 million in the prior year. GAAP net loss for the year was $101.8 million, compared to a net loss of $1.3 billion in the prior year. 

Full-year revenue for the consumables business was reported at $3.04 billion, a decrease from $3.06 billion in the prior year. 

To improve its profitability, the retailer plans to close between 20 to 30 retail stores this year, following the closing of 25 stores last year. This is part of Petco’s strategy to expand its online presence and do away with its underperforming stores. 

The recent leadership appointments of Sabrina Simmons to chief financial officer, Michael Romanko to chief customer and product officer, and Jack Stout to chief merchandising officer are also expected to help support the retailer’s strategy. 

“The successful evolution of our leadership team is a critical enabler of this work,” Anderson said. “Each of our leaders bring a wealth of retail industry expertise and a proven track record for delivering and driving results, and they are already accelerating our operational improvements.”

Looking to 2025, Petco shared its guidance for the first quarter and full year. First quarter 2025 net revenue is expected to be down by low single digits year-over-year, and adjusted EBITDA is expected between $82 million and $83 million. For the full year, net revenue is also expected to be down low single digits. Adjusted EBITDA is expected to be between $375 million and $390 million, net interest expense is expected to be around $130 million, and capital expenditure is expected to be between $130 million and $140 million. 

“I’m pleased with the progress we have made in 2024 to strengthen our retail fundamentals and set the foundation for sustainable, profitable growth,” Anderson said. “While there is more work ahead, we are operating from a stronger position today, and we have a detailed multi-phased approach in place for continued improvements. I am confident we have the right strategy and team in place to reach our full potential over time.”

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