SAN DIEGO — Petco continues to improve its operating model, as demonstrated by the retailer’s first quarter 2025 performance for the 13 weeks ended May 3.

Net sales for the quarter were reported at $1.5 billion, a 2.3% decrease year-over-year. Comparable sales dropped 1.3% year-over-year. Gross profit was $569.9 million, a 2% decrease year-over-year. Gross profit margin expanded by 30 basis points to 38.2% as a percentage of net sales. Operating income drastically improved to $16.4 million, compared to a loss of $16.9 million in the previous year. Adjusted EBITDA was reported at $89.4 million, an increase of $13.8 million. 

“We are pleased to deliver first quarter earnings results ahead of our guidance and to reaffirm our outlook for fiscal 2025, which now incorporates the impact of tariffs,” said Joel Anderson, chief executive officer of Petco. “This performance is a testament to the execution of our nearly 30,000 team members and the resilience of the category in which we operate.

“We entered the year with a detailed, phased strategy to strengthen retail fundamentals across our operating model and return the business to sustainable, profitable growth,” he added. “The current backdrop has served as a catalyst to accelerate the work that was already underway. We are pleased with the progress we are continuing to drive, and our entire team remains focused on executing our plans and driving the performance we know this business is capable of.”

Breaking down its net sales by category, Petco’s sales continue to be dominated by consumables. In the first quarter, net sales for consumables reached $748 million, a 2% decrease from $764 million in the first quarter of 2024. Services and Other categories continue to experience positive net growth, but discretionary categories remain soft, according to the company. 

The retailer is continuing to optimize its product assortment. It also closed a total of five stores over the quarter.  

“…We are optimizing our product assortment to more closely align with consumer demand, we are allocating more shelf space to higher productivity brands and SKUs,” Anderson shared during the company’s earnings call on May 5. “First, we completed our cat category product reset at the end of May. Second, we kicked off our dog category reset this week. Both are being executed earlier in the year than we had done previously. What are many elements that go into a planogram reset, key focus for this year is centered around adding capacity for top-selling SKUs through both lower productivity SKU rationalization and increased shelf space. 

“As we complete the dog food reset, you will see our shelves move about six inches higher,” he added. “While this may not seem material, it allows us to remove a lot of airspace throughout our dog consumable department and increases shelf capacity by more than 10%. This example demonstrates how detailed the teams are in fixing every part of our business.”

Additionally, the retailer is also re-examining its pricing, just in time for tariff chaos. 

“We’re now looking at the SKU level and not just at the category level,” Anderson said. “So, we’ve identified opportunities where we took price down and we’ve identity opportunities where we think there was an opportunity to take some price up. This has been part of our holistic look at improving the retail fundamentals of the business more than it just being a tariff exercise.

“But we feel really good about the progress we’ve made on price and making sure we’re able to still deliver value for our customers,” he added. “It was a really good quarter for us. We feel really good on the long-term strategy. The progress we made with leadership team, with phased approach is really working, and I think the Q1 results are a great example of that.”

Speaking of tariffs, Anderson revealed the company continues to strategize to preserve sourcing and its supply chain. 

“Our cross-functional teams across merchandising, assortment planning, supply chain, finance and operations have mobilized together to identify various contingency plans and mitigation strategies,” he detailed. “We are leaning into our long-standing scale vendor relationship, and we truly appreciate their partnership as we navigate ongoing fluid dynamics and uncertainty.

“The current environment has served as a catalyst to accelerate work that was already underway as we strengthen our operating fundamentals,” Anderson added. “We are working towards building best-in-class product cost management, pricing capabilities and centralized operating principles to our product import process, just to name a few… Our ability to reiterate our full year outlook despite absorbing the impact of tariffs currently in place illustrates the meaningful progress we've made.”

In addition to its first quarter financials, Petco provided its outlook for the second quarter and also reaffirmed its full year 2025 outlook. For the second quarter, the retailer is expecting net sales to decrease by low single digits year-over-year and adjusted EBITDA is expected to be between $92 million and $94 million. 

For the full year, net sales are expected to decrease by low single digits year-over-year. Adjusted EBITDA is expected to be between $375 million and $390 million and capital expenditures is expected to be between $125 million and $130 million. 

“Assuming tariffs remain at today’s current level and no higher, we believe we can still deliver on the outlook we provided at the start of the year,” Anderson said. “… I think the tariff side, it’s relatively stable, and it’s something we’re watching consistently, but we haven’t seen any strong spikes in inflation year-to-date. But we’re certainly watching that piece and seeing where tariffs play out.”

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