Petco Health and Wellness Q2 Earnings Call Highlights

Petco reported modest improvement in Q2 fiscal 2026: Sales reached $1.5 billion, comparable sales rose 0.6% for the second consecutive positive quarter, and adjusted EBITDA was $122 million, or $115 million excluding a $6.8 million tariff-refund benefit. The relaunch of Petco Perks created temporary sales pressure, particularly in services, as customers redeemed points faster than expected. Petco said peak redemptions have passed, while its new store format, Autoship expansion, merchandise initiatives and veterinary services showed encouraging results. Petco reaffirmed its full-year outlook for flat to 1.5% sales growth and $415 million to $430 million in adjusted EBITDA. The company is also reducing leverage, with debt down $113 million year over year and a planned $75 million repayment bringing nine-month debt reduction to $170 million.

Petco Health and Wellness NASDAQ: WOOF reported second-quarter fiscal 2026 sales of $1.5 billion and adjusted EBITDA of $122 million, as the retailer posted its second consecutive quarter of positive comparable sales and continued efforts to reduce debt. Comparable sales increased 0.6% in the quarter, while net sales were slightly higher than a year earlier, Chief Financial Officer Sabrina Simmons said. The company’s adjusted EBITDA included a $6.8 million net benefit from tariff refunds. Excluding that benefit, adjusted EBITDA was $115 million, which Simmons said was above the prior-year level and the company’s outlook.

Chief Executive Officer Joel Anderson said Petco’s “Reach for the Sky” strategy gained traction across its strategic priorities, including merchandise innovation, digital capabilities, veterinary hospitals and the integration of services with its retail stores.

Anderson said Petco’s nationwide relaunch of its Petco Perks membership program in late January made points easier for customers to redeem. The change produced stronger-than-expected redemption activity, but it also reduced second-quarter net sales, particularly in services. “Prior to the nationwide membership rollout, our sales and comp run rates were ahead of our Q2 outlook,” Anderson said. Simmons told analysts that the effect of the program transition was in the mid-single-digit millions of dollars, based on the difference between Petco’s pre-launch sales trajectory and its reported quarterly results. The company implemented guardrails intended to moderate redemption velocity and said peak redemptions are now behind it. Petco plans to focus on personalization and loyalty features in coming quarters. Anderson said the company expects a positive impact from those capabilities to emerge in 2027. During the question-and-answer session, Anderson said the company saw its total customer base grow slightly during the second quarter. He also emphasized an opportunity to increase spending among existing shoppers by moving them across Petco’s stores, digital channels and service offerings. Multi-channel shoppers who use online, store and service channels generate five times higher net spend per active customer, or NSPAC, than single-channel customers, Anderson said. However, customers using all three channels remain a small portion of Petco’s overall customer base.

Petco said consumables delivered positive comparable sales growth during the quarter. Anderson attributed the improvement in part to more frequent assortment updates, bet...