Petco Health & Wellness Company, Inc.
For the period ended Aug 1, 2026. Filed Sep 4, 2026.
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A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Aug 1, 2026 · Filed Sep 4, 2026
WOOF$2.96-0.7%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-Q
Period ended 2026-05-02; filed 2026-06-05.
0001193125-26-259944
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-Q
Period ended 2026-08-01; filed 2026-09-04.
0001193125-26-383639
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 75 previous paragraphs and 75 current paragraphs.
55 unchanged; 15 reworded; 5 added; 5 removed; 0 previous and 0 current paragraphs rearranged.
Tables are not compared: 8 previous and 8 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (5)
Current report
an increase in Adjusted EBITDA from $113.9 million to $122.2 million, inclusive of a $6.8 million net incremental tariff refund.
Current report
As a percentage of net sales, SG&A expenses were 36.5% for the thirteen weeks ended August 1, 2026 compared with 36.4% for the thirteen weeks ended August 2, 2025. The increase in SG&A expenses between the periods was primarily due to an increase in advertising and depreciation expense, along with an increase in certain employee fringe benefits, as the thirteen weeks ended August 2, 2025 included improved actuarial results from employee benefits optimization initiatives. This was partially offset by lower payroll and other compensation costs.
Current report
Income Tax (Benefit) Expense
Current report
Our effective tax rates were (68.5)% and (135.1)%, resulting in income tax benefit of $15.7 million and $13.5 million for the thirteen and twenty-six weeks ended August 1, 2026, respectively, compared to effective tax rates of 5.1% and 34.9%, resulting in income tax expense of $0.7 million and $1.2 million for the thirteen and twenty-six weeks ended August 2, 2025, respectively. The change in effective tax rate was primarily driven by a $13.4 million reduction in unrecognized tax benefits, including accrued penalties and interest, following the successful completion of a federal tax refund review by the Joint Committee on Taxation in the quarter ended August 1, 2026. As of August 1, 2026, the Company’s liability for unrecognized tax benefits was $3.5 million.
Current report
In September 2026, the Company voluntarily prepaid $75.0 million of the Amended First Lien Term Loan using existing cash on hand. The prepayment was applied to the remaining principal payments in order of scheduled payment date.
Removed paragraphs (5)
Previous report
On February 20, 2026, the U.S. Supreme Court issued a decision invalidating certain tariffs previously imposed under the International Emergency Economic Power Act ("IEEPA"). We have applied for a refund of tariffs paid, following the processes established by U.S. Customs and Border Protection. We will continue to evaluate new information and will recognize any IEEPA tariff refunds or related receivables when they are realized or realizable.
Previous report
an increase in Adjusted EBITDA from $89.4 million to $97.3 million.
Previous report
Income Tax Expense
Previous report
We compute our tax provision (benefit) for interim periods by applying the estimated annual effective tax rate to our year-to-date income (loss) before income taxes, adjusted for discrete items recognized during the quarter. However, due to the sensitivity of the estimated annual effective tax rate to changes in estimated annual pre-tax results, we determined that the actual effective tax rate method is the appropriate approach in the computation of the interim tax provision for the thirteen weeks ended May 2, 2026, as the use of the estimated annual effective tax rate would provide a distortive result.
Previous report
Our actual effective tax rate was (17.0)%, resulting in income tax expense of $2.2 million for the thirteen weeks ended May 2, 2026, compared to an estimated annual effective tax rate of (4.5%), resulting in income tax expense of $0.5 million for the thirteen weeks ended May 3, 2025. The change in tax rate for the thirteen weeks ended May 2, 2026, was primarily driven by a reduction of equity-based compensation not expected to be deductible for tax purposes, along with a change in pre-tax earnings and the application of our actual effective tax rate in the current period compared to the use of our estimated annual effective tax rate in the prior year.
Reworded paragraphs (15)
Previous wording
an increase in net sales from $1.49 billion to $1.50 billion, representing period-over-period growth of 0.2% and a comparable sales increase of 0.7%;
Current wording
an increase in net sales to $1.49 billion, and a comparable sales increase of 0.6%;
Previous wording
operating income of $24.6 million, compared to operating income of $16.4 million in the prior year period;
Current wording
operating income of $47.8 million, inclusive of a $6.8 million net incremental tariff refund, compared to operating income of $43.0 million in the prior year period;
Previous wording
net loss attributable to Class A and B-1 common stockholders of $15.1 million, compared to net loss attributable to Class A and B-1 common stockholders of $11.7 million in the prior year period; and
Current wording
net income attributable to Class A and B-1 common stockholders of $38.7 million, compared to $14.0 million in the prior year period; and
Previous wording
Thirteen Weeks Ended May 2, 2026 Compared with Thirteen Weeks Ended May 3, 2025
Current wording
Thirteen and Twenty-six Weeks Ended August 1, 2026 Compared with Thirteen and Twenty-six Weeks Ended August 2, 2025
Previous wording
Net sales increased $3.3 million, or 0.2%, to $1.50 billion in the thirteen weeks ended May 2, 2026 compared to net sales of $1.49 billion in the thirteen weeks ended May 3, 2025. The sales increase primarily reflects growth in our services business, driven by our investments in customer acquisition and retention, as well as optimization of our veterinary footprint. We also experienced positive comparable sales trends in our consumables category, offset by a lower pet care center count. We continue to focus on profitability and margin through a disciplined approach to managing unit costs, pricing, and promotional strategies.
Current wording
Net sales increased $0.7 million to $1.49 billion in the thirteen weeks ended August 1, 2026 compared to net sales of $1.49 billion in the thirteen weeks ended August 2, 2025. Net sales increased $4.0 million to $2.99 billion in the twenty-six weeks ended August 1, 2026 compared to net sales of $2.98 billion in the twenty-six weeks ended August 2, 2025. Sales during the thirteen weeks ended August 1, 2026 reflect a temporary disruption from a stronger-than-expected response to our membership program relaunch. However, we continue to experience growth in our services business, driven by our investments in customer acquisition and retention, as well as optimization of our veterinary footprint. We also experienced positive comparable sales trends in our consumables category, offset by a lower pet care center count. We continue to focus on profitability and margin through a disciplined approach to managing unit costs, pricing, and promotional strategies.
Previous wording
As a percentage of net sales, our gross profit rate was 38.4% for the thirteen weeks ended May 2, 2026 compared with 38.2% for the thirteen weeks ended May 3, 2025. We continue to focus on effectively utilizing our services footprint and managing our inventory, unit costs, pricing, and promotional strategies. We are unable to quantify the factors impacting gross profit rate described above due to the fact that such factors are based on input measures or qualitative information that do not lend themselves to quantification.
Current wording
As a percentage of net sales, our gross profit rate was 39.7% for the thirteen weeks ended August 1, 2026 compared with 39.3% for the thirteen weeks ended August 2, 2025. As a percentage of net sales, our gross profit rate was 39.0% for the twenty-six weeks ended August 1, 2026 compared with 38.7% for the twenty-six weeks ended August 2, 2025. During the thirteen weeks ended August 1, 2026, the Company received substantially all refunds related to tariffs previously paid under the International Emergency Economic Powers Act ("IEEPA"). The period-over-period increase in gross profit rate was primarily driven by the net benefit of $6.8 million relating to gross refunds, net of an investment to propel the repositioning of new assortments for future growth, as well as incremental cost pressures related to fuel and tariff expense during the thirteen weeks ended August 1, 2026. We continue to focus on effectively utilizing our services footprint and managing our inventory, unit costs, pricing, and promotional strategies. We are unable to quantify the factors impacting gross profit rate described above due to the fact that such factors are based on input measures or qualitative information that do not lend themselves to quantification.
Previous wording
As a percentage of net sales, SG&A expenses were 36.7% for the thirteen weeks ended May 2, 2026 compared with 37.1% for the thirteen weeks ended May 3, 2025. The decrease in SG&A expenses between the periods was primarily due to lower payroll and consulting costs, partially offset by an increase in advertising expenses.
Current wording
As a percentage of net sales, SG&A expenses were 36.6% for the twenty-six weeks ended August 1, 2026 compared with 36.8% for the twenty-six weeks ended August 2, 2025. The decrease in SG&A expenses between the periods was primarily due to lower payroll, other compensation, and consulting costs, partially offset by an increase in advertising expenses, along with an increase in certain employee fringe benefits, as the twenty-six weeks ended August 2, 2025 included improved actuarial results from employee benefits optimization initiatives.
Previous wording
Interest expense decreased $0.7 million, or 2.1%, to $32.8 million in the thirteen weeks ended May 2, 2026 compared with $33.5 million in the thirteen weeks ended May 3, 2025. The decrease was primarily driven by a lower aggregate outstanding principal balance of indebtedness, partially offset by higher interest rates during the thirteen weeks ended May 2, 2026. For more information, refer to Note 3, “Senior Secured Credit Facilities,” and Note 4, "Senior Secured Notes" in the Notes to Consolidated Financial Statements included in Part I, Item 1 of this Form 10-Q.
Current wording
Interest expense decreased $0.7 million, or 2.2%, to $32.6 million in the thirteen weeks ended August 1, 2026 compared with $33.3 million in the thirteen weeks ended August 2, 2025. Interest expense decreased $1.5 million, or 2.2%, to $65.3 million in the twenty-six weeks ended August 1, 2026 compared with $66.8 million in the twenty-six weeks ended August 2, 2025. The period-over-period decrease was primarily driven by a lower aggregate outstanding principal balance of indebtedness, partially offset by higher interest rates during the thirteen and twenty-six week periods ended August 1, 2026. For more information, refer to Note 3,“Senior Secured Credit Facilities,” and Note 4,"Senior Secured Notes" to the Notes to Consolidated Financial Statements included in Part I, Item 1 of this Form 10-Q.
Previous wording
Loss on extinguishment and modification of debt was $11.8 million for the thirteen weeks ended May 2, 2026. This loss was recognized in conjunction with the February 2, 2026 debt refinancing transaction described under "Sources of Liquidity—Senior Secured Credit Facilities and Senior Secured Notes" below. There was no loss on debt extinguishment and modification for the thirteen weeks ended May 3, 2025. For more information, refer to Note 3, “Senior Secured Credit Facilities,” and Note 4, "Senior Secured Notes," to the Notes to Consolidated Financial Statements included in Part I, Item 1 of this Form 10-Q.
Current wording
Loss on extinguishment and modification of debt was $11.8 million for the twenty-six weeks ended August 1, 2026. This loss was recognized in conjunction with the February 2, 2026 debt refinancing transaction described under "Sources of Liquidity—Senior Secured Credit Facilities and Senior Secured Notes" below. There was no loss on debt extinguishment and modification of debt for the thirteen weeks ended August 1, 2026 or the thirteen and twenty-six weeks ended August 2, 2025. For more information, refer to Note 3, “Senior Secured Credit Facilities,” and Note 4, "Senior Secured Notes," to the Notes to Consolidated Financial Statements included in Part I, Item 1 of this Form 10-Q.
Previous wording
We define net margin as net loss attributable to Class A and B-1 common stockholders divided by net sales and Adjusted EBITDA margin as Adjusted EBITDA divided by net sales.
Current wording
We define net margin as net income attributable to Class A and B-1 common stockholders divided by net sales and Adjusted EBITDA margin as Adjusted EBITDA divided by net sales.
Previous wording
Our primary sources of liquidity are funds generated by operating activities and available capacity for borrowings on our $546.0 million ABL Revolving Credit Facility. Our ability to fund our operations, to make planned capital investments, to make scheduled debt payments and to repay or refinance indebtedness depends on our future operating performance and cash flows, which are subject to prevailing economic conditions and financial, business, and other factors, some of which are beyond our control. Our liquidity as of May 2, 2026 was $654.4 million, inclusive of cash and cash equivalents of $166.8 million and $487.6 million of availability on the ABL Revolving Credit Facility.
Current wording
Our primary sources of liquidity are funds generated by operating activities and available capacity for borrowings on our $546.0 million ABL Revolving Credit Facility. Our ability to fund our operations, to make planned capital investments, to make scheduled debt payments and to repay or refinance indebtedness depends on our future operating performance and cash flows, which are subject to prevailing economic conditions and financial, business, and other factors, some of which are beyond our control. Our liquidity as of August 1, 2026 was $781.1 million, inclusive of cash and cash equivalents of $293.5 million and $487.6 million of availability on the ABL Revolving Credit Facility.
Previous wording
Our primary source of operating cash is sales of products and services to customers, which are substantially all on a cash basis, and therefore provide us with a significant source of liquidity. Our primary uses of cash in operating activities include: purchases of inventory; freight and warehousing costs; employee-related expenditures; occupancy-related costs for our pet care centers, distribution centers and corporate support centers; credit card fees; interest under our debt agreements; and marketing expenses. Net cash used in operating activities is impacted by our net loss adjusted for certain non-cash items, including: depreciation and amortization; amortization of debt discounts and issuance costs; deferred income taxes; equity-based compensation; impairments of goodwill and intangible assets; other non-operating income; and the effect of changes in operating assets and liabilities.
Current wording
Our primary source of operating cash is sales of products and services to customers, which are substantially all on a cash basis, and therefore provide us with a significant source of liquidity. Our primary uses of cash in operating activities include: purchases of inventory; freight and warehousing costs; employee-related expenditures; occupancy-related costs for our pet care centers, distribution centers and corporate support centers; credit card fees; interest under our debt agreements; and marketing expenses. Net cash provided by operating activities is impacted by our net income adjusted for certain non-cash items, including: depreciation and amortization; amortization of debt discounts and issuance costs; deferred income taxes; equity-based compensation; impairments of goodwill and intangible assets; other non-operating income; and the effect of changes in operating assets and liabilities.
Previous wording
Net cash used in operating activities was $31.0 million in the thirteen weeks ended May 2, 2026 compared with net cash used in operating activities of $15.5 million in the thirteen weeks ended May 3, 2025. The decrease in operating cash flows were primarily driven by a increase in inventory purchases as well as timing of invoice payments. This was partially offset by a decrease in cash paid for interest and lower payouts of prior year accrued incentive bonuses.
Current wording
Net cash provided by operating activities was $130.6 million in the twenty-six weeks ended August 1, 2026 compared with net cash provided by operating activities of $70.4 million in the twenty-six weeks ended August 2, 2025. The increase in operating cash flows were primarily driven by the timing of interest and rent payments, a decrease in inventory purchases, and the net impact of tariff refunds. This was partially offset by timing of invoice payments.
Previous wording
Net cash used in investing activities was $37.8 million and $27.1 million for the thirteen weeks ended May 2, 2026 and May 3, 2025, respectively, and consisted primarily of capital expenditures to support our business.
Current wording
Net cash used in investing activities was $69.3 million and $58.1 million for the twenty-six weeks ended August 1, 2026 and August 2, 2025, respectively, and consisted primarily of capital expenditures to support our business.
Previous wording
Net cash used in financing activities was $32.6 million for the thirteen weeks ended May 2, 2026, compared with $0.3 million used in financing activities for the thirteen weeks ended May 3, 2025. Financing cash flows in the thirteen weeks ended May 2, 2026 primarily consisted of payments of debt issuance costs and borrowings and repayments of debt in connection with the February 2, 2026 refinancing transaction discussed under "Sources of Liquidity" below. Financing cash flows in the thirteen weeks ended May 3, 2025 were not material.
Current wording
Net cash used in financing activities was $36.2 million for the twenty-six weeks ended August 1, 2026, compared with $4.3 million used in financing activities for the twenty-six weeks ended August 2, 2025. Financing cash flows in the twenty-six weeks ended August 1, 2026 primarily consisted of payments of debt issuance costs and borrowings and repayments of debt in connection with the February 2, 2026 refinancing transaction discussed under "Sources of Liquidity" below. Financing cash flows in the twenty-six weeks ended August 2, 2025 were not material.