Petco Health & Wellness Company, Inc.

Previous wording

a decrease in net sales from $1.53 billion to $1.49 billion, representing a period-over-period decrease of 2.3%;

Current wording

a decrease in net sales from $1.52 billion to $1.49 billion, representing a period-over-period decrease of 2.3% and a comparable sales decrease of 1.4%;

Previous wording

operating income of $16.4 million, compared to an operating loss of $16.8 million in the prior year period;

Current wording

operating income of $43.0 million, compared to operating income of $2.5 million in the prior year period;

Previous wording

net loss attributable to Class A and B-1 common stockholders of $11.7 million, compared to net loss attributable to Class A and B-1 common stockholders of $46.5 million in the prior year period; and

Current wording

net income attributable to Class A and B-1 common stockholders of $14.0 million, compared to net loss attributable to Class A and B-1 common stockholders of $24.8 million in the prior year period; and

Previous wording

an increase in Adjusted EBITDA from $75.6 million to $89.4 million.

Current wording

an increase in Adjusted EBITDA from $83.5 million to $113.9 million.

Previous wording

Thirteen Weeks Ended May 3, 2025 Compared with Thirteen Weeks Ended May 4, 2024

Current wording

Thirteen and Twenty-six Weeks Ended August 2, 2025 Compared with Thirteen and Twenty-six Weeks Ended August 3, 2024

Previous wording

Net sales decreased $35.7 million, or 2.3%, to $1.49 billion in the thirteen weeks ended May 3, 2025 compared to net sales of $1.53 billion in the thirteen weeks ended May 4, 2024. The sales decrease primarily reflects lower transaction volume and a lower pet care center count, as well as a greater focus on profitability and margin. We continue to experience momentum in services, driven in part by our strategic investments in customer acquisition and retention, as well as efforts to optimize our existing veterinary hospital footprint.

Current wording

Net sales decreased $35.2 million, or 2.3%, to $1.49 billion in the thirteen weeks ended August 2, 2025 compared to net sales of $1.52 billion in the thirteen weeks ended August 3, 2024. Net sales decreased $71.0 million, or 2.3%, to $2.98 billion in the twenty-six weeks ended August 2, 2025 compared to net sales of $3.05 billion in the twenty-six weeks ended August 3, 2024. The sales decrease primarily reflects lower transaction volume and a lower pet care center count, as well as a greater focus on profitability and margin through a more disciplined approach to managing unit costs, pricing, and promotional strategies. We continue to experience momentum in services, driven in part by our strategic investments in customer acquisition and retention, as well as efforts to optimize our existing veterinary hospital footprint.

Previous wording

As a percentage of net sales, our gross profit rate was 38.2% for the thirteen weeks ended May 3, 2025 compared with 37.8% for the thirteen weeks ended May 4, 2024. The increase was primarily due to improved utilization of our services footprint, effective inventory management, supply chain optimization efforts, and channel mix impacts. 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 39.3% for the thirteen weeks ended August 2, 2025 compared with 38.1% for the thirteen weeks ended August 3, 2024. As a percentage of net sales, our gross profit rate was 38.7% for the twenty-six weeks ended August 2, 2025 compared with 38.0% for the twenty-six weeks ended August 3, 2024. The increase between the periods reflects improved utilization of our services footprint, as well as more effective management of 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 37.1% for the thirteen weeks ended May 3, 2025 compared with 38.9% for the thirteen weeks ended May 4, 2024. The decrease in SG&A expenses period-over-period included lower payroll and other compensation costs, advertising expenses, and store occupancy costs. In addition, the Company incurred disposition costs relating to its Pupbox business during the thirteen weeks ended May 4, 2024.

Current wording

As a percentage of net sales, SG&A expenses were 36.4% for the thirteen weeks ended August 2, 2025 compared with 37.9% for the thirteen weeks ended August 3, 2024. As a percentage of net sales, SG&A expenses were 36.8% for the twenty-six weeks ended August 2, 2025 compared with 38.4% for the twenty-six weeks ended August 3, 2024. The decrease in SG&A expenses between the periods was primarily due to lower payroll and other compensation costs, which included improved actuarial results from employee benefits optimization initiatives, as well as lower consulting costs. In addition, the Company incurred disposition costs relating to its Pupbox business during the twenty-six weeks ended August 3, 2024.

Previous wording

Interest expense decreased $3.3 million, or 9.0%, to $33.5 million in the thirteen weeks ended May 3, 2025 compared with $36.8 million in the thirteen weeks ended May 4, 2024. The decrease was primarily driven by lower interest rates on the First Lien Term Loan during the thirteen weeks ended May 3, 2025. For more information refer to Note 4, “Senior Secured Credit Facilities,” to the Notes to Consolidated Financial Statements included in Part I, Item 1 of this Form 10-Q.

Current wording

Interest expense decreased $3.5 million, or 9.5%, to $33.3 million in the thirteen weeks ended August 2, 2025 compared with $36.8 million in the thirteen weeks ended August 3, 2024. Interest expense decreased $6.8 million, or 9.3%, to $66.8 million in the twenty-six weeks ended August 2, 2025 compared with $73.6 million in the twenty-six weeks ended August 3, 2024. The decrease was primarily driven by lower interest rates on the First Lien Term Loan during the thirteen and twenty-six week periods ended August 2, 2025. For more information, refer to Note 4, “Senior Secured Credit Facilities,” to the Notes to Consolidated Financial Statements included in Part I, Item 1 of this Form 10-Q.

Previous wording

There was no other non-operating income or loss recognized during the thirteen weeks ended May 3, 2025. Other non-operating loss was $2.7 million for the thirteen weeks ended May 4, 2024. For more information, refer to Note 6,“Fair Value Measurements,”to the Notes to Consolidated Financial Statements included in Part I, Item 1 of this Form 10-Q.

Current wording

There was no other non-operating income or loss recognized during the thirteen and twenty-six week periods ended August 2, 2025. There was no other non-operating income or loss recognized during the thirteen weeks ended August 3, 2024. Other non-operating loss was $2.7 million for the twenty-six weeks ended August 3, 2024. For more information, refer to Note 6, “Fair Value Measurements,” to the Notes to Consolidated Financial Statements included in Part I, Item 1 of this Form 10-Q.

Previous wording

Our effective tax rate was (4.5%) resulting in income tax expense of $0.5 million for the thirteen weeks ended May 3, 2025, compared to an effective tax rate of 9.1% resulting in income tax benefit of $4.5 million for the thirteen weeks ended May 4, 2024. The change in effective tax rate for the thirteen weeks ended May 3, 2025 is 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.

Current wording

Our effective tax rates were 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, compared to effective tax rates of 14.7% and 11.3%, resulting in income tax benefit of $4.7 million and $9.1 million for the thirteen and twenty-six weeks ended August 3, 2024, respectively. The change in effective tax rates for the thirteen and twenty-six weeks ended August 2, 2025 was primarily driven by a change in earnings and a decrease in the amount of compensation associated expenses not expected to be deductible for corporate income tax purposes.

Previous wording

Adjusted EBITDA is not a substitute for net loss, the most comparable GAAP measure, and is subject to a number of limitations as a financial measure, so it should be used in conjunction with GAAP financial measures and not in isolation. There can be no assurances that we will not modify the presentation of Adjusted EBITDA in the future. In addition, other companies in our industry may define Adjusted EBITDA differently, limiting its usefulness as a comparative measure. Refer to Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Reconciliation of Non-GAAP Financial Measures to GAAP Measures” included in the 2024 Form 10-K for more information regarding how we define Adjusted EBITDA.

Current wording

Adjusted EBITDA is not a substitute for net income (loss), the most comparable GAAP measure, and is subject to a number of limitations as a financial measure, so it should be used in conjunction with GAAP financial measures and not in isolation. There can be no assurances that we will not modify the presentation of Adjusted EBITDA in the future. In addition, other companies in our industry may define Adjusted EBITDA differently, limiting its usefulness as a comparative measure. Refer to Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Reconciliation of Non-GAAP Financial Measures to GAAP Measures” included in the 2024 Form 10-K for more information regarding how we define Adjusted EBITDA.

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 (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.

Previous wording

Our primary sources of liquidity are funds generated by operating activities and available capacity for borrowings on our $581.0 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 3, 2025 was $647.9 million, inclusive of cash and cash equivalents of $133.3 million and $514.6 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 $581.0 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 2, 2025 was $683.9 million, inclusive of cash and cash equivalents of $188.7 million and $495.2 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, amortization, impairments and write-offs; amortization of debt discounts and issuance costs; deferred income taxes; equity-based compensation; impairments of goodwill and intangible assets; other non-operating loss; 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 (loss) adjusted for certain non-cash items, including: depreciation, amortization, impairments and write-offs; amortization of debt discounts and issuance costs; deferred income taxes; equity-based compensation; impairments of goodwill and intangible assets; other non-operating loss; and the effect of changes in operating assets and liabilities.

Previous wording

Net cash used in operating activities was $15.5 million in the thirteen weeks ended May 3, 2025 compared with net cash used in operating activities of $8.4 million in the thirteen weeks ended May 4, 2024. The increase in net cash outflows was primarily driven by lower sales and higher payouts of prior year accrued incentive bonuses. This was partially offset by a decrease in inventory purchases and lower payroll and fringe benefits.

Current wording

Net cash provided by operating activities was $70.4 million in the twenty-six weeks ended August 2, 2025 compared with net cash provided by operating activities of $61.0 million in the twenty-six weeks ended August 3, 2024. The increase in operating cash flows were primarily driven by a decrease in inventory purchases, lower payroll and fringe benefits as well as lower operational costs, such as consulting fees. This was partially offset by lower sales and higher payouts of prior year accrued incentive bonuses.