Petco Earnings On Deck With Stock (WOOF) Under Pressure YTD: What To Expect

Petco Health and Wellness Company (WOOF) heads into earnings under some pressure. While the company's strategic initiatives and cost-cutting measures have sparked investor optimism, the underlying challenges to revenue growth remain a significant concern.

Petco's stock (NASDAQ:WOOF) has shed 21.95% YTD, although remains marginally higher (+3.23%) on the 1 year.

The current stock price hovers above the 50-day Simple Moving Average (SMA) of $3.06, signaling potential short-term bullish sentiment. However, it remains below the 200-day SMA of $3.40, suggesting a longer-term bearish trend still holds sway. This mixed technical picture reflects the uncertainty surrounding Petco's future prospects.

Petco's first-quarter fiscal 2025 results, reported in June, revealed a mixed bag. While the company managed to improve its operating income and reduce its net loss, net sales declined by 2.3% year-over-year to $1.5 billion. This decline was primarily attributed to reduced transactions and net store closures, indicating a struggle to maintain top-line growth. The reported EPS of -$0.04 also missed the consensus estimate of -$0.01, further underscoring the challenges.

Looking ahead, analysts anticipate a slight improvement in the second quarter of fiscal 2026, with an estimated EPS of $0.02 on revenue of approximately $1.49 billion. This would reflect a 2% sales decline, yet a flip to EPS profitability, with the company reporting a $0.02 loss per share this time last year,

CEO Joel Anderson, who took the helm in September 2024, has been focusing on strengthening Petco's retail fundamentals and implementing a phased approach to return to sustainable, profitable growth. This includes cost discipline, operational efficiency, and a strategic shift towards enhancing e-commerce capabilities. The planned closure of 20-30 underperforming stores in 2025 is a clear indication of the company's commitment to streamlining its operations.

The recent partnership with Uber Eats, enabling delivery from all U.S. locations, is a notable step towards enhancing Petco's e-commerce presence and catering to evolving consumer preferences. This move could potentially boost sales and improve customer convenience, but its long-term impact remains to be seen.

Following the first-quarter earnings announcement, Petco's stock experienced a significant surge, increasing by over 25%. This positive market reaction was largely driven by the company's better-than-expected earnings outlook and strategic initiatives aimed at improving profitability. The full-year earnings outlook of between $375 million and $390 million exceeded Wall Street's expectations, further bolstering investor confidence.

Petco has reaffirmed its fiscal 2025 guidance, projecting net sales to decline in the low single digits and adjusted EBITDA between $375 million and $390 million. The company plans to invest approximately $130 million to $140 million in capital expenditures, including the development of five to ten veterinary locations. These investments reflect Petco's commitment to expanding its service offerings and adapting to changing consumer needs.

While strategic initiatives and operational adjustments have positioned the company for potential stabilization and future profitability, the challenges in driving top-line growth remain significant. The coming quarters will be critical in determining whether Petco can successfully navigate these shifting sands and deliver sustainable, profitable growth.