Q2 FY2026
Filed Sep 2, 2026Petco Reports Second Quarter 2026 Results 2nd Consecutive Quarter of Positive Comparable Sales Growth Delivered Q2 Profitability Ahead of Outlook Announces $75 Million Debt Prepayment, Progressing Toward 2x Leverage Target Reaffirms Fiscal 2026 Outlook
Petco delivered its second consecutive quarter of positive comparable sales growth, expanded gross and operating margins, increased operating income and Adjusted EBITDA, and reaffirmed its full-year outlook. Results included a $6.8 million net benefit from IEEPA tariff refunds, while net sales growth was limited by disruption from stronger-than-expected membership-program points redemption.
Key metrics
as reported| Metric | Value | q/q | y/y |
|---|---|---|---|
| Total net salesGAAP | $1.5 billion | – | increased 0.05% |
| Comparable salesother | increased 0.6% | – | – |
| Gross profitGAAP | $591.1 million | – | – |
| Gross margin rateGAAP | 39.7% of net sales | – | increased 37 basis points |
| Normalized gross marginother | about flat with the prior year | – | – |
| Selling, general and administrative expensesGAAP | $543,335 (in thousands) | – | – |
| Operating incomeGAAP | $47.8 million | – | increased 11.1% |
| Operating marginGAAP | 3.2% | – | increased 32 basis points |
| Net income attributable to Class A and B-1 common stockholdersGAAP | $38.7 million | – | – |
| Net income per Class A and B-1 common share, basicGAAP | $0.14 | – | – |
| Net income per Class A and B-1 common share, dilutedGAAP | $0.13 | – | – |
| Adjusted EBITDAnon-GAAP | $122.2 million | – | – |
| Normalized Adjusted EBITDAnon-GAAP | $115.4 million | – | – |
| Adjusted EBITDA Marginnon-GAAP | 8.2% | – | – |
| Net marginGAAP | 2.6% | – | – |
| Net cash provided by operating activitiesGAAP | $161,553 (in thousands) | – | – |
| Free Cash Flownon-GAAP | $129,918 (in thousands) | – | – |
| Year-to-date net cash provided by operating activitiesGAAP | $130.6 million | – | – |
| Year-to-date Free Cash Flownon-GAAP | $60.8 million | – | – |
| Cash paid for fixed assetsGAAP | $31,635 (in thousands) | – | – |
| Ending store countother | 1,377 stores | – | – |
Segments
| Segment | Revenue | q/q | y/y |
|---|---|---|---|
| ProductsConsumables growth was cited as highlighting that the Company's 'Reach for the Sky' strategy is gaining traction. | $1,216,857 (in thousands) | – | – |
| Services and otherNo segment-specific driver was provided. | $272,363 (in thousands) | – | – |
FY 2026 and Q3 2026 outlook
- RevenueFY 2026: Flat to up 1.5% year over year; Q3 2026: 0.4% to 1.0% growth
- NoteFY 2026 Adjusted EBITDA: $415 million to $430 million
- NoteFY 2026 Net Interest Expense: ~$122 million
- NoteFY 2026 Capital Expenditures: ~$140 million
- NoteFY 2026 Depreciation & Amortization: ~$200 million
- NoteFY 2026 Net Store Closures: ~15-20
- NoteQ3 2026 Adjusted EBITDA: $100 million to $103 million
- NoteOutlook includes net IEEPA tariff refunds of $6.8 million.
- NoteOutlook assumes no additional IEEPA tariff refunds are received for the balance of the year.
What drove it
- Comparable sales increased 0.6%, marking the Company's second consecutive quarter of positive comparable sales growth.
- Growth in consumables was cited as evidence that the 'Reach for the Sky' strategy is gaining traction.
- Results included a net benefit of $6.8 million from substantially all IEEPA tariff refunds related to tariffs paid under IEEPA in 2025 and 2026.
- The tariff-refund proceeds were net of investments to propel the repositioning of new assortments for future growth and were, to a lesser degree, offset by incremental fuel and tariff expense in Q2.
- Gross margin expanded 37 basis points to 39.7% of net sales.
- Operating income increased 11.1% to $47.8 million.
Concerns
- Net sales increased 0.05%, with sales disrupted by initial stronger-than-expected points redemption from the membership program relaunch.
- Without the net benefit from the tariff refund, normalized gross margin was about flat with the prior year.
- The Company cited ongoing supply chain headwinds.
- The outlook assumes economic conditions, currency rates, and the tax and regulatory landscape remain generally consistent, and that tariffs remain at current levels.
- The outlook assumes no additional IEEPA tariff refunds are received for the balance of the year.
What to watch
- Q3 2026 net sales outlook of 0.4% to 1.0% growth.
- Q3 2026 Adjusted EBITDA outlook of $100 million to $103 million.
- Execution of second-half strategic initiatives and investments behind growth priorities.
- The planned ~$140 million of FY 2026 capital expenditures.
- Progress toward the 2x leverage target following the $75.0 million debt prepayment subsequent to quarter-end.
- The expected ~15-20 FY 2026 net store closures.
Balance sheet and cash flow
- Ending cash balance was $293.5 million, versus $188.7 million last year.
- Cash and cash equivalents were $293,498 (in thousands) as of August 1, 2026, versus $256,736 (in thousands) as of January 31, 2026.
- Inventory decreased 1.1% year-over-year versus the 0.05% increase in net sales.
- Total debt was $1.48 billion, down from $1.59 billion last year.
- Total debt was $1,479,907 (in thousands) as of August 1, 2026, versus $1,498,210 (in thousands) as of January 31, 2026 and $1,592,700 (in thousands) as of August 2, 2025.
- Net Debt was $1,186,409 (in thousands) as of August 1, 2026, versus $1,241,474 (in thousands) as of January 31, 2026 and $1,403,952 (in thousands) as of August 2, 2025.
- Year-to-date cash paid for fixed assets was $69,788 (in thousands), versus $60,516 (in thousands) last year.
- Year-to-date borrowings under long-term debt agreements were $1,500,000 (in thousands), and repayments of long-term debt were $1,502,250 (in thousands).
- The Company closed 1 net store during the quarter.
Analysis
Petco reported a second consecutive quarter of positive comparable sales growth, with comparable sales increasing 0.6% and net sales increasing 0.05% to $1.5 billion. The Company said sales were disrupted by stronger-than-expected points redemption after its membership program relaunch, while noting that sales had been trending ahead of its Q2 outlook before the relaunch. Consumables growth was identified as a positive demand indicator and as evidence that the 'Reach for the Sky' strategy is gaining traction.
Profitability improved materially. Gross profit increased to $591.1 million and gross margin increased 37 basis points to 39.7% of net sales. Operating income increased 11.1% to $47.8 million, with operating margin rising to 3.2%. Net income increased to $38.7 million from $14.0 million, and diluted EPS was $0.13 compared with $0.05. Adjusted EBITDA rose to $122.2 million from $113.9 million, while Adjusted EBITDA Margin increased to 8.2% from 7.6%.
The reported quarter included a $6.8 million net benefit from substantially all IEEPA tariff refunds associated with tariffs paid in 2025 and 2026. Petco stated that normalized gross margin was about flat with the prior year without that benefit, and normalized Adjusted EBITDA was $115.4 million. The benefit was net of investments to reposition new assortments and, to a lesser degree, offset incremental fuel and tariff expense. This makes the underlying margin trend and the execution of assortment investments important factors for the second half.
Cash generation strengthened in the first half. Year-to-date cash provided by operating activities was $130.6 million versus $70.4 million last year, and year-to-date Free Cash Flow was $60.8 million versus $9.9 million. Cash and cash equivalents were $293.5 million, while total debt was $1.48 billion. Subsequent to the quarter, Petco prepaid $75.0 million of debt, bringing total prepayments to $170 million in the past nine months as it works toward a 2x leverage target.
Management reaffirmed FY 2026 net sales guidance of flat to up 1.5% year over year and Adjusted EBITDA guidance of $415 million to $430 million. Q3 guidance calls for net sales growth of 0.4% to 1.0% and Adjusted EBITDA of $100 million to $103 million. The outlook includes net IEEPA tariff refunds of $6.8 million, assumes no additional refunds for the balance of the year, and reflects management's intent to continue investing in growth priorities while absorbing ongoing supply chain headwinds.
Management, verbatim
We delivered stronger than expected profitability in the quarter while achieving our second consecutive quarter of positive comps. We were pleased to see growth in consumables, which highlights that our 'Reach for the Sky' strategy is gaining traction. Looking ahead to the second half, we are positioned to benefit from several growth drivers and are pleased to reaffirm our full-year sales and profitability outlook. We remain confident in our ability to generate sustainable, long-term growth.
Joel Anderson, Chief Executive Officer of Petco
We are pleased to deliver another quarter of positive comps and deliver on our bottom-line commitments as we execute on our economic model. Subsequent to the second quarter, we voluntarily prepaid an additional $75 million in debt, bringing our total prepayments to $170 million in the past nine months. Looking ahead, we are pleased to reaffirm our full-year sales and Adjusted EBITDA outlook, reflecting confidence in our second half strategic initiatives while remaining thoughtful about balancing the dynamic backdrop while investing behind our growth priorities.
Sabrina Simmons, Chief Financial Officer of Petco
Not in the filing
stated, not guessed- Non-GAAP EPS
- Prior-quarter comparisons for revenue, comparable sales, gross profit, gross margin, operating income, operating margin, net income, EPS, Adjusted EBITDA, operating cash flow and Free Cash Flow
- Q2 income tax rate
- Q2 inventory balance comparison in dollars
- Share repurchases
- Dividends
- FY 2026 gross margin guidance
- FY 2026 operating expenses guidance
- FY 2026 tax rate guidance
- Q3 2026 gross margin guidance
- Q3 2026 operating expenses guidance
- Q3 2026 tax rate guidance
AlphaAI analysis generated from the company’s SEC earnings filing (Form 8-K Item 2.02, or Form 6-K for a foreign private issuer). Every figure was cross-checked against the filing text; consensus estimates, price targets and share-price reactions are not shown because they are not in the filing. AI-generated research, not investment advice.