Petco Analysts See Turnaround Progress With Higher Margins, Profitability Focus

Priya Nigam

March 27, 2025

Shares of Petco Health and Wellness Company Inc (NASDAQ:WOOF) skyrocketed in early trading on Thursday, despite the company reporting disappointing fourth-quarter results.

The company reported its results amid an exciting earnings season. Here are some key analyst takeaways.

Wedbush On Petco Health and Wellness Company

Analyst Seth Basham maintained an Outperform rating, while reducing the price target from $6 to $4.

Petco Health and Wellness Company's comps rose 0.5% in the quarter, slightly below consensus of 0.8%, while decelerating from the previous quarter's 1.8%, Basham said in a note. The company's gross margins expanded by 180 basis points to 38%, beating the consensus of 37.8%, he added.

"The results demonstrate solid progress under new CEO Joel Anderson to return the business model to retail operating excellence and drive structural costs out," the analyst wrote. While management guided to a decline in net sales, their adjusted EBITDA guidance came in at $82 million-$83 million, above consensus of $78.2 million, he stated.

Check out other analyst stock ratings.

RBC Capital Markets On Petco Health and Wellness Company

Analyst Steven Shemesh reiterated an Outperform rating, while cutting the price target from $6 to $4.

Petco Health and Wellness Company's comps decelerated sequentially, expenses rose, and market share contracted in the quarter, Shemesh said. Management presented "a three-phased approach to reset its economic model and improve profitability," he added.

The first phase of improving its operating model and leadership team is complete, while the second phase of improving margins "through merchandising, sharpening approach to pricing/promotions, optimizing store fleet and overall cost discipline across the business" is currently underway, the analyst wrote. The third phase of testing growth initiatives to drive revenue growth will begin in late 2025, he stated.

Goldman Sachs On Petco Health and Wellness Company

Analyst Kate McShane reaffirmed a Buy rating, while raising the price target from $4.00 to $4.48.

Petco Health and Wellness Company's net revenues declined by 7.3% year-on-year to $1.552 billion, missing the consensus of $1.561 billion, McShane said. The management team "is focused on retail fundamentals to strengthen the foundation for Petco to return to sustainable and profitable growth," he wrote.

The company closed 25 net locations in 2024 and plans to close another 20 to 30 net locations in 2025, "many of which were unprofitable and will help drive better adj EBITDA," the analyst stated. Management guided to adjusted EBITDA profitability growth for 2025, he further stated.

WOOF Price Action: Shares of Petco Health and Wellness Company had risen by 28.6% to $3.14 at the time of publication on Thursday.

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Photo: Shutterstock

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