On March 26, 2025, Petco Health and Wellness Co Inc (WOOF, Financial) released its 8-K filing detailing its financial results for the fourth quarter and full year of 2024. The company, a leader in pet health and wellness, operates approximately 1,423 pet care centers offering a wide range of pet care products and services through both retail outlets and online platforms.
Quarterly and Annual Financial Overview
For the fourth quarter of 2024, Petco reported a net revenue of $1.6 billion, a 7.3% decrease year-over-year, missing the analyst estimate of $1,560.85 million. This decline was partly due to the absence of a 53rd week in 2023. Comparable sales, however, saw a modest increase of 0.5% year-over-year. The gross profit for the quarter was $589.3 million, down 2.8% from the previous year.
For the full year 2024, Petco's net revenue was $6.1 billion, a 2.2% decrease from the previous year. Despite this, the company managed to reduce its GAAP net loss to $101.8 million from $1.3 billion in 2023, which included a significant $1.2 billion non-cash goodwill impairment charge. The adjusted EBITDA for the year was $336.5 million, down from $401.1 million in 2023.
Financial Achievements and Challenges
Petco's financial achievements include a reduction in net loss and an improvement in free cash flow, which was $49.7 million compared to a negative $9.9 million last year. These achievements are crucial for the company as it navigates the cyclical retail industry, where maintaining liquidity and reducing losses are vital for long-term sustainability.
However, the company faces challenges such as declining net sales and gross profit, which could impact its ability to invest in growth initiatives. The decrease in adjusted EBITDA from $105.3 million in Q4 2023 to $96.1 million in Q4 2024 highlights the need for strategic adjustments to enhance profitability.
Key Financial Metrics and Analysis
Important metrics from Petco's financial statements include a decrease in total net sales by 7% for the quarter and 2% for the year. The cost of sales also decreased, reflecting a 10% reduction in product costs for the quarter. Operating cash flow was $177.7 million, down from $215.7 million last year, indicating a need for improved operational efficiency.
The balance sheet shows total assets of $5.19 billion, with cash and cash equivalents increasing to $165.8 million from $125.4 million. This increase in liquidity is a positive sign, providing the company with more flexibility to manage its operations and investments.
Management Commentary and Future Outlook
“Our results in the fourth quarter demonstrate the progress we’ve made to return Petco to retail operating excellence,” said Joel Anderson, Petco’s Chief Executive Officer. “While there is more work ahead, I am confident our new leadership team is well-positioned to build on this early momentum, deliver double-digit adjusted EBITDA improvement in 2025 and set the business up for sustainable profitable growth.”
Looking ahead, Petco expects a slight decline in net revenue for 2025 but anticipates adjusted EBITDA to range between $375 million and $390 million. The company plans to close 20-30 net stores, reflecting a strategic focus on optimizing its retail footprint.
Conclusion
Petco Health and Wellness Co Inc (WOOF, Financial) faces a challenging retail environment with declining sales and profitability. However, the company's efforts to improve cash flow and reduce losses are positive steps towards achieving long-term growth. Investors will be keen to see how Petco navigates these challenges and capitalizes on opportunities in the pet care industry.
Explore the complete 8-K earnings release (here) from Petco Health and Wellness Co Inc for further details.
