Petco shares fall 13% as Q1 net loss widens despite sales beat

Petco reported Q1 net sales of $1.5 billion, topping estimates, but posted a wider net loss that sent shares down 13% in premarket trading.

"Our strong first-quarter results, highlighted by positive comparable sales and profitability that exceeded our outlook, provide clear, early validation that our Phase 3 'Reach for the Sky' strategy is working," Chief Executive Officer Joel Anderson said.

The pet retailer posted comparable sales growth of 0.7%, marking a return to positive territory after declines. Adjusted EBITDA rose to $97.3 million from $89.4 million a year earlier, while gross margin expanded 21 basis points to 38.4%. The net loss of $15.1 million, or 5 cents a share, compared with a loss of $11.7 million, or 4 cents, in the year-ago period.

The selloff suggests investors focused on the bottom-line deterioration rather than the sales improvement. Petco reaffirmed its full-year outlook for net sales flat to up 1.5% and adjusted EBITDA of $415 million to $430 million, with management citing momentum from its strategic initiatives.

Metric	Actual	Consensus	Beat/Miss
Revenue	$1.50B	$1.49B	+0.7%
Comparable Sales	+0.7%	—	Return to growth
Adjusted EBITDA	$97.3M	—	+8.8% YoY

The company ended the quarter with 1,378 stores after closing four net locations. Total debt fell to $1.48 billion from $1.59 billion a year earlier, while cash and cash equivalents grew to $166.8 million. Inventory declined 1.9% year over year, outpacing the 0.2% sales increase.

Services revenue rose 6.8% to $268.6 million, outperforming the products segment, where sales slipped 1.1% to $1.23 billion. Chief Financial Officer Sabrina Simmons said the company remains focused on strengthening its retail and financial fundamentals to support sustainable, profitable growth and committed to reducing its leverage ratio to 2 times.

For the second quarter, Petco forecast net sales up about 0.3% year over year, in line with consensus, and adjusted EBITDA of $110 million to $112 million. The outlook assumes current tariff levels remain in place and incorporates a partial IEEPA tariff refund received in May, with no additional refunds expected for the rest of the year.

The wider loss raises questions about Petco's path to sustained profitability even as its top-line initiatives gain traction. Investors will watch the Q2 earnings call for evidence that margin improvement can keep pace with sales recovery.

This article is for informational purposes only and does not constitute investment advice.