Petco Health and Wellness Company Keeps PT at $4.15 Despite Q2 Revenue Growth

Jefferies reiterated a Hold rating on Petco Health and Wellness Company, keeping the price target at $4.15. Q2 FY2025 results showed $1.5 billion in revenue, just in line with estimates and up 2.3% YoY. E-commerce is now more profitable, and inventory control is improving. Operating income increased by $40.6 million to reach $43 million, and adjusted EBITDA soared by $30.3 million to $113.9 million.

Petco Health and Wellness Company (NASDAQ: WOOF) has announced plans to close up to 30 more of its stores as part of a broader transformation strategy aimed at improving profitability and operational efficiency. This decision follows the company's Q2 FY2025 earnings report, which showed mixed results despite a slight increase in revenue. The company reported $1.5 billion in revenue, up 2.3% year-over-year, but also faced a 1.4% decline in comparable sales Popular pet retailer closing dozens of stores^[1].

Petco's CEO, Joel Anderson, emphasized the company's progress in transforming its business model during the Q2 earnings call. He highlighted improvements in gross profit margins, operating income, and adjusted EBITDA, which increased to $113.9 million Popular pet retailer closing dozens of stores^[1]. Anderson also underscored the company's intention to give customers a reason to visit its stores, announcing a new marketing plan that includes in-store events and experiences designed to engage pet parents Popular pet retailer closing dozens of stores^[1].

The company's strategy to close underperforming stores is part of a larger effort to streamline its operations and compete more effectively against e-commerce giants like Amazon and Chewy. According to data from Placer.ai, PetSmart commanded 62.1% of pet-store foot traffic from January to May 2024, while Petco held 37.9% Popular pet retailer closing dozens of stores^[1]. This indicates a significant gap that Petco is attempting to close by enhancing its in-store experience and improving its online offerings.

Investors have reacted to the news of store closures with caution. Shares of Petco fell 3.8% in the afternoon session following the announcement, although the stock market's overreaction to news events suggests that the market views this as a meaningful but not fundamentally altering development Why Petco (WOOF) Stock Is Down Today^[2]. Petco's stock has been volatile, with 63 moves greater than 5% over the last year, and the company's shares are trading 40% below their 52-week high Why Petco (WOOF) Stock Is Down Today^[2].

Despite the challenges, Petco's e-commerce platform has shown signs of growth and profitability. The Gabelli Pet Parents' Fund, which invests in pet industry companies, reported strong returns in Q2 2025, with Chewy Inc. (CHWY) being one of the largest contributors The Gabelli Pet Parents' Fund Q2 2025 Commentary^[3]. This indicates that the pet industry is expanding, driven by rising pet ownership and evolving consumer preferences.

In conclusion, Petco's strategic decision to close underperforming stores is part of a broader transformation aimed at improving profitability and operational efficiency. While the company faces challenges, its focus on enhancing the in-store experience and improving its e-commerce platform could position it for future growth.