Petco Health and Wellness Company, Inc.

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Chewy Posts 8% Sales Growth While Petco Revenue Stays Flat

Chewy reported an 8% increase in sales for the quarter ended May 2026, while Petco Health and Wellness saw flat revenue in the same period. Chewy's quarterly revenue reached $3.3 billion, compared to Petco's $1.5 billion. Chewy trades at 0.7 times sales and 19 times EBITDA with a slight net cash balance, whereas Petco trades at 0.12 times sales and 10 times EBITDA but carries $2.3 billion in debt against a $750 million market cap. Chewy generates 84% of its sales from Autoship repurchases and is expanding into vet care, private label goods, and advertising to boost margins.

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Petco Faces Flat Sales, Falling EPS, and High Debt

Petco's stock has dropped 14% over the past six months to $2.54, underperforming the S&P 500's 9% gain. The company's same-store sales have been flat over the last two years, indicating weak demand. Earnings per share declined by 34.5% annually over the past three years while revenue remained flat, reflecting profitability challenges. Petco also carries $2.78 billion in debt against only $166.8 million in cash, with a net-debt-to-EBITDA ratio of 6×, signaling high leverage risk.

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Petco Reports First Positive Comparable Sales in Five Quarters, Analysts Adjust Targets

Petco Health and Wellness reported first-quarter 2026 results on June 3, with comparable sales rising 0.7%, the first positive comp in five quarters. Net sales edged up 0.2% to $1.5 billion, gross margin expanded 21 basis points to 38.4%, and operating income jumped 50.5% to $24.6 million. Adjusted EBITDA reached $97.3 million, up from $89.4 million a year earlier, while net loss widened to $15.1 million from $11.7 million. CEO Joel Anderson said the results validate the company's strategy, and Petco reaffirmed its full-year adjusted EBITDA guidance of $415 million to $430 million. Following the report, Goldman Sachs raised its price target to $4.14 from $3.83 with a Neutral rating, Evercore ISI lifted its target to $3.50 from $3 with an In Line rating, and Citi lowered its target to $3.25 from $4 while maintaining Neutral.

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Three Consumer Stocks That Concern Us

StockStory identifies three consumer stocks it is passing on: RH, Genuine Parts, and Petco. RH, formerly Restoration Hardware, saw flat sales over three years and a 39.2% annual earnings-per-share contraction, with a high net-debt-to-EBITDA ratio of 7 times. Genuine Parts posted 3.1% annual sales growth over three years, lagging peers, and its 4.5% operating margin trails the industry average. Petco experienced flat revenue and a 34.5% annual EPS decline over three years, alongside a 6 times net-debt-to-EBITDA ratio that may pressure capital access.

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Petco pauses vet hospital expansion to protect cash flow

Petco has halted construction of new veterinary hospitals to preserve free cash flow, pausing a key differentiator against online rivals Amazon and Chewy. The company currently operates about 300 vet hospitals and plans to resume building in 2027, CEO Joel Anderson said during the first-quarter earnings call. Service revenue rose 5.8% to $255.9 million in the fourth quarter of 2025, while product revenue fell 3.9% to $1.259 billion. Total debt stood at $1.48 billion, down over $100 million from a year earlier, and free cash flow was an outflow of $69 million for the quarter.

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Chewy acquires Modern Animal to expand pet healthcare platform

Chewy is acquiring technology-enabled veterinary care provider Modern Animal, accelerating its push into the pet healthcare market. The combined businesses are expected to operate 60 clinics by the end of fiscal 2026, with embedded revenue contribution approaching $290 million at steady state. Chewy's fiscal 2026 outlook includes an estimated $70 million revenue contribution from Modern Animal, with total net sales guidance of $13.40 billion to $13.55 billion, representing year-over-year growth of 6.3% to 7.5%. Management expects the acquisition to create a modest margin-rate drag during 2026 as integration progresses, while the company plans to open 10 to 12 Chewy Vet Care locations this year. Chewy shares have fallen 22.8% in the past three months, and the stock currently carries a Zacks Rank #4 (Sell).

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