Petco reported its second consecutive quarter of positive comparable-sales growth, alongside stronger profitability and further debt reduction, signaling continued progress in its turnaround strategy.
For Q2 fiscal 2026, net sales were approximately $1.5 billion, essentially flat year over year, while comparable sales increased 0.6%. Petco said sales were affected by stronger-than-expected customer points redemption following the relaunch of its membership program. Before the relaunch, sales were tracking ahead of the company’s Q2 outlook.
Profitability improves
Petco’s gross profit rose to $591.1 million, with reported gross margin increasing 37 basis points to 39.7%.
Operating income increased 11.1% to $47.8 million, while operating margin improved to 3.2% from 2.9% a year earlier.
Net income increased substantially to $38.7 million, compared with $14.0 million in Q2 2025. Adjusted EBITDA reached $122.2 million, compared with $113.9 million a year earlier. Excluding the $6.8 million net benefit from IEEPA tariff refunds, normalized adjusted EBITDA was $115.4 million.
Balance sheet moves forward
Petco also announced an additional $75 million voluntary debt prepayment after quarter-end, taking total debt prepayments to $170 million over the past nine months.
Total debt stood at approximately $1.48 billion, down from $1.59 billion a year earlier. Cash increased to $293.5 million, while year-to-date operating cash flow reached $130.6 million, compared with $70.4 million in the prior-year period.
FY2026 outlook reaffirmed
Petco maintained its full-year guidance:
Metric |
FY2026 Outlook |
|---|---|
Net sales |
Flat to +1.5% |
Adjusted EBITDA |
$415M–$430M |
Net interest expense |
~$122M |
Capital expenditure |
~$140M |
Net store closures |
~15–20 |
Q3 guidance calls for 0.4%–1.0% sales growth and $100–$103 million adjusted EBITDA.
Animal-health industry implication
The more strategically important development for the animal-health sector is Petco’s continued integration of retail, preventive pet care and veterinary services.
Petco’s financial recovery suggests that the pet-health opportunity is increasingly moving beyond product retail toward a broader pet-care ecosystem, where nutrition, preventive healthcare, veterinary services and recurring customer relationships can reinforce each other.
For animal-health companies, Petco therefore remains an important commercial channel to monitor—particularly for preventive healthcare, veterinary diagnostics, therapeutics, nutrition and chronic-condition management.
Bottom line
Petco is showing early signs of a more stable operating model: positive comparable sales + improved profitability + stronger cash generation + $170 million of debt prepayments in nine months. The modest top-line growth means the turnaround is not complete, but the combination of financial discipline and an expanding pet-health platform makes Petco strategically relevant to the U.S. animal-health market.
