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On Friday, BofA Securities analysts increased the price target for Petco Health & Wellness Co. Inc. (NASDAQ: WOOF) to $2.50 from $2.10, while keeping an Underperform rating. This adjustment follows Petco’s first-quarter adjusted EBITDA of $89.4 million, surpassing both BofA’s expectation of $83 million and the Street’s estimate of $82 million.
Net sales for Petco showed a decline of 2.3% year-over-year, with comparable store sales dropping 1.3%. This was largely due to the closure of 30 stores over the past year, including five closures during the first quarter. While sales trends for services showed a slight increase of 1% year-over-year, consumables experienced a decline of 2.1%, and discretionary supplies and companion animals saw a decrease of 4.2%. With total revenue of $6.12 billion in the last twelve months and an InvestingPro Financial Health score indicating weakness, these trends warrant close monitoring.
Petco’s gross margin remained stable at 38.2%, aligning with BofA’s forecast and slightly below the Street’s estimate of 38.3%. This margin stability was supported by effective margin management strategies, including improved merchandising and better control of markdowns and promotions.
The company’s selling, general, and administrative (SG&A) expenses ratio improved by approximately 160 basis points year-over-year, excluding last year’s one-time disposition costs. This improvement was attributed to progress in retail fundamentals, according to the analysts.
Overall, while Petco’s sales figures showed some areas of concern, the stronger-than-expected EBITDA performance and margin management efforts contributed to BofA’s decision to raise the price target.
In other recent news, Petco Health and Wellness Company Inc (NASDAQ:WOOF). reported its first-quarter 2025 earnings, which fell short of analyst expectations. The company posted an earnings per share (EPS) of -$0.04, missing the anticipated -$0.02, and reported revenue of $1.5 billion, below the forecasted $1.55 billion. Despite these misses, Petco experienced a significant increase in operating profit by $33 million. The company is also preparing to launch a new membership program in 2026. Analysts from UBS and Morgan Stanley (NYSE:MS) have shown interest in Petco’s strategic initiatives and growth potential, despite the current challenges. Petco maintains its full-year adjusted EBITDA guidance between $375 million and $390 million, with expectations of a slight decline in net sales. The company continues to focus on operational efficiencies and cost management, which contributed positively to its gross margin expansion.
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