Petco at Goldman Sachs Conference: Strategic Transformation Focus

On Thursday, 04 September 2025, Petco Health and Wellness Company Inc. (NASDAQ:WOOF) presented at the Goldman Sachs 32nd Annual Global Retailing Conference 2025. The company outlined its strategic transformation efforts, emphasizing progress in retail fundamentals and profitability improvements. CEO Joel Anderson highlighted a phased approach focusing on execution and bottom-line enhancements, while also addressing challenges such as store closures and consumer debt.

Key Takeaways

• Petco is in phase two of its transformation, focusing on execution and profitability.
• Veterinary services are a key differentiator, with a focus on scaling efficiently.
• Approximately 25 store closures are expected this year, with potential growth in 2027.
• The company is cautiously optimistic about consumer resilience amid rising debt.
• A "test and learn" approach is planned for phase three, starting in 2026.

Financial Results

• EBITDA: Improvements have been observed in Q1 and Q2.
• Gross Margins: Efforts are focused on expanding gross margins.
• Inventory: Down 9.5% at the end of the first half, with sales down 2%. The aim is to maintain inventory below sales.
• Store Closures: 25 closures anticipated this year, with moderation expected next year and potential growth by 2027.
• Sales per Square Foot: Focus on improvement without significant capital expenditure.

Operational Updates

• Store Experience: Operating 1,400 stores, with optimal size around 13,000 square feet. Lease renewals provide flexibility.
• Services: Optimizing the existing veterinary fleet of 300 locations without major capital investment.
• Merchandise Differentiation: Emphasis on product development and private label to increase basket size.
• Omnichannel: Enhancing speed and convenience through stores and digital integration for appointments and loyalty points.

Future Outlook

• Phase Three Growth Pillars: Focus on store experience, merchandise differentiation, scaling services, and omnichannel optimization.
• Consumer Environment: Anticipated resilience in the second half, with limited tariff headwinds and monitoring of consumer debt.

Q&A Highlights

• Competition: Market share consolidation is expected to continue at pre-COVID rates.
• Pricing Strategy: Effective management of pricing, with AUR levers in use.
• Inventory Management: Aiming to keep inventory below sales levels in the latter half of the year.

For a deeper dive into Petco’s strategic initiatives and financial performance, readers are encouraged to refer to the full transcript.

Full transcript - Goldman Sachs 32nd Annual Global Retailing Conference 2025:

Kate: Hi, hi everybody. Thank you for attending one of our last fireside chats of the conference. It’s our pleasure to introduce you to Petco Health and Wellness Company Inc. Today we have with us Joel Anderson, Chief Executive Officer, and we also have with us Sabrina Simmons, Chief Financial Officer. Thank you both for joining us today. We’re excited to have you. You do have a lot going on.

Joel Anderson, Chief Executive Officer, Petco Health and Wellness Company Inc.: Yes, we do.

Kate: I almost wonder if I have to be up here. You could just launch into all your phases and initiatives. Obviously, this has been a big year of transformation for Petco Health and Wellness Company Inc. so far. You have this multi-phased approach and focused on three stages. The first one is the strengthening of the retail fundamentals. I wondered if we could maybe just level set in terms of what you’ve been able to accomplish, how do you think you’re positioned, and how soon and closer we are to the next phase?

Joel Anderson, Chief Executive Officer, Petco Health and Wellness Company Inc.: Yeah, look, as you just alluded to, this transformation is very well grounded in specific phases. We’re well past phase one, but I think it’s important I articulate phase one for a second because that really led to the foundation of putting us in phase two. So much of phase one was just a combination of, one, identifying where the opportunities were, as well as rebuilding the leadership team. We completed the rebuilding of the leadership team with Sabrina joining and a couple others at the beginning of the year, end of February. Like any great strategy, it only works if you’re also really good at execution. That’s phase two. If I had to summarize phase two, it’s really about executing and implementing.

While we had a long runway last year of really identifying a lot of things, what I’m most excited about and most pleased about, and it’s already showing up in our results both Q1 and certainly in Q2, is a lot of improvement in EBITDA. Specifically, phase two was really about improving the bottom line. That’s really where we’ve been focused. That’s where you’ve seen the movement. It’s also been about improving the culture. I mean, we’ve changed the culture from playing not to lose to playing to win. That’s the part that’s been, as Sabrina said a number of times, it’s become fun to save money. People are excited about it. We celebrate that at Petco. We’re reinventing the culture and I’m really pleased with where we’re at in phase two.

Kate: That’s great. If we can maybe jump ahead to phase three, which I know is on the come.

Joel Anderson, Chief Executive Officer, Petco Health and Wellness Company Inc.: Yeah.

Kate: What are you most excited about, what do you think will come to fruition first?

Joel Anderson, Chief Executive Officer, Petco Health and Wellness Company Inc.: What is important about phase three is that it is equally as grounded in a strategy. While many of you are very interested in when we are going to get to phase three, we are also being very disciplined in our approach. As I said, we are squarely in phase two, but we are starting to think about phase three strategically. Our strategy on phase three growth is centered around four pillars. I am happy to go into all four of those pillars, but I would articulate them quickly. One is about amazing store experience. Our partners are incredible. They love pets, and fostering the fun of a great store experience is number one. Number two is merchandise differentiation. I think we have an incredible opportunity to differentiate our product in our stores. Number three is services at scale.

While strategically we have made many acquisitions and grown hospitals very fast, we have a big opportunity as part of our growth to take all our services to scale. Services are tough. They are hard to do, but in many ways, that is our moat. That is something we are really good at and it is hard to replicate. Finally, it is winning with omnichannel. Those are the four pillars that we are now looking at that will lead our growth that will start to show up in 2026. It is also important I mention to you that the approach we are taking is very much a test and learn approach. There is not some big unveil coming, Kate. If you think about merchandise differentiation, as we change a department, we will test and learn, try it in 25 stores, make sure it works, and then roll it out.

There is not this, we are going to change the whole store and wait until next July. As each department gets corrected and fixed and we bring more opportunities to it, we will start to roll those out. It will be grounded in a lot of facts that prove this works before we make the inventory investment. Of course, you have to sell through what you currently have.

Kate: Maybe a good place to drill down with regards to the pillars, and then the piece that I find most interesting is the services. It’s a traffic driver. It’s a reason to go to the store. Omnichannel is part of it too. Also from a competitive standpoint, I think it’s a differentiator. I wondered if you could maybe talk through just services, maybe how you found services when you got there, where you think services can go, and how big of a deal do you think it is versus your competitors?

Joel Anderson, Chief Executive Officer, Petco Health and Wellness Company Inc.: It’s a great question. Quite honestly, Kate, when I was making a decision to make a change, services was one of the compelling reasons I got excited about Petco. On one hand, we’ve had grooming a long time. On the other hand, we made the right strategic decision to grow hospitals internally. All our vet operations are Petco owned. I think that gives us a really nice point of differentiation that our veterinarians are connected to our groomers who are connected to the center of store. It’s one big Petco ecosystem. Like you alluded to, services is something that, not in my lifetime will you take online, right? You have to physically show up. To your point, it drives traffic. Having said all that, we’ve seen since looking under the covers a big opportunity to optimize our services.

If I look at vet, again, that’s staged out how we’re going to optimize it. The first one is optimizing the existing fleet. We went from zero to 300 in a very short period of time. Now we have a fleet there that, without having to spend a lot of capital, that’s in the rearview mirror, it’s been spent, we can really grow our hospital operations. We’re improving the digital operations so that you can make appointments easier online. We’re improving the number of days our hospitals are open. That takes just training and developing more veterinarians, but doesn’t take a lot of capital. You’re absolutely right. Services is a big point of differentiation for us. Even on the grooming side, despite having it for as long as we had, we found there was a lot of times you’d go online and there wasn’t a grooming appointment available.

We’ve optimized the software. We’ve standardized how many pets our groomers can see. We’re getting better at utilizing our junior pet stylists to maybe do the washings so that our senior pet stylists can do the more difficult ones, which then again, you can train a junior pet stylist much quicker. You open up more appointments. We’re really making that efficient. Down the road, we’ll start to look at opening more hospitals as an example.

Kate: That’s great. Just speaking of competition, I know it’s very fragmented, but you also have some very solid competitors in the space, both with NAS and specialty. We talked about services as a differentiator, but just overall, how are you thinking about competition and what Petco Health and Wellness Company Inc.’s value proposition is amongst the competitive set?

Joel Anderson, Chief Executive Officer, Petco Health and Wellness Company Inc.: Yeah, it’s a good question, right? We do have a wide spectrum of competitors. If anything, the pet space became too easy to grow during the COVID years. You just opened a door and sales happened. As you’ve gotten back to a more normalized growth rate, you’ve got to be tighter and you’ve got to be differentiated. I think for many of the reasons I just articulated, our growth strategy, all four of those pillars are points I believe we can be different than the competition. Even when I talked about omnichannel, it’s important I didn’t say e-commerce. Our stores will play a really key role. As we start to grow e-commerce again, same-day deliveries, two-hour deliveries, buy online, pick up in store. Even the fact of the mobile phone playing a very important role in making grooming appointments, making vet appointments, checking your loyalty points.

We really think of it as a digital operation that really enables the stores as well as serves the pure play customer that wants an online delivery.

Kate: Speed has been actually something that we have heard across the board at this conference in terms of that is what the customer is looking for, obviously value. I think speed and convenience is right up there now with value based on what everybody is telling us. How do you feel you are today with regards to the convenience and speed versus your competitors? Can you get better?

Joel Anderson, Chief Executive Officer, Petco Health and Wellness Company Inc.: Yeah. The good news about that is, A, we agree. Yeah, it is an element the customer’s looking for. B, we can get faster without it having to be a huge capital outlay for us. In addition to using our distribution centers for repeat delivery, because that’s a planned purchase, we know what date we owe them that shipment. It’s much easier and, you know, efficient to use the distribution center. For a customer that needs speed and wants speed, those 1,400-ish stores we have out there are already kind of forward-deployed inventory. We’re getting much better at, you know, using market fulfillment centers, and we’re being very strategic about that as well. We are utilizing our lower volume stores as opposed to our higher volume stores, not to disrupt the customer that’s coming in, you know, foot traffic.

By the way, that also makes the lower volume store more efficient because you’re sending more inventory in there to fulfill an online order. I agree 100% that speed is a component that we are focused on and it’ll get better in 2026.

Kate: Great. You mentioned 1,400 stores. I think you’ve closed some stores since you guys have been at the company. How do you think about your store count and your fleet? Is there any criteria that you’re looking at to evaluate store performance today?

Joel Anderson, Chief Executive Officer, Petco Health and Wellness Company Inc.: Yeah, several elements. Sabrina, if you want to weigh in, Sabrina sits in our real estate committee meeting every week. First and foremost, we look at the financial performance of the store, bottom line profitability, labor rates, things like that. The second thing we look at is the market. Is this a node we want to be in? Maybe it’s just in the wrong location. We look at that. We look at the overall trajectory and health of our store fleet. We’re fortunate enough that we’re in a situation that over half of our stores come up for lease renewal in the next few years. That, Kate, really gives us a lot of flexibility that we can outward project where we need to be. Having said all that, the health of our stores is in pretty good shape. We’ve really looked at that. The EBITDA continues to improve.

As we alluded to, we closed 25 last year. We expect to close about that this year. It’ll start to moderate next year. I think as you get into 2027, actually start to see growth. I don’t know, Sabrina?

Sabrina Simmons, Chief Financial Officer, Petco Health and Wellness Company Inc.: Yeah, the only thing I’d add to that, all of that’s right on, is there’s a really nice opportunity that we have in store productivity. We have a nice size fleet nationwide. I think it’s an advantage these days to be an omnichannel player. Most pure play e-com want to establish some brick and mortar. We have that differentiator in the services. Over the last few years, as our gross margins came down, so did the performance in our stores. Building back as we are focused on gross margin expansion, focused on the four-wall profitability of our boxes, we’re just looking at square foot sales improve. We’ve even seen that in the first half.

We’re just at the very beginning, again, without having to spend a whole lot of capital, of just reaping the benefits of increased profitability within those four walls as we improve our merchandise, as we improve how we operate around our pricing architecture, promotions, all of that to improve our margins.

Kate: Given that you do have 50% of your store base up for renewal the next two years, does that give you an opportunity to maybe reassess the size of the store or think about a different way to approach the store?

Joel Anderson, Chief Executive Officer, Petco Health and Wellness Company Inc.: Yeah, we’ve actually already looked at the size of the store. You know, our average store is about 13,000 square feet. That’s the optimal model, and we feel really good about the size of our store. As Sabrina said, we still have opportunity to, you know, improve sales per square foot. There’s a lot of initiatives that are all about that. That feels good, and that does represent an overwhelming majority of our stores.

Kate: Sabrina, I know you’ve worked very hard on the cost side of things. One of the areas that I think you’ve been focused on is moving towards more impactful targeted promotions and any kind of opportunity as a result of that. How have you been able to balance the promotional activity and maybe what the customer has been used to versus this new more targeted strategy?

Sabrina Simmons, Chief Financial Officer, Petco Health and Wellness Company Inc.: Yeah, I mean, first of all, we always start with a customer lens. We know to play in retail effectively these days, you have to be very value conscientious. You have to offer value, play on the holidays, do promotion. What we’ve been doing is not trying to take away any of that promotional cadence, but more responsibly execute it. What was happening before in our stores, purposefully and probably some inadvertently before the management team came in, was we were allowing customers to use a lot of stacking. They could take a coupon on a markdown, on an extra 20. You deteriorate margin quite quickly that way. I don’t actually think most customers even expected to be able to do all of that stacking.

We’re still offering the promotion, but we’re getting much more careful and disciplined about how we’re operationalizing that so that we’re preventing all of that stacking. We’re also just looking overall at depth because, again, we got a little eager about chasing sales. There wasn’t enough balance on the profitability side. Now we have a really talented team who’s working on inventory planning, merchandise planning, managing our margin appropriately so that each promo we do, we have an opportunity to look at depth of promo and perhaps get the same lift without having to go so deep.

Kate: Another area that I know you’ve been focused on is just your cost. Could you maybe update us on how the conversations have been with suppliers and what you’ve been able to accomplish there?

Joel Anderson, Chief Executive Officer, Petco Health and Wellness Company Inc.: No, take it.

Sabrina Simmons, Chief Financial Officer, Petco Health and Wellness Company Inc.: Okay. Yes, we started that at the very end of 2024. What we have found, broadly speaking about the company, is a lot of operating, this is why we talk a lot about retail fundamentals, because there’s a lot of low-hanging fruit and basics that we have found we can just do a better job executing to that reaps a lot of return. I would say merch and non-merch procurement were both areas of opportunity where we really weren’t using the weight of our size at $6 billion in sales to be assertively negotiating with our vendors. We always want to create win-wins, but we really weren’t negotiating as hard as we could to affect that win-win balance with them. We have done that much more effectively beginning last winter. We are in the midst of doing that again as we’re preparing in the summer to have discussions around 2026.

That has reaped a lot of benefit for us as well. Again, on the non-merch side, we’ve put in a whole team now. We didn’t have really a professional procurement team that was focused just on looking at negotiating deals on the IT side, on the freight side, having good discipline around RFPing everything to make sure we were getting the best pricing always. All of that now has been put in place and is starting to reap the benefits you’re seeing in our financial statements.

Kate: That’s great. I wanted to make sure I asked a question on the merchandising. It can go two ways or two kind of big questions. Before you guys arrived at the company, the company had been more premium focused and didn’t have many value brands. I think once things started to kind of normalize after COVID, there was a realization that more had to be offered. There were more value brands introduced. When we just think about the non-discretionary or just the consumables piece, is there a lot of work to do there? Are you happy with the good, better, best and how things are positioned?

Joel Anderson, Chief Executive Officer, Petco Health and Wellness Company Inc.: As Sabrina just alluded to on pricing and AUC and all that, we’ve got a lot of work to do there. As it relates to strategically how I think about it, you know, I came out of a business that was largely discretionary. My prior business was largely consumable, Walmart, right? We’re blessed at Petco Health and Wellness Company Inc. that we’ve got both, and they operate very differently. I think of the consumables business as our traffic driver. It’s a reason to come to Petco Health and Wellness Company Inc. all the time. Where we’ve been really focused on that, like if you’re going to be successful in consumables, you’ve got to be in stock all the time. Certainly, it’s a very national brand, so you’ve got to be sharp, price sharp, right?

A lot of our efforts on consumables have been about improving our in stocks, and we’ve made incredible progress there. As I think about the discretionary side, having spent 10 years in it, the opportunity with that is basket, right? Consumables is going to bring them into Petco Health and Wellness Company Inc., and the discretionary provides us the opportunity to drive basket. I think we have an opportunity to not treat that side of the business so much in a set it and forget it mentality, and it needs to be one that changes much more frequently, surprise and delight. I’m coming in for my bag of dog food, and like, that is a really cute collar, and it’s got my dog’s name on it. There’s a personalization element to it. There’s a trendright, newness element of it. We’re really working on both sides of it combined together.

It’ll help drive more consumers into the store and drive a bigger basket.

Kate: That’s where I was going to go with my second question on the discretionary side, because, you know, Michael, the former Chief Merchant at Five Below, is your Chief Merchant now.

Joel Anderson, Chief Executive Officer, Petco Health and Wellness Company Inc.: Yeah.

Kate: We know he has great ideas. I wondered when we could maybe start, it sounds like you’re going to do a lot of test and learn, but when we could start to see more of that infiltrate into the store.

Joel Anderson, Chief Executive Officer, Petco Health and Wellness Company Inc.: I’m big in understanding what somebody’s superpower is, and Michael’s true superpower is sourcing and product development. As he’s gotten on board, joined right around the same time as Sabrina, he has already had a trip overseas, understands our brands, our private label brands. Not too surprising, he and I are aligned on the ability to use discretionary to really drive surprise and delight and drive newness and drive trend. I think there’s a license element to it that obviously exists on the human side, and I think it exists on our side as well. As I alluded to at the very beginning, Kate, this isn’t going to be a big unveil.

Kate: Right.

Joel Anderson, Chief Executive Officer, Petco Health and Wellness Company Inc.: We’re working on many categories. We’ll start testing them later in the year. It won’t show up in real sales till next year because we want to get it right, you know, and it’s the same way I used to do it at Five Below, like you got to test it, right? We are not going to bet the farm. I can’t go to Sabrina and say, I need $100 million in inventory to go do this without having, you know, the facts to back it up. It’s a real opportunity for us to really drive a new assortment throughout our whole supply side. On our last call, I alluded to one example and, you know, share that with you. We brought in human, right?

T-shirts and coffee mugs and sweatshirts, you know, because the pet parent loves to, you know, show off who their pet is, you know, and snarky sayings for pets and bring that to life. That’s just one example of many to come.

Kate: That’s great. We are asking five questions of every company who meets with us on stage. A lot we’ve touched on already, but this is more less about Petco Health and Wellness Company Inc., more just about your expectation for the consumer and the health of the consumer. Just what do you think the consumer will look like or what the environment will look like in the second half versus what you’ve seen in the first half?

Joel Anderson, Chief Executive Officer, Petco Health and Wellness Company Inc.: I obviously have to look at it a little bit through the lens of Petco, but I think of the broader lens, they’ve been surprisingly uber resilient, right? I think about in our lens, Sabrina alluded to getting rid of double stacking. You would think despite pulling back on some of that, you look at our second quarter results on sales versus first quarter on a two-year stack, we actually had a 100 basis point sequential improvement. That to me, big picture, alludes to the consumer remained resilient as we tightened. Look, we all know tariffs are coming. In the pet space, it’s not near as meaningful as it is in some of the other categories, but there’ll be a halo impact on it. I think we’re cautiously optimistic. I’ve been in the fourth quarter world.

I mean, Five Below was very much fourth quarter and my Toys "R" Us days. The consumer is not going to pull back in the fourth quarter. I think that’s a given. They’ll buy for holiday. I’m a little concerned about the amount of consumer debt rising. I think that’ll be interesting to watch as we get into 2026. I think the back half of the year looks like it’ll maintain the consistency we’ve seen.

Kate: Okay. Our second question is on pricing. You just mentioned tariffs really isn’t necessarily anything huge in the pet space necessarily. To the extent that maybe you’ve had to raise prices here and there because of tariffs or whatever else, have you seen any elasticity response as a result?

Joel Anderson, Chief Executive Officer, Petco Health and Wellness Company Inc.: Yeah, and Sabrina, feel free to jump in here too. For us, pricing is a little different.

Kate: Yep.

Joel Anderson, Chief Executive Officer, Petco Health and Wellness Company Inc.: Because, you know, we started looking at our pricing last year, long before we knew tariffs were coming. We have taken price up, and in some cases, we have taken price down. It was more about us fixing our model than it was being, you know, driven by tariff. I think of promo stacking as a pricing mechanism that we had a pull against. We do not have a huge tariff headwind coming. At the same time, we know we have to be competitive, you know, and we watch it every day. Sabrina’s team’s done a great job putting more guardrails around that. Maybe you want to talk about.

Sabrina Simmons, Chief Financial Officer, Petco Health and Wellness Company Inc.: No, I think that’s right. We’ve been using all of our AUR levers, including pricing, since the beginning of 2025, and we monitor it closely. In our sector, we’re not faced with the same headwinds as some other sectors. There’s a meaningful change in the tariff, so we’re aware of that. We’ll be monitoring the competition mostly. We want to stay competitive, again, customer-first lens. We’ll also be watching any unit changes. Most of our changes have been in play, both up and down, for the first half already. We feel like we’re managing through it fine.

Kate: Our third question is on inventory. Can you discuss your expectation for inventory growth into the second half?

Sabrina Simmons, Chief Financial Officer, Petco Health and Wellness Company Inc.: Yeah, this is an area that I’ve been quite pleased at how quickly the teams rallied and responded very responsibly. It’s one of the silver linings of tariffs, honestly, because we really quickly started to look at SKU rationalization. It first started with, do we really need to import all this, you know, on the private label side? It forced us then to really get a head start on, we have a lot of inventory that’s not as productive as we want it to be. We should really start rationalizing this. The team did a fantastic job. We delivered at the end of the first half year, inventory down 9.5%, on sales down 2%. It’s a great spread, negative. We always want to keep a relationship to that. We expect to keep a healthy relationship with inventory below sales in the second half.

I think that’s one of your best protections in a potentially volatile macro, is being really, really well managed on inventory. It’s a strength for us.

Kate: Our fourth question is on non-tariff related margin drivers. Freight, wages, and materials. How do you think that will look into 2026, better, same, or worse?

Sabrina Simmons, Chief Financial Officer, Petco Health and Wellness Company Inc.: Yeah, I mean, here too, this is where when I mentioned how we brought in a professional procurement team, they went to work on looking at all of these different areas of non-merch. One of the areas that we focused on most because the dollars are big, are freight and supply chain. We went and did really major RFPs with a lot of our providers. We feel like we’re in a really good position with medium-term contracts that keep our pricing very well controlled. It’s one of the things that has helped us leverage so much as well in 2025. That’ll continue into 2026. All of the, and that’s just part of the margin profile. Of course, we’re going to continue to use all of the other levers as well. We feel very well positioned and confident in where we stand there.

Kate: Great. Our fifth question is about the competitive landscape and consolidation. Do you think market share consolidation will speed up, slow down, or be the same in 2026?

Joel Anderson, Chief Executive Officer, Petco Health and Wellness Company Inc.: Yeah, look, I think I look at it over a longer lens. If you go back to pre-COVID, there was a consistent consolidation that kind of all disappeared during COVID time. We’ve seen that return in 2023 and 2024. I wouldn’t say it’s an acceleration. I think it’s more of what we’ve seen recently and more consistent with what we saw before COVID. I think that’s what’s beautiful about retail if you’ve got the stomach for it, right? You’ve got to keep reinventing yourself. You’ve got to have a point to differentiate. You’ve got to stay relevant. It’s one of the things I’m excited about Petco Health and Wellness Company Inc. and why I came, because I think the brand is still relevant. Sabrina Simmons and I have been working along with the rest of the team to just fix some retail fundamentals. Relevancy is key.

Those brands that got complacent during COVID because sales were just happening are probably the ones that are struggling the most. It’s not so much that it’s an acceleration as much as, if you look back further, this is kind of how retail works.

Kate: Thank you so much for joining us today. This was great.

Joel Anderson, Chief Executive Officer, Petco Health and Wellness Company Inc.: Thanks, Kate.

Kate: Appreciate the time.

Joel Anderson, Chief Executive Officer, Petco Health and Wellness Company Inc.: Thank you.

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