Petco Health & Wellness Company, Inc. (WOOF)

CIK: 0001826470. SIC: 5990 Retail-Retail Stores, NEC. Latest 10-K as of: 2026-03-13.

SIC breadcrumb: Retail Trade > Miscellaneous Retail > SIC 5990 Retail-Retail Stores, NEC

SEC company page: https://www.sec.gov/edgar/browse/?CIK=1826470. Latest filing source: 0001193125-26-106114.

Selected Fundamentals

Financials

Annual standardized facts from SEC companyfacts as of latest extracted filing date 2026-03-13. Source: https://data.sec.gov/api/xbrl/companyfacts/CIK0001826470.json. Derived margins, ratios, and free cash flow are computed from the extracted annual SEC facts.

Flow metrics use full-year FY periods from 10-K/10-K/A filings; balance-sheet metrics use FY-end instants. Free cash flow = operating cash flow - capital expenditures. Missing metrics are omitted rather than fabricated.

Ratios

ROE and ROA use period-end equity/assets. Liabilities / equity uses total liabilities divided by stockholders' equity. Current ratio uses current assets divided by current liabilities when both are reported.

Financial Charts

Quarterly

Quarterly standardized facts from SEC companyfacts as of latest extracted filing date 2026-06-05. Source: https://data.sec.gov/api/xbrl/companyfacts/CIK0001826470.json.

Flow metrics use discrete quarter-length periods from 10-Q/10-Q/A filings. Q4 revenue and net income are derived only when annual FY and nine-month YTD facts exist for the same fiscal year; derived Q4 values are labeled. EPS Q4 is not derived.

Quarterly Charts

Macro Cross-References

• CPIAUCSL - Consumer Price Index for All Urban Consumers: All Items in U.S. City Average
• UNRATE - Unemployment Rate
• FEDFUNDS - Federal Funds Effective Rate
• CES0500000003 - Average Hourly Earnings of All Employees, Total Private
• DFEDTARU - Federal Funds Target Range - Upper Limit
• DFEDTARL - Federal Funds Target Range - Lower Limit
• DGS3MO - Market Yield on U.S. Treasury Securities at 3-Month Constant Maturity
• DGS2 - Market Yield on U.S. Treasury Securities at 2-Year Constant Maturity
• DGS10 - Market Yield on U.S. Treasury Securities at 10-Year Constant Maturity
• DGS30 - Market Yield on U.S. Treasury Securities at 30-Year Constant Maturity
• T10Y2Y - 10-Year Treasury Constant Maturity Minus 2-Year Treasury Constant Maturity
• CPILFESL - Consumer Price Index for All Urban Consumers: All Items Less Food and Energy
• CPIUFDSL - Consumer Price Index for All Urban Consumers: Food
• CPIENGSL - Consumer Price Index for All Urban Consumers: Energy
• CUSR0000SAH1 - Consumer Price Index for All Urban Consumers: Shelter
• PCEPI - Personal Consumption Expenditures: Chain-type Price Index
• PCEPILFE - Personal Consumption Expenditures Excluding Food and Energy: Chain-type Price Index
• PPIACO - Producer Price Index by Commodity: All Commodities
• T10YIE - 10-Year Breakeven Inflation Rate
• U6RATE - Total Unemployed, Plus All Marginally Attached Workers Plus Total Employed Part Time for Economic Reasons
• PAYEMS - All Employees, Total Nonfarm
• CIVPART - Labor Force Participation Rate
• EMRATIO - Employment-Population Ratio
• UNEMPLOY - Unemployed
• CE16OV - Employment Level
• ICSA - Initial Claims
• JTSJOL - Job Openings: Total Nonfarm
• JTSQUR - Quits: Total Nonfarm
• GDPC1 - Real Gross Domestic Product
• A191RL1Q225SBEA - Real Gross Domestic Product: Percent Change from Preceding Period
• INDPRO - Industrial Production: Total Index
• TCU - Capacity Utilization: Total Index
• HOUST - New Privately-Owned Housing Units Started: Total Units
• PERMIT - New Privately-Owned Housing Units Authorized in Permit-Issuing Places: Total Units
• RSAFS - Advance Retail Sales: Retail Trade
• PCE - Personal Consumption Expenditures
• DSPIC96 - Real Disposable Personal Income
• PSAVERT - Personal Saving Rate
• M2SL - M2
• BOPGSTB - U.S. International Trade in Goods and Services: Balance
• MSPUS - Median Sales Price of Houses Sold for the United States
• HSN1F - New One Family Houses Sold: United States
• RHORUSQ156N - Homeownership Rate in the United States
• TTLCONS - Total Construction Spending: Total Construction in the United States
• RRVRUSQ156N - Rental Vacancy Rate in the United States
• TOTALSL - Total Consumer Credit Owned and Securitized
• REVOLSL - Revolving Consumer Credit Owned and Securitized
• DRCCLACBS - Delinquency Rate on Credit Card Loans, All Commercial Banks
• GDP - Gross Domestic Product
• GPDI - Gross Private Domestic Investment
• GCE - Government Consumption Expenditures and Gross Investment
• PCEC - Personal Consumption Expenditures
• NETEXP - Net Exports of Goods and Services
• GFDEBTN - Federal Debt: Total Public Debt
• GFDEGDQ188S - Federal Debt: Total Public Debt as Percent of Gross Domestic Product
• FYFSD - Federal Surplus or Deficit
• FGRECPT - Federal Government Current Receipts
• FGEXPND - Federal Government: Current Expenditures
• MANEMP - All Employees, Manufacturing
• USCONS - All Employees, Construction
• USTRADE - All Employees, Retail Trade
• USFIRE - All Employees, Financial Activities
• USGOVT - All Employees, Government
• AWHAETP - Average Weekly Hours of All Employees, Total Private
• DGORDER - Manufacturers' New Orders: Durable Goods
• NEWORDER - Manufacturers' New Orders: Nondefense Capital Goods Excluding Aircraft
• BUSINV - Total Business Inventories
• EXPGS - Exports of Goods and Services
• IMPGS - Imports of Goods and Services
• IR - Import Price Index (End Use): All Commodities
• PPIFIS - Producer Price Index by Commodity: Final Demand

Latest quarter (10-Q)

Latest 10-Q source: 0001193125-26-259944.

Extracted structurally from real Item 2 body heading to real Item 3/4 boundary. Published MD&A gate trimmed front/tail over-capture. Confidence: high. Filing date: 2026-06-05. Report date: 2026-05-02.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our consolidated financial statements and the accompanying notes included elsewhere in this Quarterly Report on Form 10-Q (this “Form 10-Q”), as well as the corresponding Management’s Discussion and Analysis of Financial Condition and Results of Operations contained in our Annual Report on Form 10-K for the fiscal year ended January 31, 2026 (the “2025 Form 10-K”). The discussion and analysis below contains certain forward-looking statements about our business and operations that are subject to the risks, uncertainties, and other factors referred to in Part II, Item 1A, “Risk Factors” of this Form 10-Q. These risks, uncertainties, and other factors could cause our actual results to differ materially from those expressed in, or implied by, the forward-looking statements. The risks described in this Form 10-Q and in other documents we file from time to time with the U.S. Securities and Exchange Commission (the “SEC”), including the section entitled “Forward-Looking Statements” in this Form 10-Q, should be carefully reviewed. All amounts herein are unaudited.

Overview

Petco Health and Wellness Company, Inc. (“Petco”, the “Company”, “we”, “our” and “us”) is a leading pet specialty retailer focused on improving the lives of pets, pet parents, and our own partners. We nurture the pet-human bond in the aisles of more than 1,500 Petco stores across the U.S., Mexico, and Chile.

Our multicategory strategy integrates our digital assets with our nationwide physical footprint to meet the needs of pet parents who are looking for a single source for all their pets' needs. Petco.com, our e-commerce site, and the Petco app, our personalized mobile app, together serve as hubs for pet parents to book appointments and manage all of their pets’ needs, while enabling them to shop wherever, whenever, and however they want. We are focused on continually improving both our digital capabilities as well as our membership offering.

We strive to be a company that is improving millions of pet lives as well as the lives of pet parents and the partners who work for us. In tandem with Petco Love, an independent 501(c)(3) nonprofit organization, we work with and support thousands of local animal welfare groups nationwide and, through these partnerships and in-store adoption events, we have helped find homes for over 7 million animals.

Macroeconomic factors, including interest rates, potential inflationary pressures, supply chain constraints, tariffs, and global economic and geopolitical developments, including geopolitical conflicts and tensions, have had varying impacts on our results of operations that are difficult to isolate and quantify. We cannot predict the duration or ultimate severity of these macroeconomic factors or the ultimate impact on our operations and liquidity. Please refer to the risk factors referred to in Part II, Item 1A, “Risk Factors” of this Form 10-Q.

On February 20, 2026, the U.S. Supreme Court issued a decision invalidating certain tariffs previously imposed under the International Emergency Economic Power Act ("IEEPA"). We have applied for a refund of tariffs paid, following the processes established by U.S. Customs and Border Protection. We will continue to evaluate new information and will recognize any IEEPA tariff refunds or related receivables when they are realized or realizable.

How We Assess the Performance of Our Business

In assessing our performance, we consider a variety of performance and financial measures, including the following:

Comparable Sales

Comparable sales is an important measure throughout the retail industry and includes both retail and digital sales of products and services. A new location or digital site is included in comparable sales beginning on the first day of the fiscal month following 12 full fiscal months of operation and is subsequently compared to like time periods from the previous year. Relocated pet care centers become comparable pet care centers on the first day of operation if the original pet care center was open longer than 12 full fiscal months. If, during the period presented, a pet care center was closed, sales from that pet care center are included up to the first day of the month of closing. There may be variations in the way in which some of our competitors and other retailers calculate comparable sales. As a result, data in this filing regarding our comparable sales may not be comparable to similar data made available by other retailers.

16

Comparable sales allow us to evaluate how our overall ecosystem is performing by measuring the change in period-over-period net sales from locations and digital sites that have been open for the applicable period. We intend to improve comparable sales by continuing initiatives aimed to increase customer retention, frequency of visits, and basket size. General macroeconomic and retail business trends are also a key driver of changes in comparable sales.

Non-GAAP Financial Measures

Management and our board of directors review, in addition to GAAP (as defined herein) measures, certain non-GAAP financial measures, including Adjusted EBITDA and Free Cash Flow, to evaluate our operating performance, generate future operating plans, and make strategic decisions regarding the allocation of capital. Further explanations of these non-GAAP measures, along with reconciliations to their most comparable GAAP measures, are presented below under “Reconciliation of Non-GAAP Financial Measures to GAAP Measures.”

Executive Summary

Comparing the thirteen weeks ended May 2, 2026 with the thirteen weeks ended May 3, 2025 (unless otherwise noted), our results included the following:

•
an increase in net sales from $1.49 billion to $1.50 billion, representing period-over-period growth of 0.2% and a comparable sales increase of 0.7%;

•
operating income of $24.6 million, compared to operating income of $16.4 million in the prior year period;

•
net loss attributable to Class A and B-1 common stockholders of $15.1 million, compared to net loss attributable to Class A and B-1 common stockholders of $11.7 million in the prior year period; and

•
an increase in Adjusted EBITDA from $89.4 million to $97.3 million.

Results of Operations

The following tables summarize our results of operations and the percent of net sales of line items included in our consolidated statements of operations (dollars in thousands):

Thirteen weeks ended

May 2,

2026

May 3,

2025

Net sales:

Products

$

1,228,087

$

1,241,891

Services and other

268,645

251,508

Total net sales

1,496,732

1,493,399

Cost of sales:

Products

757,778

766,285

Services and other

164,529

157,146

Total cost of sales

922,307

923,431

Gross profit

574,425

569,968

Selling, general and administrative expenses

549,799

553,609

Operating income

24,626

16,359

Interest income

(1,497

)

(1,359

)

Interest expense

32,785

33,494

Loss on extinguishment and modification of debt

11,840

—

Loss before income taxes and income

   from equity method investees

(18,502

)

(15,776

)

Income tax expense

2,199

495

Income from equity method investees

(5,555

)

(4,610

)

Net loss attributable to Class A and B-1

   common stockholders

$

(15,146

)

$

(11,661

)

17

Thirteen weeks ended

May 2,

2026

May 3,

2025

Net sales:

Products

82.1

%

83.2

%

Services and other

17.9

16.8

Total net sales

100.0

100.0

Cost of sales:

Products

50.6

51.3

Services and other

11.0

10.5

Total cost of sales

61.6

61.8

Gross profit

38.4

38.2

Selling, general and administrative expenses

36.7

37.1

Operating income

1.7

1.1

Interest income

(0.1

)

(0.1

)

Interest expense

2.2

2.3

Loss on extinguishment and modification of debt

0.8

—

Loss before income taxes and income

   from equity method investees

(1.2

)

(1.1

)

Income tax expense

0.1

0.0

Income from equity method investees

(0.3

)

(0.3

)

Net loss attributable to Class A and B-1

   common stockholders

(1.0

)%

(0.8

)%

Thirteen weeks ended

May 2,

2026

May 3,

2025

Operational Data:

Comparable sales change

0.7

%

(1.3

)%

Total pet care centers (U.S.) at end of period

1,378

1,393

Adjusted EBITDA (in thousands)

$

97,331

$

89,449

Thirteen Weeks Ended May 2, 2026 Compared with Thirteen Weeks Ended May 3, 2025

Net Sales and Comparable Sales

Thirteen weeks ended

(dollars in thousands)

May 2,

2026

May 3,

2025

$

Change

%

Change

Consumables

$

746,827

$

748,070

$

(1,243

)

(0.2

%)

Supplies and companion animals

481,260

493,821

(12,561

)

(2.5

%)

Services and other

268,645

251,508

17,137

6.8

%

Net sales

$

1,496,732

$

1,493,399

$

3,333

0.2

%

Net sales increased $3.3 million, or 0.2%, to $1.50 billion in the thirteen weeks ended May 2, 2026 compared to net sales of $1.49 billion in the thirteen weeks ended May 3, 2025. The sales increase primarily reflects growth in our services business, driven by our investments in customer acquisition and retention, as well as optimization of our veterinary footprint. We also experienced positive comparable sales trends in our consumables category, offset by a lower pet care center count. We continue to focus on profitability and margin through a disciplined approach to managing unit costs, pricing, and promotional strategies.

We are unable to quantify certain factors impacting sales described above due to the fact that such factors are based on input measures or qualitative information that do not lend themselves to quantification.

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Gross Profit

As a percentage of net sales, our gross profit rate was 38.4% for the thirteen weeks ended May 2, 2026 compared with 38.2% for the thirteen weeks ended May 3, 2025. We continue to focus on effectively utilizing our services footprint and managing our inventory, unit costs, pricing, and promotional strategies. We are unable to quantify the factors impacting gross profit rate described above due to the fact that such factors are based on input measures or qualitative information that do not lend themselves to quantification.

Selling, General and Administrative (“SG&A”) Expenses

As a percentage of net sales, SG&A expenses were 36.7% for the thirteen weeks ended May 2, 2026 compared with 37.1% for the thirteen weeks ended May 3, 2025. The decrease in SG&A expenses between the periods was primarily due to lower payroll and consulting costs, partially offset by an increase in advertising expenses.

Interest Expense

Interest expense decreased $0.7 million, or 2.1%, to $32.8 million in the thirteen weeks ended May 2, 2026 compared with $33.5 million in the thirteen weeks ended May 3, 2025. The decrease was primarily driven by a lower aggregate outstanding principal balance of indebtedness, partially offset by higher interest rates during the thirteen weeks ended May 2, 2026. For more information, refer to Note 3, “Senior Secured Credit Facilities,” and Note 4, "Senior Secured Notes" in the Notes to Consolidated Financial Statements included in Part I, Item 1 of this Form 10-Q.

Loss on Extinguishment and Modification of Debt

Loss on extinguishment and modification of debt was $11.8 million for the thirteen weeks ended May 2, 2026. This loss was recognized in conjunction with the February 2, 2026 debt refinancing transaction described under "Sources of Liquidity—Senior Secured Credit Facilities and Senior Secured Notes" below. There was no loss on debt extinguishment and modification for the thirteen weeks ended May 3, 2025. For more information, refer to Note 3, “Senior Secured Credit Facilities,” and Note 4, "Senior Secured Notes," to the Notes to Consolidated Financial Statements included in Part I, Item 1 of this Form 10-Q.

Income Tax Expense

We compute our tax provision (benefit) for interim period

[Excerpt truncated for page length; source filing is linked above.]

Latest 10-K MD&A

Extracted from Item 7 to the first post-MD&A boundary after HTML sanitization. Confidence: high. Filing date: 2026-03-13. Report date: 2026-01-31.

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our consolidated financial statements and the accompanying notes included elsewhere in this Annual Report on Form 10-K. The discussion and analysis below contains certain forward-looking statements about our business and operations that are subject to the risks, uncertainties, and other factors described in the section entitled “Risk Factors,” included in Part I, Item 1A, and elsewhere in this Annual Report on Form 10-K. These risks, uncertainties, and other factors could cause our actual results to differ materially from those expressed in, or implied by, the forward-looking statements. The risks described in documents we file from time to time with the U.S. Securities and Exchange Commission (the “SEC”), including the sections entitled “Cautionary Note Regarding Forward-Looking Statements” and “Risk Factors” in this Annual Report on Form 10-K, should be carefully reviewed.

Overview

Petco Health and Wellness Company, Inc. (“Petco”, the “Company”, “we”, “our” and “us”) is a leading pet specialty retailer focused on improving the lives of pets, pet parents, and our own partners. We nurture the pet-human bond in the aisles of more than 1,500 Petco stores across the U.S., Mexico, Puerto Rico, and Chile.

Our multicategory strategy integrates our digital assets with our nationwide physical footprint to meet the needs of pet parents who are looking for a single source for all their pets’ needs. Petco.com, our e-commerce site, and the Petco app, our personalized mobile app, together serve as hubs for pet parents to book appointments and manage all of their pets’ needs, while enabling them to shop wherever, whenever, and however they want. We are focused on continually improving both our digital capabilities as well as our membership offering.

We strive to be a company that is improving millions of pet lives as well as the lives of pet parents and the partners who work for us. In tandem with Petco Love, an independent 501(c)(3) nonprofit organization, we work with and support thousands of local animal welfare groups nationwide and, through these partnerships and in-store adoption events, we have helped find homes for over 7 million animals.

Our product offering leverages a broad assortment of national brands, owned brands, and exclusive merchandise, providing customers with a wide variety of nutritional options at a range of price points. Our product offering is complemented by a wide variety of pet care supplies and companion animals. We integrate our product offering with our services business, comprised of veterinary care, grooming, and training, with a focus on treating the whole pet, including their physical, mental, and social well-being. Further enhancing the customer experience, our over 26,000 knowledgeable, passionate partners in our pet care centers provide important high-quality advice to our customers.

Macroeconomic factors, including interest rates, potential inflationary pressures, supply chain constraints, tariffs, and global economic and geopolitical developments, including geopolitical conflicts and tensions, have had varying impacts on our results of operations that are difficult to isolate and quantify. We cannot predict the duration or ultimate severity of these macroeconomic factors or the ultimate impact on our operations and liquidity. Please refer to the risk factors in Part I, Item 1A, "Risk Factors" of this Form 10-K.

How We Assess the Performance of Our Business

In assessing our performance, we consider a variety of performance and financial measures including the following:

Comparable Sales

Comparable sales is an important measure throughout the retail industry and includes both retail and digital sales of products and services. A new location or digital site is included in comparable sales beginning on the first day of the fiscal month following 12 full fiscal months of operation and is subsequently compared to like time periods from the previous year. Relocated pet care centers become comparable pet care centers on the first day of operation if the original pet care center was open longer than 12 full fiscal months. If, during the period presented, a pet care center was closed, sales from that pet care center are included up to the first day of the month of closing. There may be variations in the way in which some of our competitors and other retailers calculate comparable sales. As a result, data in this filing regarding our comparable sales may not be comparable to similar data made available by other retailers.

46

Comparable sales allow us to evaluate how our overall ecosystem is performing by measuring the change in period-over-period net sales from locations and digital sites that have been open for the applicable period. General macroeconomic and retail business trends are also a key driver of changes in comparable sales.

Non-GAAP Financial Measures

Management and our board of directors review, in addition to GAAP (as defined herein) measures, certain non-GAAP financial measures, including Adjusted EBITDA and Free Cash Flow, to evaluate our operating performance, generate future operating plans, and make strategic decisions regarding the allocation of capital. Further explanations of these non-GAAP measures, along with reconciliations to their most comparable GAAP measures, are presented below under “Reconciliation of Non-GAAP Financial Measures to GAAP Measures.”

Factors Affecting Our Business

We believe that our performance and future success depend on several factors that present significant opportunities for us but also pose risks and challenges, including those discussed below and in the section titled “Risk Factors” included in Part I, Item 1A of this Annual Report on Form 10-K.

Pet Industry Trends

The U.S. pet care industry is large, serving millions of households with pets, and has exhibited healthy growth over time driven by an increase in the pet population and ongoing trends in pet humanization and premiumization. Due to the essential, repeat nature of pet care, the industry has demonstrated resilience across economic cycles.

In 2025, with new leadership in place, we embarked on a purposeful strategy to sharpen our fundamentals with a specific focus on driving improved profitability and cash flow. This strategy is anchored upon four key pillars: providing a trusted store experience for our customers; offering new, trend-driven products that complement our evergreen assortment; scaling our unique and competitively differentiated services offering; and powering it all with an integrated omni-channel experience driven by a revamped membership offering, repeat delivery, and seamless digital-to-store engagement.

Customer Pet Purchase Trends

Our multi-channel ecosystem is designed to support our customers regardless of how customers choose to shop for their pet care needs. As we saw the major purchase trend shift and grow into areas like e-commerce, services, and veterinary care, we actively invested to build capabilities and offerings to capitalize on the opportunity. Our business will be impacted by our ability to continue to understand and timely react to changing customer purchase trends.

Customer Acquisition, Retention, and Spend

Our business is impacted by our ability to successfully attract new customers to any one of our channels, build their loyalty to encourage return visits, and expand their spend with Petco across multiple purchase channels (e.g., pet care centers, e-commerce, and services) and categories (e.g., pet food, supplies, and companion animals). This is the primary focus of our customer engagement efforts from our differentiated digital engine, to marketing campaigns, and to new product introductions. The ability to convert more of our customers to loyal, multi-channel shoppers will positively effect business performance.

Innovation and Transformation

We have made prudent investments to support our innovation and business transformation strategies. These investments have included: optimization of our veterinary footprint, digital and e-commerce integration; enhanced supply chain capacity including additional distribution centers; data analytical capabilities; technological enhancements; and marketing effectiveness.

Gross Margin and Expense Management

Our operating results are impacted by our ability to convert revenue into healthy gross margin and operating margin. There are many factors that impact gross margin results, including (but not limited to) pricing and promotion strategies, customer shipping preferences, sales mix of product, and potential tariffs. Along with

47

managing gross margin, the other lever in delivering operating margin is expense management, which is impacted by our ability to implement cost optimization initiatives and find opportunities to operate more efficiently.

Talent and Culture

We see our Petco partners as the core to building a purpose-driven performance culture. Our business results rely on our ability to continually: add talented partners, specifically in our scaling business areas like e-commerce, veterinary care, and grooming and training services; provide the best tools, partner training, and competitive compensation to deliver higher sales and better customer experiences; and engender a positive, collaborative, and respectful working environment. Our partners represent the strength of our brand every day and are key to our ongoing growth.

Significant Components of Results of Operations

Net Sales

Our net sales comprise gross sales of products and services, net of sales tax and certain discounts and promotions offered to our customers, including those offered under our customer loyalty programs. Net sales are driven by comparable sales, new pet center locations, and expanded offerings.

Cost of Sales and Gross Profit

Gross profit is equal to our net sales minus our cost of sales. Gross profit rate measures gross profit as a percentage of net sales.

Our cost of sales includes the following types of expenses:

•
direct costs (net of vendor rebates, allowances, and discounts for products sold) including inbound freight charges;

•
shipping and handling costs associated with sales to customers;

•
freight costs associated with moving merchandise inventories;

•
inventory shrinkage costs and write-downs;

•
payroll and benefit costs of pet groomers, trainers, veterinarians, and other direct costs of services; and

•
costs associated with operating our distribution centers including payroll and benefits, occupancy costs, and depreciation.

Selling, General, and Administrative Expense

The following types of expenses are included in our selling, general, and administrative costs (“SG&A”):

•
payroll and benefit costs of pet care center employees and corporate employees;

•
occupancy and operating costs of pet care centers and corporate facilities;

•
depreciation and amortization related to pet care centers and corporate assets;

•
credit card fees;

•
store pre-opening and remodeling costs;

•
advertising costs; and

•
other selling and administrative costs.

Goodwill and Indefinite-Lived Intangible Impairment

In connection with the fiscal 2015 acquisition of us by our Sponsors, we recorded goodwill of approximately $3.0 billion and an indefinite-lived trade name asset of $1.1 billion. We evaluate these assets for impairment annually and whenever events or changes in circumstances indicate that the carrying value may not be recoverable.

48

During the third quarter of fiscal 2023, we concluded indicators of impairment existed due to declines in the Company’s share price, as well as current macroeconomic conditions, and performed an interim impairment test of our goodwill and indefinite-lived trade name, which resulted in a pre-tax goodwill impairment charge of $1,222.5 million. Please read the discussion of these assets under “Critical Accounting Policies and Estimates.”

Interest Expense

Our interest expense in fiscal 2023 through fiscal 2025 was primarily associated with our First Lien Term Loan, ABL Revolving Credit Facility, and interest rate hedges. Refer to the discussion under “Liquidity and Capital Resources—Sources of Liquidity” for further information.

Income Tax Expense (Benefit)

Income taxes consist of an estimate of federal and state income taxes based on enacted federal and state tax rates, as adjusted for allowable credits, deductions, and the valuation allowance against deferred tax assets, as applicable.

Income from Equity Method Investees

Investments for which the Company exercises significant influence but does not have control are accounted for under the equity method. Equity method investment activity is primarily related to a 50% joint venture with Grupo Gigante, S.A.B. de C.V. (the “Mexico joint venture”) to establish Petco locations in Mexico and Chile. The Company’s share of the investee’s results is presented as either income or loss from equity method investees in the accompanying consolidated statements of operations.

49

Executive Summary

Comparing fiscal 2025 and fiscal 2024, our results included the following:

•
a decrease in net sales from $6.12 billion to $5.96 billion, representing a period-over-period decrease of 2.5% and comparable sales decrease of 1.6%;

•
operating income of $120.4 million, compared to operating income of $7.1 million in the prior year period;

•
net income attributable to Class A and B-1 common stockholders of $9.1 million, compared to net loss attributable to Class A and B-1 common stockholders of $101.8 million in the prior year, and;

•
an increase in Adjusted EBITDA from $336.5 million to $408.2 million.

Results of Operations

The following tables summarize our results of operations and the percent of net sales of line items included in our consolidated statements of operations (dollars in thousands):

Fiscal years ended

January 31,

2026

February 1,

2025

February 3,

2024

(52 weeks)

(52 weeks)

(53 weeks)

Net sales:

Products

$

4,936,323

$

5,116,891

$

5,273,710

Services and other

1,025,144

999,571

981,574

Total net sales

5,961,467

6,116,462

6,255,284

Cost of sales:

Products

3,028,909

3,173,269

3,269,628

Services and other

627,486

618,791

631,821

Total cost of sales

3,656,395

3,792,060

3,901,449

Gross profit

2,305,072

2,324,402

2,353,835

Selling, general and administrative expenses

2,184,639

2,317,351

2,311,625

Goodwill impairment

—

—

1,222,524

Operating income (loss)

120,433

7,051

(1,180,314

)

Interest income

(6,305

)

(3,714

)

(3,405

)

Interest expense

131,199

143,531

150,909

Loss on partial extinguishment of debt

565

—

920

Other non-operating income

—

(4,800

)

(4,727

)

Loss before income taxes and income from

   equity method investees

(5,026

)

(127,966

)

(1,324,011

)

Income tax expense (benefit)

6,266

(7,481

)

(27,613

)

Income from equity method investees

(20,358

)

(18,669

)

(16,188

)

Net income (loss) attributable to Class A and B-1 common

   stockholders

$

9,066

$

(101,816

)

$

(1,280,210

)

50

Fiscal years ended

January 31,

2026

February 1,

2025

February 3,

2024

(52 weeks)

(52 weeks)

(53 weeks)

Net sales:

Products

82.8

%

83.7

%

84.3

%

Services and other

17.2

16.3

15.7

Total net sales

100.0

100.0

100.0

Cost of sales:

Products

50.8

51.9

52.3

Services and other

10.5

10.1

10.1

Total cost of sales

61.3

62.0

62.4

Gross profit

38.7

38.0

37.6

Selling, general and administrative expenses

36.6

37.9

37.0

Goodwill impairment

—

—

19.5

Operating income (loss)

2.1

0.1

(18.9

)

Interest income

(0.1

)

(0.1

)

(0.1

)

Interest expense

2.3

2.4

2.5

Loss on partial extinguishment of debt

0.0

—

0.0

Other non-operating income

—

(0.1

)

(0.1

)

Loss before income taxes and income from

   equity method investees

(0.1

)

(2.1

)

(21.2

)

Income tax expense (benefit)

0.1

(0.1

)

(0.4

)

Income from equity method investees

(0.4

)

(0.3

)

(0.3

)

Net income (loss) attributable to Class A and B-1 common

   stockholders

0.2

%

(1.7

)%

(20.5

)%

Fiscal years ended

January 31,

2026

February 1,

2025

February 3,

2024

(52 weeks)

(52 weeks)

(53 weeks)

Operational Data:

Comparable sales change

(1.6

)%

0.3

%

1.8

%

Total pet care centers (U.S. and Puerto Rico) at end of period

1,382

1,398

1,423

Adjusted EBITDA (in thousands)

$

408,167

$

336,526

$

401,103

Fiscal 2025 (52 weeks) Compared with Fiscal 2024 (52 weeks)

Net Sales and Comparable Sales

Fiscal years ended

(dollars in thousands)

January 31,

2026

February 1,

2025

$

Change

%

Change

Consumables

$

2,968,321

$

3,043,178

$

(74,857

)

(2.5

%)

Supplies and companion animals

1,968,002

2,073,713

(105,711

)

(5.1

%)

Services and other

1,025,144

999,571

25,573

2.6

%

Net sales

$

5,961,467

$

6,116,462

$

(154,995

)

(2.5

%)

Net sales decreased $155.0 million, or 2.5%, to $5.96 billion in fiscal 2025 compared to net sales of $6.12 billion in fiscal 2024. The sales decrease primarily reflects lower transaction volume and a lower pet care center count, as well as a greater focus on profitability and margin through a more disciplined approach to managing unit costs, pricing, and promotional strategies. We continue to experience momentum in services, driven in part by our strategic investments in customer acquisition and retention, as well as efforts to optimize our existing veterinary hospital footprint.

51

We are unable to quantify certain factors impacting sales described above due to the fact that such factors are based on input measures or qualitative information that do not lend themselves to quantification.

Gross Profit

As a percentage of net sales, our gross profit rate was 38.7% for fiscal 2025 compared to 38.0% for fiscal 2024. The increase between the periods reflects more effective management of our inventory, unit costs, pricing, and promotional strategies, as well as improved utilization of our services footprint. We are unable to quantify the factors impacting gross profit rate described above due to the fact that such factors are based on input measures or qualitative information that do not lend themselves to quantification.

Selling, General and Administrative Expenses

As a percentage of net sales, SG&A expenses decreased from 37.9% in fiscal 2024 to 36.6% in fiscal 2025. The decrease in SG&A expenses between the periods was primarily due to lower payroll and other compensation costs, which included improved actuarial results from employee benefits optimization initiatives, as well as lower consulting costs. In addition, the Company incurred disposition costs relating to its Pupbox business during fiscal 2024.

Interest Expense

Interest expense decreased $12.3 million, or 8.6%, to $131.2 million in fiscal 2025 compared with $143.5 million in fiscal 2024. The decrease was primarily driven by lower interest rates on the First Lien Term Loan. For more information refer to Note 7, “Senior Secured Credit Facilities,” in the Notes to Consolidated Financial Statements included in Part II, Item 8 of this Annual Report on Form 10-K.

Loss on Extinguishment and Modification of Debt

In fiscal 2025, the Company recognized $0.6 million of losses on partial extinguishment of debt. This loss was recognized in conjunction with voluntary principal repayments on the First Lien Term Loan during fiscal 2025. The Company did not recognize any losses on extinguishment or modification of debt in fiscal 2024. For more information refer to Note 7, “Senior Secured Credit Facilities,” in the Notes to Consolidated Financial Statements included in Part II, Item 8 of this Annual Report on Form 10-K.

Other Non-Operating Income

There was no other non-operating income or loss recognized during fiscal 2025. Other non-operating income was $4.8 million for fiscal 2024, and was primarily related to remeasurements of an equity investment without a readily determinable fair value. For more information refer to Note 9, “Fair Value Measurements,” to the Notes to Consolidated Financial Statements included in Part II, Item 8 of this Annual Report on Form 10-K.

Income Tax Expense (Benefit)

Our effective tax rate was 40.9% for fiscal 2025, resulting in income tax expense of $6.3 million, compared to an effective tax rate of 6.8% resulting in income tax benefit of $7.5 million for fiscal 2024. The increase in effective tax rate in fiscal 2025 as compared to fiscal 2024 is primarily driven by an increase in earnings and a decrease in the amount of compensation associated expenses not expected to be deductible for corporate income tax purposes in fiscal 2025.

On July 4, 2025, the One Big Beautiful Bill Act (“OBBBA”) was signed into law. OBBBA introduces significant changes to U.S. income-tax legislation. Key provisions affecting the Company include (i) 100 percent bonus depreciation for qualified property placed in service after January 19, 2025, (ii) immediate expensing of domestic research and experimental expenditures starting January 1, 2025, and (iii) an increase to the cap on the deductibility of business interest expense for taxable years starting after December 31, 2024. These provisions did not have a material impact to income taxes in our financial statements for fiscal 2025.

52

Prior Year Discussion of Results and Comparisons

For information on fiscal 2024 results and similar comparisons, please read “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our previous Annual Report on Form 10-K filed with the SEC on March 31, 2025.

Reconciliation of Non-GAAP Financial Measures to GAAP Measures

The following information provides definitions and reconciliations of certain non-GAAP financial measures to the most directly comparable financial measures calculated and presented in accordance with GAAP. Such non-GAAP financial measures are not calculated in accordance with GAAP and should not be considered superior to, as a substitute for or alternative to, and should be considered in conjunction with, the most comparable GAAP measures. The non-GAAP financial measures presented may differ from similarly-titled measures used by other companies.

Adjusted EBITDA

We present Adjusted EBITDA, a non-GAAP financial measure, because we believe it enhances an investor’s understanding of our financial and operational performance by excluding certain material non-cash items, unusual or non-recurring items that we do not expect to continue in the future, and certain other adjustments we believe are or are not reflective of our ongoing operations and performance. Adjusted EBITDA enables operating performance to be reviewed across reporting periods on a consistent basis. We use Adjusted EBITDA as one of the principal measures to evaluate and monitor our operating financial performance and to compare our performance to others in our industry. We also use Adjusted EBITDA in connection with establishing discretionary annual incentive compensation targets, to make budgeting decisions, to make strategic decisions regarding the allocation of capital, and to report our quarterly results as defined in our debt agreements, although under such agreements the measure is calculated differently and is used for different purposes.

Adjusted EBITDA is not a substitute for net income (loss), the most comparable GAAP measure, and is subject to a number of limitations as a financial measure, so it should be used in conjunction with GAAP financial measures and not in isolation. There can be no assurances that we will not modify the presentation of Adjusted EBITDA in the future. In addition, other companies in our industry may define Adjusted EBITDA differently, limiting its usefulness as a comparative measure.

The table below reflects the calculation of Adjusted EBITDA and Adjusted EBITDA Margin for the periods presented:

Fiscal years ended

January 31,

2026

February 1,

2025

February 3,

2024

(dollars in thousands)

(52 weeks)

(52 weeks)

(53 weeks)

Net income (loss) attributable to Class A and B-1

  common stockholders

$

9,066

$

(101,816

)

$

(1,280,210

)

Interest expense, net

124,894

139,817

147,504

Income tax expense (benefit)

6,266

(7,481

)

(27,613

)

Depreciation and amortization

196,710

208,517

203,615

Income from equity method investees

(20,358

)

(18,669

)

(16,188

)

Loss on partial extinguishment of debt

565

—

920

Goodwill impairment

—

—

1,222,524

Equity-based compensation expense

32,650

50,212

81,859

Other non-operating income

—

(4,800

)

(4,727

)

Mexico joint venture EBITDA (1)

46,135

41,615

38,226

Acquisition and divestiture-related integration costs (2)

—

3,719

—

Other costs (3)

12,239

25,412

35,193

Adjusted EBITDA

$

408,167

$

336,526

$

401,103

Net sales

$

5,961,467

$

6,116,462

$

6,255,284

Net margin (4)

0.2

%

(1.7

)%

(20.5

)%

Adjusted EBITDA Margin

6.8

%

5.5

%

6.4

%

53

(1)
Mexico joint venture EBITDA represents 50% of the entity’s operating results for the periods presented, as adjusted to reflect the results on a basis comparable to our Adjusted EBITDA. In the financial statements, this joint venture is accounted for as an equity method investment and reported net of depreciation and income taxes. Because such a presentation would not reflect the adjustments made in our calculation of Adjusted EBITDA, we include our 50% interest in our Mexico joint venture on an Adjusted EBITDA basis to ensure consistency. The table below presents a reconciliation of Mexico joint venture net income to Mexico joint venture EBITDA:

Fiscal years ended

January 31,

2026

February 1,

2025

February 3,

2024

(dollars in thousands)

(52 weeks)

(52 weeks)

(53 weeks)

Net income

$

40,715

$

37,559

$

32,375

Depreciation

28,934

27,360

26,141

Income tax expense

18,267

16,010

11,449

Foreign currency loss

772

169

1,520

Interest expense, net

3,581

2,131

4,966

EBITDA

$

92,269

$

83,229

$

76,451

50% of EBITDA

$

46,135

$

41,615

$

38,226

(2)
Acquisition and divestiture-related costs include direct costs resulting from acquiring, integrating, or divesting businesses. These include third-party professional and legal fees, losses on sales of divestitures, and other integration-related costs that would not have otherwise been incurred as part of the Company’s operations.

(3)
Other costs include, as incurred: restructuring costs and restructuring-related severance costs; legal reserves associated with significant, non-ordinary course legal or regulatory matters; and costs related to certain significant strategic transactions. In fiscal 2025, other costs were primarily driven by $9.7 million of severance and $2.5 million relating to legal matters. In fiscal 2024, other costs were primarily driven by $15.8 million of severance and $7.7 relating to legal matters and strategic initiatives.

(4)
We define net margin as net income (loss) attributable to Class A and B-1 common stockholders divided by net sales and Adjusted EBITDA margin as Adjusted EBITDA divided by net sales.

Free Cash Flow

Free Cash Flow is a non-GAAP financial measure that is calculated as net cash provided by operating activities less cash paid for fixed assets. Management believes that Free Cash Flow, which measures our ability to generate additional cash from our business operations, is an important financial measure for use in evaluating the Company’s financial performance.

Although other companies report their free cash flow, numerous methods exist for calculating a company’s free cash flow. As a result, the method used by the Company’s management to calculate our Free Cash Flow may differ from the methods used by other companies to calculate their free cash flow.

The table below reflects the calculation of Free Cash Flow for the periods presented:

Fiscal years ended

January 31,

2026

February 1,

2025

February 3,

2024

(dollars in thousands)

(52 weeks)

(52 weeks)

(53 weeks)

Net cash provided by operating activities

$

314,050

$

177,673

$

215,719

Cash paid for fixed assets

(127,097

)

(127,990

)

(225,598

)

Free Cash Flow

$

186,953

$

49,683

$

(9,879

)

Liquidity and Capital Resources

Overview

Our primary sources of liquidity are funds generated by operating activities and available capacity for borrowings on our $581 million ABL Revolving Credit Facility. Our ability to fund our operations, to make planned capital investments, to make scheduled debt payments and to repay or refinance indebtedness depends on our future operating performance and cash flows, which are subject to prevailing economic conditions and financial, business, and other factors, some of which are beyond our control. Our liquidity as of January 31, 2026 was $724.2 million inclusive of cash and cash equivalents of $256.7 million and $467.5 million of availability on the ABL Revolving Credit Facility. We believe that our current resources, together with anticipated cash flows from operations and borrowing capacity under the ABL Revolving Credit Facility, will be sufficient to finance our operations, meet our

54

current cash requirements, and fund anticipated capital investments for at least the next 12 months. We may, however, seek additional financing to fund future growth or refinance our existing indebtedness through the debt capital markets, but we cannot be assured that such financing will be available on favorable terms, or at all.

We are a party to contractual obligations involving commitments to make payments to third parties. These obligations impact our short-term and long-term liquidity and capital resource needs. Certain contractual obligations are reflected on the consolidated balance sheet as of January 31, 2026, while others are considered future obligations. Our contractual obligations primarily consist of operating leases and long-term debt and related interest payments. We also enter certain short-term lease commitments, letters of credit and purchase obligations in the normal course of business. Refer to Note 5, “Leases,” and Note 7, “Senior Secured Credit Facilities,” in the Notes to Consolidated Financial Statements included in Part II, Item 8 of this Annual Report on Form 10-K for amounts outstanding as of January 31, 2026 related to operating leases and debt, respectively. Refer also to further discussion on our debt refinancing transaction in “Sources of Liquidity” below.

Purchase obligations and commitments consist of open purchase orders, as well as non-cancellable commitments for information technology, marketing and other products and services used in the normal course of business. We also have a commitment for naming rights to a baseball stadium. Refer to Note 14, “Commitments and Contingencies—Baseball Stadium Naming Rights Commitment” in the Notes to Consolidated Financial Statements included in Part II, Item 8 of this Annual Report on Form 10-K for more information. As of January 31, 2026, our purchase obligations and commitments were $372.8 million of which $319.8 million is considered short-term.

Cash Flows

The following table summarizes our consolidated cash flows:

Fiscal years ended

(dollars in thousands)

January 31,

2026

February 1,

2025

February 3,

2024

(52 weeks)

(52 weeks)

(53 weeks)

Total cash provided by (used in):

Operating activities

$

314,050

$

177,673

$

215,719

Investing activities

(124,556

)

(123,903

)

(207,445

)

Financing activities

(101,747

)

(8,754

)

(85,352

)

Net increase (decrease) in cash, cash equivalents

  and restricted cash

$

87,747

$

45,016

$

(77,078

)

Operating Activities

Our primary source of operating cash is sales of products and services to customers, which are substantially all on a cash basis, and therefore provide us with a significant source of liquidity. Our primary uses of cash in operating activities include: purchases of inventory; freight and warehousing costs; employee-related expenditures; occupancy-related costs for our pet care centers, distribution centers and corporate support centers; credit card fees; interest under our debt agreements; and marketing expenses. Net cash provided by operating activities is impacted by our net income (loss) adjusted for certain non-cash items, including: depreciation, amortization, impairments and write-offs; amortization of debt discounts and issuance costs; deferred income taxes; equity-based compensation; impairments of goodwill and intangible assets; other non-operating income; and the effect of changes in operating assets and liabilities.

Net cash provided by operating activities was $314.1 million in fiscal 2025 compared with net cash provided by operating activities of $177.7 million in fiscal 2024. The increase in operating cash flows were primarily driven by a decrease in inventory purchases, lower cash paid for operating leases, lower cash paid for income taxes, and lower operational costs, such as consulting fees. This was partially offset by lower sales and higher payouts of prior year accrued incentive bonuses as well as timing of invoice payments.

Net cash provided by operating activities was $177.7 million in fiscal 2024 compared with $215.7 million in fiscal 2023. The decrease in operating cash flows were primarily driven by lower sales and the timing of invoice payments. This was partially offset by decreases in inventory purchases, advertising, freight, and cash paid for operating leases.

55

Investing Activities

Net cash used in investing activities was $124.6 million, $123.9 million, and $207.4 million for fiscal 2025, fiscal 2024, and fiscal 2023, respectively, and consisted primarily of capital expenditures to support our business.

Capital expenditures were relatively even between fiscal 2025 and fiscal 2024. In fiscal 2026, we expect to spend approximately $140 million in capital expenditures.

The decrease in capital expenditures between fiscal 2024 and fiscal 2023 was primarily driven by reductions in new pet care centers and hospitals.

Capital expenditures by category during the periods set forth below are as follows:

Fiscal years ended

(dollars in thousands)

January 31,

2026

February 1,

2025

February 3,

2024

New and existing pet care center

   locations

$

54,060

$

46,084

$

121,815

Digital and information technology

53,572

51,948

70,598

Supply chain and other

19,465

29,958

33,185

Total capital expenditures

$

127,097

$

127,990

$

225,598

Financing Activities

Net cash used in financing activities was $101.7 million for fiscal 2025, compared with $8.8 million used in financing activities in fiscal 2024 and $85.4 million used in financing activities in fiscal 2023.

Financing cash flows in fiscal 2025 primarily consisted of $95.3 million in principal repayments on the term loan.

Financing cash flows in fiscal 2024 primarily consisted of borrowings and repayments on the ABL Revolving Credit Facility and payments for tax withholdings on stock-based awards.

Financing cash flows in fiscal 2023 primarily consisted of $75.0 million in principal repayments on the term loan, borrowings and repayments under the ABL Revolving Credit Facility, and payments for tax withholdings on stock-based awards.

Sources of Liquidity

Senior Secured Credit Facilities

On March 4, 2021, the Company completed a refinancing transaction by entering into the $1,700.0 million First Lien Term Loan originally maturing on March 4, 2028 and the ABL Revolving Credit Facility, originally maturing on March 4, 2026 with availability of up to $500.0 million, subject to a borrowing base.

Interest on the First Lien Term Loan was based on, at the Company’s option, either a base rate or Adjusted Term SOFR, subject to a 0.75% floor, payable upon maturity of the SOFR contract, in either case plus the applicable rate. The base rate was the greater of the bank prime rate, federal funds effective rate plus 0.5% or Adjusted Term SOFR plus 1.0%. The applicable rate was 2.25% per annum for a base rate loan or 3.25% per annum for an Adjusted Term SOFR loan. Principal and interest payments commenced on June 30, 2021. Principal payments were typically $4.25 million quarterly.

56

The Company voluntarily repaid $75.0 million of the principal of the First Lien Term Loan using existing cash on hand during fiscal 2023. The repayments were applied to remaining principal payments in order of scheduled payment date.

In March 2024, the Company amended the ABL Revolving Credit Facility, which now consists of two tranches, to increase its total availability from $500.0 million to $581.0 million and extend the maturity on a portion of this availability. The first tranche has availability of up to $35.0 million, subject to a borrowing base, maturing on March 4, 2026. The second tranche has availability of up to $546.0 million, subject to a borrowing base, maturing on March 29, 2029. Interest on the ABL Revolving Credit Facility is based on, at the Company's option, either the base rate subject to a 1% floor, or Term SOFR subject to a floor of 0%, plus an applicable margin. All other key terms of the ABL Revolving Credit Facility remained unchanged.

During fiscal 2025, the Company voluntarily repaid $95.3 million of the principal of the First Lien Term Loan using existing cash on hand. The repayments were applied to the remaining principal payments in order of scheduled payment date.

On February 2, 2026, the Company entered into an amendment to the First Lien Term Loan (“Amended First Lien Term Loan”) and issued $600.0 million in aggregate principal amount of senior secured notes (the “Senior Secured Notes”). Following the amendment, $900.0 million of principal remained on the Amended First Lien Term Loan.

Senior Secured Notes

The Senior Secured Notes bear interest at 8.25% per annum and mature on February 1, 2031. The Company issued the Senior Secured Notes pursuant to an indenture, dated as of February 2, 2026 (the “Indenture”). The Indenture contains covenants that, among other things, restrict the Company’s ability and the ability of its restricted subsidiaries to: incur additional indebtedness or guarantee indebtedness; pay dividends or make other distributions in respect of, or repurchase or redeem, capital stock; issue certain preferred stock or similar equity securities; make loans and investments; sell or otherwise dispose of assets; incur liens; enter into transactions with affiliates, enter into agreements restricting our subsidiaries’ ability to pay dividends; and consolidate, merge, or sell all or substantially all assets. These restrictions, however, are subject to a number of important exceptions and qualifications.

The Indenture also provides that the Senior Secured Notes may become subject to redemption under certain circumstances, including a change of control (as defined in the Indenture) of the Company. Prior to February 1, 2028, the Company may, at its option, redeem the Senior Secured Notes in whole or in part, at a redemption price equal to 100% of the principal amount of the Senior Secured Notes being redeemed plus the make-whole premium set forth in the Indenture, together with accrued and unpaid interest. On and after February 1, 2028, the Company may, at its option, redeem the Senior Secured Notes in whole or in part, at certain redemption prices (expressed as percentages of the principal amount thereof) set forth in the Indenture, together with accrued and unpaid interest.

For more information regarding this indebtedness, refer to Note 7, “Senior Secured Credit Facilities,” in the Notes to Consolidated Financial Statements included in Part II, Item 8 of this Annual Report on Form 10-K.

Derivative Instruments

The Company entered into interest rate cap, collar and swap agreements to limit the maximum interest on a portion of the Company’s variable-rate debt and decrease its exposure to interest rate variability relating to three-month Term SOFR. For more information regarding derivative instruments, refer to Note 8, “Derivative Instruments,” in the Notes to Consolidated Financial Statements included in Part II, Item 8 of this Annual Report on Form 10-K.

Segment

We operate under one reportable segment and support and serve pets and their parents through our integrated ecosystem of pet care centers, services, and e-commerce.

57

Seasonality

Our financial performance is not significantly impacted by seasonality, as the majority of our sales are generated by pet parents caring for their pets year-round.

Critical Accounting Policies and Estimates

The preparation of our consolidated financial statements in conformity with accounting principles generally accepted in the United States (“GAAP”) requires us to make assumptions and estimates about future results and apply judgments that affect the reported amounts of assets, liabilities, net sales, expenses and related disclosures. We base our estimates and judgments on historical experience, current trends and other factors that we believe to be relevant at the time our consolidated financial statements are prepared. On an ongoing basis, we review the accounting policies, assumptions, estimates and judgments to ensure that our financial statements are presented fairly and in accordance with GAAP. However, because future events and their effects cannot be determined with certainty, actual results could differ from our assumptions and estimates, and such differences could be material.

We state our significant accounting policies in the notes to our annual consolidated financial statements, which are included in this Annual Report on Form 10-K. We believe that the following accounting policies and estimates described below have the greatest potential impact on our financial statements, and therefore we consider these to be critical to aid in fully understanding and evaluating our reported financial results.

Inventory Reserves

We value our inventory at the lower of the cost or net realizable value through the establishment of inventory valuation and shrink reserves. Cost is determined by the average cost method and includes inbound freight charges. Our valuation reserves represent the excess of the carrying value or average cost, over the amount we expect to realize from the ultimate sale of the inventory. Valuation reserves establish a new cost basis, and subsequent changes in facts or circumstances do not result in an increase in the newly established cost basis. Our valuation reserves are subject to uncertainties, as the calculation requires us to make assumptions regarding inventory aging, forecasted consumer demand and trends and the promotional environment.

Our inventory shrink reserve represents estimated physical inventory losses that have occurred since the last physical inventory date. Periodic inventory observations are performed on a regular basis at pet care center locations, and cycle counts are performed for inventory at distribution centers to ensure inventory is properly stated in our consolidated financial statements. During the period between counts at pet care center locations, we accrue for estimated shrink losses based on historical shrinkage results, taking into consideration any current trends in the business.

We have not made any material changes in our methodology used to establish our inventory valuation and shrink reserves during the past three fiscal years, and we have not had material adjustments between our estimated shrinkage percentages and actual results. A 10% difference in our actual valuation reserve at January 31, 2026 would have an insignificant effect on pre-tax loss in fiscal 2025. Additionally, we do not believe there is a reasonable likelihood that there will be a material change in future estimates or assumptions we use to calculate our shrink reserve. However, if estimates of losses are inaccurate, we may be exposed to losses or gains that could be material. A 10% difference in our actual shrink reserve at January 31, 2026 would have affected pre-tax loss by $3.4 million in fiscal 2025.

Vendor Allowances

We receive various forms of consideration from our merchandise vendors (vendor allowances). We receive vendor allowances, primarily in the form of cooperative advertising reimbursements, rebate incentives, prompt purchase discounts, and vendor compliance charges pursuant to agreements with certain vendors. Substantially all vendor allowances are initially deferred as a reduction of the cost of inventory purchased and recorded as a reduction to cost of sales in the consolidated statements of operations as the inventory is sold. Vendor rebates and allowances that are identified as specific, incremental, and identifiable costs incurred by the Company in selling the vendors’ products are classified as a reduction of selling, general and administrative expenses in the consolidated statements of operations as the costs are incurred, as the related costs are also classified as selling, general and administrative expenses.

We establish a deferral for vendor income that is earned but not yet received and record the deferral as a reduction to merchandise inventory. The majority of the year-end vendor income deferrals are collected within the

58

following fiscal quarter, and we do not believe there is reasonable likelihood that the assumptions used in our estimate will change significantly. Historically, adjustments to our vendor income deferral have not been material. A 10% difference in our vendor income deferred at January 31, 2026 would have affected pre-tax loss by $2.0 million in fiscal 2025.

We have not made any material changes in the accounting methodology we use to assess vendor allowances during the past three fiscal years.

Long-lived Assets

Long-lived assets, other than goodwill and intangible assets, which are separately discussed below, are tested for recoverability whenever events or changes in circumstances indicate that the carrying value of an asset may not be recoverable. Long-lived assets are reviewed for impairment at the lowest level of identifiable cash flows, and are not recoverable if the carrying amount exceeds the sum of the undiscounted cash flows expected to result from the use and eventual disposition. If a long-lived asset is not recoverable, an impairment loss is recognized for the amount by which the carrying amount of the long-lived asset (or group of assets) exceeds its fair value, with fair value determined based on the income approach.

Factors we consider important and which could trigger an impairment review include: (i) significant underperformance of a pet care center relative to expected historical or projected future operating results; (ii) significant changes in the manner of our use of assets or strategy for our overall business; (iii) significant negative industry or economic trends; or (iv) planned pet care center closings.

We have not made any material changes in the accounting methodology we use to assess impairment losses during the past three fiscal years.

Goodwill and Trade Name Intangible Assets

Goodwill

We evaluate goodwill annually in our fourth quarter or whenever events or changes in circumstances indicate that the carrying value may not be recoverable. We have identified one reporting unit and selected our fourth fiscal quarter to perform our annual goodwill impairment testing. Goodwill impairment guidance provides entities the option to perform a qualitative assessment to determine whether further impairment testing is necessary. The qualitative assessment requires significant judgments about economic conditions, including the entity’s operating environment, its industry and other market conditions, entity-specific events related to financial performance or loss of key personnel, and other events that could impact the reporting unit. If management concludes, based on assessment of relevant events, facts, and circumstances, that it is more likely than not that a reporting unit’s fair value is greater than its carrying value, no further impairment testing is required.

If management’s assessment of qualitative factors indicates that it is more likely than not that the fair value of a reporting unit is less than its carrying value, then a quantitative assessment is performed. We also have the option to bypass the qualitative assessment described above and proceed directly to the quantitative assessment, where we compare the fair value of the reporting unit to its carrying value. If the fair value of the reporting unit exceeds the carrying value of our net assets assigned to that unit, goodwill is not considered impaired, and we are not required to perform further testing. If the carrying value of net assets assigned to the reporting unit exceeds the fair value of the reporting unit, then we would record an impairment loss equal to the difference. In cases where a quantitative test is performed, the fair value of our reporting unit is estimated using the assistance of a third-party valuation firm. If a quantitative assessment is performed, the evaluation includes management estimates of cash flow projections based on internal future projections and/or use of a market approach by reviewing transactional and financial data of publicly traded companies. The assumptions used in the impairment analysis are inherently subject to uncertainty and small changes in these assumptions could have a significant impact on the concluded value. The Company's market capitalization is also considered as part of the analysis, in order to further validate the reasonableness of the fair values concluded for the reporting unit. Factors that may trigger an interim impairment test may include, but are not limited to, current economic and market conditions or a significant decline in the Company’s stock price and market capitalization compared to net book value.

We have not made any material changes in the accounting methodology we use to assess goodwill impairment losses during the past three fiscal years.

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Indefinite-lived trade name

We consider the Petco trade name to be an indefinite-lived intangible asset, as we currently anticipate that this trade name will contribute cash flows to us indefinitely. We perform our annual impairment test during the fourth quarter of each year or whenever events or changes in circumstances indicate the carrying value may not be recoverable. Management has the option to first perform a qualitative assessment of its trade name asset to determine whether it is necessary to perform a quantitative impairment test. We also have the option to bypass the qualitative assessment described above and proceed directly to quantitative assessment.

In cases where a quantitative test is performed, the fair value of our trade name is estimated using the assistance of a third-party valuation firm. Factors that may trigger an interim impairment test may include, but are not limited to, a significant decline in the Company’s stock price and market capitalization compared to net book value, or changes in the pattern of utilization of the intangible asset. Significant assumptions used in the determination of fair value of the trade name generally include prospective financial information, growth rates, discount rates and comparable multiples from publicly traded companies in similar industries. An impairment charge is recorded for the amount by which the carrying amount of the trade name exceeds its fair value.

We have not made any material changes in the accounting methodology we use to assess indefinite-lived trade name impairment during the past three fiscal years.

Self-insurance Reserves

We maintain accruals for our self-insurance of workers’ compensation, employee-related healthcare benefits and general and auto liabilities. Insurance coverage is in place above per occurrence retention limits to limit our exposure to large claims. These insurance policies have stated maximum coverage limits, after which we bear the risk of loss. When estimating our self-insurance reserves, we consider a number of factors, including historical experience, trends related to claims and payments, and information provided by our insurance brokers and actuaries. Periodically, we review our assumptions and valuations provided by our actuaries to determine the adequacy of our self-insurance reserves.

We are required to make assumptions and to apply judgments to estimate the ultimate cost to settle reported claims and claims incurred but not reported at the balance sheet date. There were no significant changes to the self-insurance reserves during the past three years other than routine current period activity. A 10% change in our self-insurance reserves at January 31, 2026 would have affected pre-tax loss by $9.6 million in fiscal 2025.

Recent Accounting Pronouncements

Refer to Note 1, “Summary of Significant Accounting Policies,” in the Notes to Consolidated Financial Statements included in Part II, Item 8 of this Annual Report on Form 10-K for information regarding recently issued accounting pronouncements.