Petco Health and Wellness Company reported second-quarter 2026 net sales of $1.49 billion, representing a 0.05% increase from the prior year, while comparable sales grew 0.6%. The company’s adjusted EBITDA reached $122.2 million compared with $113.9 million in the year-ago period, marking a rise of approximately $8.3 million.
However, the adjusted EBITDA improvement was significantly influenced by a $6.8 million net benefit from tariff refunds related to the International Emergency Economic Powers Act. Excluding this refund, normalized adjusted EBITDA totaled $115.4 million, representing just $1.5 million or approximately 1.3% growth above the prior year. Gross margin expanded by 37 basis points to 39.7%, though this metric was essentially flat year over year without the refund benefit. Product sales declined 0.7%, while services and other sales increased 3.6%.
Cash generation improved substantially. Year-to-date operating cash flow reached $130.6 million compared with $70.4 million, while free cash flow increased to $60.8 million from $9.9 million. The company ended the quarter with $293.5 million in cash, up from $188.7 million a year earlier. Total debt declined to $1.48 billion from $1.59 billion, with net debt falling to $1.19 billion from $1.40 billion. Following the quarter, Petco prepaid an additional $75 million in debt, bringing voluntary debt repayments to $170 million over nine months.
The company reaffirmed full-year guidance for net sales growth of flat to 1.5% and adjusted EBITDA of $415 million to $430 million, with the range including the $6.8 million tariff refund and assuming no additional such refunds for the remainder of the year. Analysts noted that while Petco demonstrated cash generation and debt reduction, the tariff refund substantially magnified reported profitability metrics, and underlying growth excluding this benefit remained constrained by modest comparable sales performance.
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