WOOF 10-K & 10-Q changes, risk factors and insider trading

Investing in our securities involves uncertainty and risk due to a variety of factors. You should carefully consider the risks described below with all of the other information included in this Annual Report on Form 10-K. SomeStatements ofin this section are based on the factors,Company’s events,beliefs and contingenciesopinions discussedregarding belowmatters maythat havecould occurredmaterially adversely affect the Company in the past,future. References to past events are provided by way of example only and the disclosures below are not representationsintended to be a complete listing or a representation as to whether or not thesuch factors, events, or contingenciesfactors have occurred in the past, but are provided because future occurrences of such factors, events, or contingencies could have a material adverse effect on our business, results of operations, financial condition, cash flows or stock price.past. Further, the risks and uncertainties described below are not the only ones we face.face and should not be considered a complete statement of all potential risks or uncertainties that the Company faces or may face in the future. Additional risks not presently known to us or that we currently deem immaterial may also materially affect our business. If any of the following risks were to occur, our business, financial condition, and results of operations could be materially adversely affected. In that case, the trading price of our Class A common stock could decline, and you could lose all or part of your investment. For a summary of these risks, please read “Risk Factors Summary,” which immediately precedes Part I, Item 1 of this Annual Report on Form 10-K.

Our sales depend on consumer spending, which is influenced by numerous factors beyond our control, including general economic conditions, disruption or volatility in global financial markets, changes in interest rates, inflation, the availability of discretionary income and credit, weather, consumer confidence, and unemployment levels. We have experienced, and could continue to experience, declines in sales of certain products and services and changes in the types of products and services purchased during economic downturns. Our business could be harmed by any material decline in the amount of consumer spending, which could reduce our sales, or a decrease in the sales of higher-margin products and services, which could reduce our profitability and adversely affect our business. For instance, aan declineincrease in theprice amountsensitivity ofin discretionary consumer spending due in part to persistent inflation has negatively impacted sales of discretionary items, which has had, and could continue to have, an adverse affecteffect on our profitability.

We have also benefited from increasing pet ownership, discretionary spending on pets, and trends in humanization and premiumization in the pet industry, as well as favorable pet ownership demographics. To the extent these trends continue to slow or reverse, our sales and profitability would continue to be adversely affected. Specifically, though we’ve experienced significant growth in sales of non-discretionary consumables, spending on non-discretionary items has declined due in part to persistent inflation, which has adversely impacted our profitability. Further, in response to shifting consumer demand, beginning in fiscal 2023 we broadened our assortment to include more national brand products, which are typically lower priced and less profitable, in addition to taking strategic pricing actions throughout our broader assortment of merchandise. Though sales of such products have been significant, if we do not increase the average basket size of customers purchasing such products, or we are unsuccessful in transitioning such customers into higher margin products over time, then our profitability could be adversely affected. The success of our business depends in part on our ability to identify and respond to evolving trends in demographics and consumer preferences. Failure to timely identify or effectively respond to changing consumer tastes, preferences, spending patterns, and pet care needs could adversely affect our relationship with our customers, the demand for our products and services, our market share, and our profitability.

Our growth depends, in part, on our ability to successfully introduce, improve, and reposition our products and services to meet the requirements of pet parents. This, in turn, depends on our ability to predict and respond to evolving consumer trends, demands, and preferences. For instance, in responsefiscal 2025, we grew our merchandise offering by expanding our portfolio of owned brands and exclusive products in an effort to shiftingposition consumerPetco demandas the go-to destination for premium and increasedinnovative competition,pet beginning in fiscal 2023 we broadened our assortment to include more national brand products, particularly consumables,nutrition and in fiscal 2024 we implemented strategic pricing actions across our assortment.supplies.

Sustained change in consumer preferences could decrease the attractiveness of what we believe to be our competitive advantages, including our extensive product assortment, premium product offerings, omnichannel capabilities, high-qualityowned service offerings, and a unique customer experience, which could adversely affect our business and results of operations. Further, if we fail to otherwise positively differentiate our customer experience from that of our competitors, our business and results of operations could be adversely affected.

Our strategies include, among other things, developing compelling products that are new and trend-driven, offering our customers an engaging store experience that is supported by passionate and trusted in-store employees, expanding our veterinaryveterinary, training, and grooming service offerings andofferings, building out our digital and data capabilities,capabilities in an effort to provide a seamless omnichannel experience, growing our market share in consumables like fresh/frozen and in services like veterinary care, grooming, and training, enhancing our owned brand portfolio, streamlining floor-level processes and store manager responsibilities in our pet care centers, and introducing new offerings to better connect with our customers. However, we may not be able to execute on these strategies as effectively as anticipated. Our ability to execute on these strategies depends on a number of factors, including:

our ability to hire, train, and retain skilled personnel, including veterinarians, information technology professionals, owned brand merchants, and groomersgroomers, and trainers;

We havehave, at times, experienced difficulties recruiting and retaining skilled veterinarians due to shortages that could disrupt our business.

The successful growth of our veterinary services business depends significantly on our ability to recruit and retain skilled veterinarians and other veterinary technical staff. We face competition from other veterinary service providers in the labor market for veterinarians and,and veterinary technical staff, from time to time, we have experienced shortages of skilled veterinarians in markets in which we operate, or desire to operate, our veterinary service businesses, which has required us or our affiliated veterinary practices to increase wages and enhance benefits to recruit and retain enough qualified veterinarians and veterinary technical staff to adequately staff our veterinary services operations. If we are unable to recruit and retain qualified veterinarians,veterinarians and veterinary technical staff, or to control our labor costs, our business, financial condition, and results of operations may be materially adversely affected.

Additionally, customer expectations about the methods by which they purchase and receive products or services are also becoming more demanding. Customers routinely use technology and a variety of electronic devices and digital platforms to rapidly compare products and prices, read product reviews, determine real-time product availability, and purchase products. Once products are purchased, customers are seeking alternate options for delivery of those products, and they often expect quick, timely, and low-price or free delivery and/or convenient pickup options. In addition, if there are changes in the usage and functioning of search engines or decreases in consumer use of search engines, for example, as a result of the continued development of AI technology, this could negatively impact our websites. We must continually anticipate and adapt to these changes in the purchasing process.

In some circumstances, increased transactions through our website may result in reduced customer traffic in our pet care centers, particularly as customers take advantage of buy online and pick up in store, curbside pickup, and home delivery services available for online orders when making certain types of purchases, such as for bulk orders, repeat deliveries, or heavy pet products. There is a risk that any such reduced customer traffic may reduce the sales of certain products and services in our pet care centers. The cost of shipping online orders, incuding the availability of freepromotional shipping of online and “extended aisle” orders increases our costs and could adversely affect our profitability.

Our growth rate depends, to a large degree, on the availability of adequate capital to fund the expansion of our offerings, including veterinary services andservices, digital capabilities, and enhancing our store experience, which in turn will depend in large part on cash flow generated by our business and the availability of equity and debt capital. We cannot assure you that we will be able to maintain sufficient cash flow or obtain sufficient equity or debt capital on acceptable terms, or at all, to support our expansion plans.

We are dependent upon the efforts of our key personnel, including our executive officers, and from time to time, there have been, and in the future may be, changes to our management team resulting from the hiring, departure or realignment of executive functions. The departure of any of our key personnel could affect our ability to run our business effectively.effectively or without disruption. Our success will, in part, depend on our ability to retain our current management and to develop, attract, and retain qualified personnel in the future. Competition for senior management personnel is intense with increasingly aggressive compensation packages, and we cannot assure you that we can retain our key personnel or that our succession planning will prove effective. Furthermore, significant declines in our stock price have reduced the retention value of our outstanding share-based awards, which could impact the competitiveness of our compensation over time. The loss of a member of senior management requires the remaining executive officers and our board of directors to divert immediate and substantial attention to seeking a replacement. The inability to fill vacancies in our key personnel positions, including executive positions, on a timely basis could adversely affect our ability to implement our business strategy and be disruptive to our business, which would negatively impact our results of operations.

We purchase significant amounts of products from a number of vendors with limited supply capabilities. There can be no assurance that our current pet food or supply vendors will be able to accommodate our anticipated growth and expansion of our business. An inability of our existing vendors to provide products or other product supply disruptions that may occur in the future could impair our business, financial condition, and results of operations.

MostMany of the premium pet food brands that we purchase are not widely carried in supermarkets, warehouse clubs, or mass merchants. If any premium pet food manufacturers were to make premium pet food products widely available in supermarkets or through mass merchants, or if the premium brands currently available to supermarkets and mass merchants were to increase their market share at the expense of the premium brands sold only through specialty pet food and supplies retailers, our ability to attract and retain customers or our competitive position may suffer. Further, if supermarkets, warehouse clubs, or mass merchants begin offering any of these premium pet food brands at lower prices, our sales and gross margin could be adversely affected.

SeveralSome of the pet food brands and product lines we currently purchase and offer for sale to our customers are not offered by our closest pet specialty competitor. However, in most cases, we have not entered into formal exclusivity agreements with the vendors for such brands. In certain circumstances, in the event these vendors choose to enter into distribution arrangements with other specialty pet retailers or other competitors our sales could suffer and our business could be adversely affected.

Our business and financial results have been, and could be in the future, adversely affected by health epidemics, pandemics, and similar outbreaks. For example, as a result of the COVID-19 pandemic, we reduced operations in many of our pet care centers in fiscal 2020, which decreased our pet care center revenues. Despite our efforts to manage these matters, their ultimate effects also depend on factors beyond our knowledge or control, including the duration, severity, and recurrence of any outbreak and actions taken to contain its spread and mitigate its public health effects. Health epidemics, pandemics, and similar outbreaks may adversely affect our business, financial position, results of operations, and cash flows, including by resulting in (i) significant volatility in demand for our products and services, (ii) changes in consumer behavior and preferences, (iii) disruptions of our manufacturing and supply chain operations, (iv) disruption of our cost saving programs and restructuring initiatives, (v) limitations on our employees’ ability to work and travel, and (vi) changes to economic or political conditions in markets in which we operate.

Our vendors generally ship merchandise to one or more of our distribution centers, which receive and allocate merchandise to our locations and e-commerce customers. The success of our pet care centers depends on their timely receipt of merchandise. If any shipped merchandise were to be delayed because of the impact of severe weatherweather, tariffs, or other disruptions on transnational shipping, particularly from our vendors in Asia, our operations would likely be significantly disrupted. Disruption to shipping and transportation channels due to slowdowns or work stoppages at ports on the West Coast of the United States have occurred in the past, and to the extent they occur in the future, could cause us to rely more heavily on airfreight to achieve timely delivery to our customers, resulting in significantly higher freight costs. Further, increased transportation costs, including tariffs and sustained increases in fuel costs, have resulted in higher operating costs in the past. We may not be able to pass all or any portion of these higher costs on to our customers or adjust our pricing structure in a timely manner in order to remain competitive, either of which could have a material adverse effect on our results of operations.

We occasionally seek to grow our business through acquisitions ofof, or investments inin, new or complementary businesses, products, or services, or through strategic ventures, and the failure to successfully identify these opportunities, manage and integrate these acquisitions, investments, or alliances, or to achieve an adequate return on these investments, could have an adverse effect on us.

From time to time we also make strategic investments. These investments typically involve many of the same risks posed by acquisitions, particularly those risks associated with the diversion of our resources, the inability of the new venture to generate sufficient revenues,revenues or a return on our investment, the management of relationships with third parties, and potential expenses. Strategic ventures have the added risk that the other strategic venture partners may have economic, business, or legal interests or objectives that are inconsistent with our interests and objectives.

While to date, we do not believe such identified cybersecurity incidents have been material to us, including to our reputation or business operations, or had a material financial impact,impact on us, we cannot assure you that such incidents or future cyber-incidents will not expose us to material liability. Security could be compromised and confidential information, such as customer credit card numbers or account information, employee information, or other personally identifiable information that we or our vendors collect, transmit, or store, could be misappropriated or system disruptions could occur. In addition, cyber-attacks such as ransomware or phishing attacks could lock us out of our information systems and disrupt our operations. We may not have the resources or technical sophistication to anticipate or prevent rapidly evolving types of cyber-attacks. Attacks may be targeted at us, our customers, our employees, our vendors, or others who have entrusted us with information. Actual or anticipated attacks may cause us to incur increasing costs, including costs to deploy additional personnel and protection technologies, train employees, and engage third-party experts and consultants. Advances in computer capabilities, including as a result of artificial intelligence,intelligence ("AI"), supercomputing, new technological discoveries, or other developments may result in the breach or compromise of the technology used or maintained by us to protect transactions or other sensitive data. In addition, data and security breaches could also occur as a result of systems misconfigurations as well as non-technical issues, includingsuch as intentional or inadvertent breaches by our employees or by persons with whom we have commercial relationships, that result in the unauthorized release or availability of personal or confidential information. Additionally, it may take considerable time for us to investigate and evaluate the full impact of cybersecurity incidents, particularly for sophisticated or widespread attacks. These factors may inhibit our ability to provide prompt, full, and/or reliable information about the incident to our customers, partners, regulators, and the public. Any compromise or breach of our or our vendors’ computer network security could result in a violation of applicable privacy and other laws, costly investigations, litigation, including class actions, and notification, as well as potential regulatory or other actions by governmental agencies and harm to our brand, business, and results of operations. As a result of any of the foregoing, we could experience adverse publicity, loss of sales, the cost of remedial measures, including substantial legal fees, and significant expenditures to reimburse third parties for damages, each of which could adversely impact our results of operations. While we maintain cyber and crime insurance, any such insurance may not be sufficient to cover actual losses, may not apply to the circumstances relating to any particular loss or incident, or may become materially more costly over time.

The efficient operation of our business is dependent on our information systems and those of our vendors. In particular, we rely on our information systems to effectively manage our financial and operational data, to maintain our in-stock positions, and to transact the sale of our products in our pet care centers and online. The failure of our information systems or those of our vendors to perform as designed, the loss of data, or any interruption of our information systems or those of our vendors for aan significantextended period of time could disrupt our business.

Our operations also depend on our ability to maintain and protect the computer systems we use to manage our purchase orders, pet care center inventory levels, web applications, accounting functions, and other critical aspects of our business. Our systems and those of our vendors are vulnerable to damage from extreme weather, fire, floods, earthquakes, power loss, telecommunications failures, terrorist and cyber-attacks, employee error, and similar events. Our disaster recovery planning and those of our vendors may not be sufficient to adequately respond to any such events. In addition, we may have inadequate insurance coverage to compensate for any related losses and expenses. Any of these events could damage our reputation, disrupt our business, supply chain, or sales, and be expensive to remedy.

From time to time, we receive claims or complaints alleging that we do not properly care for some of the pets we handle or for companion animals we handle and sell, which may include dogs, cats, birds, fish, reptiles, and other small animals. DeathsDeaths, illnesses, or injuries sometimes occur while animals are in our care. As a result, we may be subject to claims that our animal care practices, including grooming, training, veterinary, and other services, or the related training of our associates or handling of animals by them, do not provide the proper level of care. Any such claims or complaints, as well as any related news reports or reports on social media, even if inaccurate or untrue, could cause negative publicity, which in turn could harm our business and have a material adverse effect on our results of operations. In addition, legislative or regulatory initiatives in certain jurisdictions restricting the retail sale of pets, could expand to additional markets, and if adopted at scale, could adversely affect our sales, operations, and financial results.

the burden of complying with foreign laws, including regulatory regimes, tax laws, privacy laws, labor and employment laws, and financial accounting standards;

Moreover, our products are sourced from a wide variety of vendors, including from vendors overseas, such as China. In addition, some of the products that we purchase from vendors in the United States also depend, in whole or in part, on vendors located outside the U.S. There continues to be significant uncertainty regarding the future of international trade agreements and ultimately the United States’ consistent position on international trade. For example, the U.S. government has threatened to undertake a number of actions relating to trade with Mexico, including the closure of the border and has imposed tariffs on goods imported into the United States from Mexico, and Canada. In addition, the U.S. government has issued sanctions on Chinese companies, raised tariffs, and recentlyduring 2025 imposed new tariffs on a wide range of imports of Chinese products and may impose additional tariffs in the future. Moreover, recent U.S. tariffs imposed or threatened to be imposed on China, Mexico, Canada, and other countries and any retaliatory actions taken by such countries couldhave resulted in and are expected to continue to result in us incurring additional costs to procure a portion of the merchandise we offeroffer. While we take steps to mitigate or avoid these increased costs and maydisruptions, requiresuch usas tothrough raiseselectively raising prices on certain products.products or altering sourcing, our ability to do so may be limited by competitive pressures, customer acceptance, and operational and supply chain constraints, especially in the short term. Additional trade restrictions, including sanctions, tariffs, quotas, embargoes, safeguards, border shutdowns, and customs restrictions, could further increase the cost or reduce the supply of products available to us and to our vendors based in the United States and may require us to modify our supply chain organization or other current business practices or raise prices,prices further, any of which could harm our business, financial condition, and results of operations.operations, and competitive position.

costs related to acquisitions of businesses; and general economic factors.factors, including new or increased tariffs or other trade restrictions.

We could be adversely affected if consumers lose confidence in the safety and quality of our owned brand or vendor-supplied consumable pet products and supplies. Adverse publicity about these types of concerns, whether valid or not, may discourage consumers from buying the products in our locations or cause vendor production and delivery disruptions. The actual or perceived sale of contaminated pet consumables by our vendors or us could result in product liability claims against our vendors or us and a loss of consumer confidence, which could have an adverse effect on our sales and operations. In addition, if our products are alleged to pose a risk of injury or illness, or if they are alleged to have been mislabeled, misbranded, or adulterated, or to otherwise be in violation of governmental regulations, we may be subject to fines or litigation costs, and may need to find alternate ingredients for our products, delay production of our products, or discard or otherwise dispose of our products, which could adversely affect our results of operations. If this occurs after the affected product has been distributed, we may need to withdraw or recall the affected product. Given the difficulty in converting pet food customers, if we lose customers due to a loss of confidence in safety or quality, it may be difficult to reacquire such customers.

The Company faces risks related to outbreaks of communicable diseases among pets including, but not limited to, canine parvo virus, kennel cough, leptospirosis, feline and canine distemper and canine influenza virus. A widespread outbreak of any communicable disease,disease can cause decreased customer demand for the Company’s grooming, training, and veterinary services as customers avoid public spaces with other pets in order to avoid contracting the applicable disease. The future impact of any such outbreak of a communicable disease is difficult to predict and dependent on the severity, magnitude and duration of the outbreak.

The pet food and supplies industry is subject to risks related to increases in the prices and availability of certain commodities used in the production of certain pet food and other pet-related products, specifically seed, wheat, and rice, as well as other materials that are used in the production of certain pet accessories. Additionally, increased human and/or pet consumption or population increases may potentially limit the supply of or increase prices for certain meat proteins, many of which are used in animal feed. Throughout 2023 and 2024,2025, costs of certain commodities increasedcontinued to increase due to increased fuel prices, heightened transportation costs, tariffs and other trade restrictions, and general inflationary pressures, and at times we have resultingly observed increases in the costs we pay for certain vendor-supplied products. To help mitigate the impact of these cost increases, we have in the past implemented select price increases, which is consistent with our historical practice. However, our ability to pass on increased purchase costs both now and in the future is and will be significantly impacted by market conditions and competitive factors. If we are unable to pass on any increased purchase costs to customers, we would experience reduced margins and could experience decreased demand for orour products and services and reduced margins,servicess, which could have a material adverse effect on our business, financial condition, and results of operations.

We are not currently party to a collective bargaining agreement with any of our employees. We have, however, experienced attempted union organizing campaigns,campaigns in the past, and may continue to experience union organizing campaigns, which can be disruptive to our operations, increase our labor and operating costs, and decrease our operational flexibility. We cannot assure you that some or all of our employees will not become covered by a collective bargaining agreement or that we will not encounter labor conflicts or strikes. In addition, organized labor may benefit from new legislation or legal interpretations, as well as current or future unionization efforts among other large employers. Particularly, in light of current support for changes to federal and state labor laws,employers; we therefore cannot provide any assurance that we will not experience additional and/or successful union organization activity in the future. Any labor disruptions could have an adverse effect on our business or results of operations and could cause us to lose customers. Further, our responses to any union organizing efforts could negatively impact our reputation and have adverse effects on our business, including on our financial results.

Geopolitical events, such as war or civil unrest in a country in which our vendors are located or dependent upon, or terrorist or military activities disrupting transportation, communication, or utility systems, local protests, and unrest and natural disasters, such as hurricanes, tornadoes, floods, earthquakes, wildfires, and other severe weather and climate conditions (including those resulting from climate change),conditions, whether occurring in the United States or abroad, particularly during peak seasonal periods, have disrupted and in the future could disrupt our operations or the operations of one or more of our vendors, in the affected areas, and damage or destroy one or more of our pet care centers or distribution centers located in the affected areas. Such events could also result in temporary or long-term supply chain disruptions, or cause increased transportation costs (whether due to fuel prices, fuel supply, or otherwise). For example, the ongoing conflicts in Ukraine and the Middle East have resulted, and could continue to result, in volatile commodity markets, supply chain disruptions, and increased costs for transportation, energy, packaging and raw materials and other input costs. Further, even if a severe weather event does not ultimately cause damage to any of our pet care centers or distribution centers, we expend significant efforts in anticipation of such event to protect the health and safety of our partners, guests, and the live animals that we sell and/or offer for adoption in the subject area. As a result of any such events, day-to-day operations, particularly our ability to receive products from our vendors or transport products to our pet care centers, could be adversely affected, or we could be required to close pet care centers or distribution centers in the affected areas or in areas served by the affected distribution center. These factors have caused and could in the future cause consumer confidence and spending to decrease or otherwise become less predictable during the particular event. Further, these factors could result in increased volatility in the United States and the global economy, including financial markets and economy.markets. These or other occurrences could significantly impact our operating results and financial performance.

A potential result of climate change is more frequent or more severe weather events or natural disasters. To the extent such weather events or natural disasters do become more frequent or severe, disruptions to our business, including store closures and/or damage, and our vendors and costs to repair damaged facilities or maintain or resume operations could increase. The long-term impacts of climate change, whether involving physical risks (such as extreme weather conditions or rising sea levels) or transition risks (such as regulatory or technology changes or increased operating costs, including the cost of insurance) are expected tocould be widespread and unpredictable. These changes over time could also affect, for example, the availability and cost of certain products, insurance, commodities (including grains and proteins), and energy (including utilities), which in turn may impact our ability to procure those certain goods or services required for the operation of our business at the quantities and levels we require or on otherwise commercially reasonable terms.

Inflation in the United States remained elevated throughout fiscal 2024.2025. This is primarily believed to be the result of a multitude of factors, including elevated costs of product inputs and transportation costs, increased labor costs, and spending of excess savings, among other factors. Additionally, the imposition of tariffs on imports by the U.S. has resulted in higher input costs. We have experienced inflationary pressures in certain areas of our business, including with respect to employee wages and the cost of merchandise, and it has become increasingly difficult to mitigate such pressures through price increases. We cannot predict any future trends in the rate of inflation or associated increases in our operating costs and how that may impact our business. To the extent we are unable to recover higher operating costs resulting from inflation or otherwise mitigate the impact of such costs on our business, our revenues and gross margins could decrease, and our financial condition and results of operations could be adversely affected. Furthermore, inflation has resulted in, and may continue to result in, decreased customer spending on certain discretionary items, such as supplies and companion animal sales, which has adversely impacted our revenues and gross margins.

We are implementing the use of artificial intelligence (“AI”) solutions, including machine learning and generative AI tools (both internal and external) that collect, aggregate, transcribe, and analyze data to assist in the development of our services and products and in the use of internal tools that support our business. These applications may become increasingly important in our operations over time. This emerging technology presents a number of legal, compliance, privacy, security, and ethical risks inherent in its use. AI algorithms are based on machine learning and predictive analytics, which can create accuracy issues, unintended biases, and discriminatory outcomes that could harm our brand, reputation, business, or customers. Additionally, no assurance can be made that the usage of AI will assist us in being more efficient or offset the costs of its development and implementation. Further, dependence on AI without adequate safeguards to make certain business decisions may introduce additional operational vulnerabilities by producing inaccurate outcomes, recommendations, or other suggestions based on flaws in the underlying data or other unintended results. Our competitors or other third parties may incorporate AI into their business, services, and products more rapidly or more successfully than us, which could hinder our ability to compete effectively and adversely affect our results of operations. Implementing the use of AI successfully, ethically and as intended,intended will require significant resources. In addition, the use of AI may increase regulatory, cybersecurity, intellectual property, consumer protection, discrimination, and data privacy risks, such as intended, unintended, or inadvertent transmission of proprietary or sensitive information.information, infringement on third parties' intellectual property rights, or discrimination against job applicants. The technologies underlying AI and their use cases are rapidly developing, and it is not possible to predict all of the legal, operational or technological risks related to the use of AI. While new AI initiatives, laws, and regulations are emerging and evolving, they have largely been implemented at the state and local level and what they ultimately will look like in the aggregate remains uncertain, and our obligation to comply with them could entail significant costs, negatively affect our business, or limit our ability to incorporate certain AI capabilities into our business.

We have undertaken, and may undertake in the future, actions intended to enhance our profitability and drive performanceperformance. and inIn late fiscal 2024 we began efforts to optimize our assortment and store labor model, and take costs out of all areas of our business in an effort to enhance profitability and drive performance. Implementation of any such actions may be costly and disruptive to our business, and we may not be able to obtain the anticipated cost savings and operational improvements within the projected timing or at all. Additionally, as a result of these actions, we may experience a loss of continuity, loss of accumulated knowledge and/or inefficiency, loss of key employees and/or other retention issues during transitional periods. These actions also require a significant amount of time and focus, which may divert attention from operating and growing our business. Moreover, projections of any cost savings or other benefits associated with these actions are based on current business operations and market dynamics, and could be significantly impacted by various factors, including but not limited to general economic conditions, future investment decisions, and the market environment.

We currently accept payments using a variety of methods, including, but not limited to, credit cards, debit cards, PayPal, Apple Pay, Google Pay, Samsung Pay, Klarna, and gift cards. As we offer new payment options to consumers, we may be subject to additional regulations, compliance requirements, fraud, and other risks. For certain payment methods, we pay interchange and other fees, which often increase over time and raise our operating costs and lower profitability. As a merchant that accepts debit and credit cards for payment, we are subject to PCI DSS, which contains compliance guidelines and standards with regard to the physicalphysical, administrativeadministrative, and technical security requirements for storing, processing, and transmitting of individual cardholder data. By accepting debit cards for payment, we are also subject to compliance with American National Standards Institute data encryption standards and payment network security operating guidelines. Additionally, the Fair and Accurate Credit Transactions Act requires systems that print payment card receipts to employ personal account number truncation so that the cardholder’s full account number is not viewable on the slip.

We collect, maintain, use, and share personal information provided to us through online activities and other consumer, employee, applicant, and business-to-business interactions in order to provide a better experience for our customers, employees, and vendors. Our current and future marketing programs depend on our ability to collect, maintain, use, and share this personal information with service providers and other vendors, and our ability to do so depends on the trust that our customers place in us and our ability to maintain that trust. Additionally, our use of consumer data is subject to the terms of our privacy policies and certain contractual restrictions in vendor contracts as well as evolving federal, state, and international laws and enforcement trends. While we strive to comply with all such regulatory and contractual obligations and believe that we are good stewards of the data of our customers’customers, data,employees, vendors, and applicants, this area is rapidly evolving, and these requirements may be interpreted and applied in a manner that is inconsistent from one jurisdiction to another, may conflict with other rules, or may conflict with our practices. If we violate privacy laws, we would suffer damage to our reputation and be subject to proceedings or actions against us by governmental entities or others. Due to the rapidly evolving nature of this area of the law, we have seen an increase in claims filed against us and others by plaintiffs and state regulatory authorities alleging violations of various data privacy laws. Although no such proceeding asserted or filed against us has subjected us to material liability to date, any such proceeding or action could hurt our reputation, force us to spend significant amounts to defend our practices, distract our management, increase our costs of doing business, and result in monetary liability and/or injunctive relief impacting our marketing, analytics, and other business operations.

In addition, various federal and state legislative and regulatory bodies, or self-regulatory organizations, continue to expand or further enforce current laws or regulations, enact new laws or regulations, or issue revised rules or guidance regarding privacy, data protection, consumer protection, and advertising. For example, in June 2018, California enacted the California Consumer Privacy Act (the “CCPA”), which took effect on January 1, 2020. The CCPA gave California residents expanded rights to access and delete their personal information, opt out of certain uses of personal information, and receive detailed information about what personal information is collected, how their personal information is used, and how that personal information is shared. The CCPA provided for civil penalties for violations enforced by the California Attorney General, as well as a private right of action for data breaches that has resulted in an increase in consumer class actions and other litigation. Further, on November 3, 2020, the California Privacy Rights Act (the “CPRA”) was voted into law by California residents and went into effect on January 1, 2023. The CPRA significantly amends the CCPA, and imposes additional data protection obligations on companies doing business in California, including additional consumer rights processes and opt outs for certain uses of sensitive data. It also created the California Privacy Protection Agency, a new data protection agency specifically tasked to issue privacy regulations and enforce the law, which results in increased regulatory scrutiny of California businesses in the areas of data collection, protection, and security. The CCPA and CPRA marked the beginning of a trend toward more stringent state privacy legislation in the United States. Similar laws have been passed in several states (including Colorado, Virginia, Utah, Oregon, Montana, Texas, Florida, New Jersey, and others),states, and have been proposed in additional states and at the federal level. Such laws have conflicting requirements that make compliance challenging. We have incurred and expect to continue to incur costs to adapt our systems and practices to comply with these requirements, and these costs may adversely affect our financial condition and results of operations. Additionally, our risk of regulatory enforcement, investigations, fines, and penalties increases with each state that passes similar privacy laws. Further, the FTC and many state attorneys general have interpreted existing federal and state consumer protection laws to impose evolving standards for the collection, use, dissemination, and security of other personal data. Courts may also adopt the standards for fair information practices promulgated by the FTC, which concern consumer notice, choice, security, and access. Consumer protection laws require us to publish statements that describe how we handle personal data and choices individuals may have about the way we handle their personal data. If such information that we publish is considered untrue, we could be subject to government and private claims of unfair or deceptive trade practices, which would lead to significant liabilities and consequences. Further, according to the FTC, violating consumers’ privacy rights or failing to take appropriate steps to keep consumers’ personal data secure may constitute unfair acts or practices in or affecting commerce in violation of Section 5(a) of the Federal Trade Commission Act.

Our trademarks, such as Bond & Co., EveryYay, Good 2 Go, Good Lovin’, Harmony, Imagitarium, Leaps & Bounds, Petco, Petco Love, Petco Park, PetCoach, Reddy, Ruff & Mews, So Phresh, Vetco, Well & Good, Where the Pets Go, WholeHearted, You & Me, Youly, Vital Care Core, and Vital Care Premier, are valuable assets that support our brand and consumers’ perception of our products. We rely on trademark, copyright, trade secret, patent, and other intellectual property laws, as well as nondisclosure and confidentiality agreements and other methods, to protect our trademarks, trade names, proprietary information, technologies, and processes. We might not be able to obtain broad protection in the United States for all of our intellectual property. The protection of our intellectual property rights may require the expenditure of significant financial, managerial, and operational resources. Moreover, the steps we take to protect our intellectual property may not adequately protect our rights or prevent third parties from infringing or misappropriating our proprietary rights, and we may be unable to broadly enforce all of our trademarks. Any of our patents, trademarks, or other intellectual property rights may be challenged by others or invalidated through administrative process or litigation. Our patent and trademark applications may never be granted. Additionally, the process of obtaining patent protection is expensive and time-consuming, and we may be unable to prosecute all necessary or desirable patent applications at a reasonable cost or in a timely manner. Even if issued, there can be no assurance that these patents will adequately protect our intellectual property, as the legal standards relating to the validity, enforceability, and scope of protection of patent and other intellectual property rights are uncertain. We also cannot be certain that others will not independently develop or otherwise acquire equivalent or superior technology or intellectual property rights. Further, our nondisclosure agreements and confidentiality agreements may not effectively prevent disclosure of our proprietary information, technologies, and processes and may not provide an adequate remedy in the event of unauthorized disclosure of such information, which could harm our competitive position. In addition, effective intellectual property protection may be unavailable or limited for some of our trademarks and patents in some foreign countries. We might be required to expend significant resources to monitor and protect our intellectual property rights. For example, we may need to engage in litigation or similar activities to enforce our intellectual property rights, to protect our trade secrets, or to determine the validity and scope of proprietary rights of others. However, we may be unable to discover or determine the extent of any infringement, misappropriation, or other violation of our intellectual property rights and other proprietary rights. Despite our efforts, we may be unable to prevent third parties from infringing upon, misappropriating, or otherwise violating our intellectual property rights and other proprietary rights. Any such litigation, whether or not resolved in our favor, could require us to expend significant resources and divert the efforts and attention of our management and other personnel from our business operations. If we fail to protect our intellectual property, our business, financial condition, and results of operations may be materially adversely affected.

We have obligations with respect to the non-use and non-disclosure of third-party intellectual property. The steps we take to prevent misappropriation, infringement, or other violations of the intellectual property of othersothers, including in connection with our use of emerging technologies such as AI tools for content and image generation in marketing or other business activities, may not be successful. From time to time, third parties have asserted intellectual property infringement claims against us and are likely to continue to do so in the future. These risks have been amplified by the increase in third parties whose sole or primary business is to assert such claims.claims, as well as evolving legal and regulatory frameworks governing the use of AI and related technologies. While we believe that our products and operations do not infringe in any material respect upon proprietary rights of other parties and/or that meritorious defenses would exist with respect to any assertions to the contrary, we may from time to time be found to infringe on the proprietary rights of others.

Any claims that our products, services, systems, applications, or marketing materials (including materials created or modified using AI tools) infringe the proprietary rights of third parties, regardless of their merit or resolution, could be costly to investigate, defend and/or settle, result in injunctions against us or payment of damages or licensing fees by us, and may divert the efforts and attention of our management and technical personnel. We may not prevail in such proceedings given the complex technical issuesissues, developing legal standards related to AI, and inherent uncertainties in intellectual property litigation. If such proceedings result in an adverse outcome, we could, among other things, be required to:

We are involved in litigation arising in the ordinary course of business, including claims related to federal or state wage and hour laws, working conditions, predictive scheduling regulations, worker classification, securities laws, antitrust laws, product liability, consumer protection, advertising, employment, intellectual property, tort, privacy, data protection, disputes with landlords and vendors, claims from customers or employees alleging failure to maintain safe premises, and other matters. Even if we prevail, litigation is time-consuming and expensive. An unfavorable outcome in one or more of these existing lawsuits, or future litigation to which we become a party, could have a material adverse effect on our business, financial condition, results of operations, and cash flows.

Continuing politicalPolitical and social attention to the issue of climate change has resulted in both existing and pending international agreements and national, regional, or local legislation and regulatory measures to limit greenhouse gas emissions, such as cap and trade regimes, carbon taxes, restrictive permitting, increased fuel efficiency standards, and incentives or mandates for renewable energy, as well as legal and regulatory requirements requiring certain climate-related disclosures, and pressure from shareholders, ratings agencies, state agencies, the SEC, and other third parties to make various climate-related disclosures. We may also be subject to additional and more complex reporting requirements in the future.future and such requirements may be inconsistent or conflicting. For example, the State of California recently passed the Climate Corporate Data Accountability Act and the Climate-Related Financial Risk Act that will imposeimposes broad climate-related disclosure obligations on companies doing business in California, including us. TheWhile SECcertain hasaspects alsoof adoptedthe rulemakingAct onare climatesubject changeto disclosuresongoing thatlitigation, couldothers significantlyare increasescheduled complianceto burdensgo andinto associated regulatory costs and complexity, although such rulemaking has been stayed.effect. Such measures have subjected us, and may subject our vendors, to additional costs and restrictions and require significant operating and capital expenditures, including with respect to waste and energy reduction, compliance costs, and workforce initiatives, which could adversely impact our business, financial condition, results of operations and cash flows.

We have developed targets,goals, and other initiatives related to sustainability matters. These statements reflect our current plans and do not constitute a guarantee that they will be achieved. Our efforts to research, establish, accomplish, and accurately report on these targetsgoals and initiatives expose us to numerous operational, reputational, financial, legal, and other risks. Our ability to achieve any stated targetgoal or initiative is subject to numerous factors and conditions, many of which are outside of our control. Examples of such factors include evolving regulatory requirements affecting sustainability standards or disclosures or imposing different requirements, evolving disclosure standards and/or policies established by regulators and standards organizations, stockholders, ratings agencies, and proxy advisory firms, the pace of changes in technology, the availability of requisite financing, and the availability of suppliers that can meet sustainability and other standards. Furthermore, methodologies for reporting sustainability information may be updated and previously reported information may be adjusted to reflect improvement in the availability and quality of third-party data, changing assumptions, changes in the nature and scope of our operations, and other changes in circumstances. Our processes and controls for reporting sustainability information across our operations are evolving along with multiple disparate standards for identifying, measuring, and reporting sustainability metrics, including sustainability-related disclosures that may be required by the SEC and othercertain regulators, and such standards may change over time, which could result in significant revisions to our current goals or reported progress in achieving such goals, or adversely impact our ability to achieve such goals in the future.

Our business may face increased scrutiny from regulators, the investment community, other stakeholders, and the media related to our sustainability activities.activities and positions. If our sustainability practicesactivities and positions do not meet the expectations and standards of regulators, investors, or other stakeholders, which continue to evolve and may conflict with one another, our reputation, our ability to attract or retain employees and customers, and our attractiveness as an investment, business partner, or as an acquiror could be negatively impacted. Similarly, our failure or perceived failure to pursue or fulfill our targets and initiatives, to comply with environmental regulations, or to satisfy various reporting standards with respect to these matters, within required timelines or those which we announce, or at all, could have the same negative impacts, as well as expose us to federal and state government enforcement actions and private litigation. Additionally, we could become the target of litigation, investigations or other proceedings initiated by government authorities or private actors alleging that our activities related to sustainability and societal matters are anti-competitive, discriminatory or otherwise unlawful. Furthermore, positions we take or do not take on social issues may be unpopular with some of our customers, partners, advocacy groups, or other stakeholders in the communities in which we operate, which may lead to adverse effects on our business.

At FebruaryJanuary 1,31, 2025,2026, we had outstanding a (i) $1,700.0$1,500.0 million secured term loan facility maturing on March 4, 2028 (the “First Lien Term Loan”) governed by the Term Loan Credit Agreement and (ii) secured asset-based revolving credit facility providing for senior secured financing of up to $581.0 million, consisting of two tranches with the first tranche having availability of up to $35.0 million, subject to a borrowing base, maturing on March 4, 2026, and the second tranche having availability of up to $546.0 million, subject to a borrowing base, maturing on March 29, 2029 (as amended from time to time, the “ABL Revolving Credit Facility” governed by the ABL Credit Agreement). Our substantial indebtedness could restrict our operations and could have important consequences. For example, it could:

The FirstIndenture, Lienthe Term Loan Credit Agreement, and the ABL Revolving Credit FacilityAgreement bothall impose material restrictions on us. These restrictions, subject in certain cases to ordinary course of business and other exceptions, may limit our ability to engage in some transactions, including the following:

Any future debt that we incur may contain financial maintenance covenants. In addition, the ABL Revolving Credit FacilityAgreement contains financial maintenance covenants that are triggered by certain conditions. Events beyond our control, including prevailing economic, financial, and industry conditions, could affect our ability to satisfy these financial maintenance covenants, and we cannot assure you that we will satisfy them.

Any failure to comply with the restrictions of the FirstIndenture, Lienthe Term Loan,Loan Credit Agreement, the ABL Revolving Credit Facility,Agreement, and any subsequent financing agreements, including as a result of events beyond our control, may result in an event of default under these agreements, which in turn may result in defaults or acceleration of obligations under these agreements and other agreements, giving our lenders and other debt holders the right to terminate any commitments they may have made to provide us with further funds and to require us to repay all amounts then outstanding. Our assets and cash flow may not be sufficient to fully repay borrowingsobligations existing under our outstanding debt instruments. In addition, we may not be able to refinance or restructure the payments on the applicable debt. Even if we were able to secure additional financing, it may not be available on favorable terms.

We may incur substantial additional indebtedness in the future, which would increase our debt service obligations and could further reduce the cash available to invest in operations. The terms of the credit agreements governingIndenture, the First Lien Term Loan Credit Agreement, and the ABL Revolving Credit FacilityAgreement allow us and our subsidiaries to incur additional indebtedness, subject to limitations. As of FebruaryJanuary 1,31, 2025,2026, we and our subsidiaries had an additional $515.6$467.5 million of unused commitments available to be borrowed under the ABL Revolving Credit Facility. This amount is net of $58.4 million of outstanding letters of credit issued in the normal course of business and a $7.0$55.1 million borrowing base reduction for a shortfall in qualifying assets.assets, net of reserves. If new debt is added to our debt levels, or any debt is incurred by our subsidiaries, the related risks that we and our subsidiaries now face could increase.

We cannot assure you that our business will generate sufficient cash flows from operations or that future borrowings will be available to us under the ABL Revolving Credit Facility in an amount sufficient to enable us to pay our indebtedness or to fund our other liquidity needs. Further, we cannot assure you that we will be able to refinance any of our indebtedness, including the Senior Secured Notes, the First Lien Term LoanLoan, and the ABL Revolving Credit Facility, on commercially reasonable terms, or at all.

Our failure to comply with the covenants contained in the credit agreements for the First LienIndenture, Term Loan Credit Agreement and the ABL Revolving Credit Facility,Agreement, including as a result of events beyond our control, could result in an event of default that could cause repayment of our debt to be accelerated.

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. ThroughWe ournurture omnichannelthe ecosystem,pet-human webond providein ourthe customers with a comprehensive offeringaisles of products and services to fulfill their pets’ needs through our more than 1,500 petPetco carestores centers inacross the U.S., Mexico, and Puerto Rico, including a network of in-store veterinary hospitals, our digital channel, and our flexible fulfillment options.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'pets’ needs. OurPetco.com, our e-commerce sitesite, and the Petco app, our personalized mobile appapp, 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, a life-changingan independent 501(c)(3) nonprofit organization, we work with and support thousands of local animal welfare groups across the countrynationwide and, through these partnerships and in-store adoption events, we have helped find homes for nearlyover 7 million animals.

Our product offering leverages a broad assortment of national,national brands, owned brand,brands, and exclusive merchandise, providing customers with a wide variety of nutritional options, including health-focused options freeat froma artificialrange ingredients,of price points. Our product offering is complemented by a wide variety of pet care supplies and companion animals. While we offer pet parents a full spectrum of product choices, we maintain a number of premium products to address ongoing humanization and premiumization trends in the market. We integrate our product offering with our services businessbusiness, whichcomprised includesof veterinary care, groominggrooming, and training.training, Leveraging our experience in Vetco mobile clinics, we operatewith a networkfocus ofon fulltreating service,the generalwhole practicepet, veterinaryincluding hospitalstheir complementedphysical, by prescription,mental, and insurancesocial offerings. We are increasingly linking our offerings with membership programs such as Vital Care Premier and pet health insurance in an effort to create deeper engagement with our customers, and with our Vital Care Core loyalty program members specifically, which members accounted for over 90% of transactions in fiscal 2024.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 rising interest rates, potential inflationary pressures, supply chain constraints, tariffs, and global economic and geopolitical developmentsdevelopments, including geopolitical conflicts and tensions, have had varying impacts on our results of operations, such as decreases in sales of discretionary items like supplies,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. For more information regarding certain risks associated with these macroeconomic factors, pleasePlease refer to the risk factors in Part I, Item 1A, "Risk Factors" of this Form 10-K.

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.

The U.S. pet care industry is large, serving millions of households with pets, and has exhibited steadyhealthy 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. However, during fiscal 2024, we continued to observe a softening discretionary spend and shifting consumer preferences for more value-centric products associated with the current inflationary macroeconomic environment. In response to this shifting demand, we have broadened our assortment to include more national brands and implemented strategic pricing actions to offer more balanced price points in an effort to appeal to a broader base of consumers.

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 effectively capitalize on the opportunity. Our business will be impacted by our ability to continue to understand and timely react to changing customer purchase trends.

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 digital,our differentiated digital engine, to performance marketing campaigns, and to new product introductions, and to Petco partner cross- and up-selling activities in pet care centers.introductions. The ability to convert more of our customers to loyal, multi-channel shoppers will positively affecteffect business performance.

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

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. We have shifted our sales mix by broadening our assortment to include more value-oriented national brand products, which can have lower margins. Along with managing gross margin, the other lever in delivering operating margin is expense management.management, Thewhich Companyis hasimpacted implementedby our ability to implement cost optimization initiatives in the past and expects to continue to find opportunities to operate more efficiently in the future.efficiently.

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. 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.”

Our interest expense in fiscal 2023 through fiscal 2025 was primarily associated with aour firstFirst lienLien termTerm loanLoan, facility,ABL aRevolving revolvingCredit credit facility,Facility, and interest rate caps and collars. Throughout fiscal 2023, we entered into interest rate collar agreements to limit the maximum interest on a portion of our variable-rate debt and decrease our exposure to interest rate variability.hedges. Refer to the discussion under “Liquidity and Capital Resources—Sources of Liquidity” for further information.

Income Tax Expense (Benefit) Expense

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.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.

Comparing fiscal 2024 (52 weeks)2025 and fiscal 2023 (53 weeks),2024, our results included the following:

a decrease in net sales from $6.26$6.12 billion to $6.12$5.96 billion, representing a period-over-period decrease of 2.2%2.5% and comparable sales growthdecrease of 0.3%1.6%;

netoperating loss attributable to Class A and B-1 common stockholdersincome of $101.8$120.4 million, compared to netoperating loss attributable to Class A and B-1 common stockholdersincome of $1,280.2$7.1 million in the prior year, impacted by goodwill impairment in the prior year period, andperiod;

Aan decreaseincrease in Adjusted EBITDA from $401.1$336.5 million to $336.5$408.2 million.

Net sales decreased $138.8$155.0 million, or 2.2%,2.5%, to $6.12$5.96 billion in fiscal 20242025 compared to net sales of $6.26$6.12 billion in fiscal 2023,2024. The sales decrease primarily drivenreflects bylower $116.6transaction millionvolume attributableand a lower pet care center count, as well as a greater focus on profitability and margin through a more disciplined approach to themanaging 53rdunit weekcosts, inpricing, fiscaland 2023.promotional strategies. We continue to experience momentum in services, driven in part by our strategic investments in customer acquisition and retention, as well as aefforts moreto matureoptimize our existing veterinary hospital footprint. This was offset by a decrease in supplies and companion animals sales, driven by softening in discretionary spend.

Gross profit decreased $29.4 million, or 1.3%, to $2.32 billion in fiscal 2024 compared to gross profit of $2.35 billion for fiscal 2023. As a percentage of net sales, our gross profit rate was 38.7% for fiscal 2025 compared to 38.0% for fiscal 2024 compared to 37.6% for fiscal 2023.2024. The increase wasbetween primarilythe dueperiods toreflects supplymore chaineffective costmanagement efficiencies,of decreasedour shipmentinventory, volumeunit oncosts, lowerpricing, inventoryand levels,promotional strategies, as well as improved hospitalutilization margins, and growth inof our Vitalservices Care Premier membership program. These increases were partially offset by the full year impact of investments made in bringing additional brands into our consumables assortment.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.

Interest expense decreased $7.4$12.3 million, or 4.9%,8.6%, to $131.2 million in fiscal 2025 compared with $143.5 million in fiscal 2024 compared with $150.9 million in fiscal 2023.2024. The decrease was primarily driven by lower interest rates on the First Lien Term Loan and pre-tax gains recognized in interest expense related to the Company's cash flow hedges during fiscal 2024.Loan. For more information refer to Note 7, “Senior Secured Credit Facilities,” and 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.

Other Non-Operating (Income) Loss

There was no other non-operating income or loss recognized during fiscal 2025. Other non-operating income was $4.8 million for fiscal 20242024, and was primarily related to remeasurements of an equity investment without a readily determinable fair value. Other non-operating income was $4.7 million for fiscal 2023, and was related to remeasurements of the fair value of the Company's investment in Rover Group, Inc. 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) Expense

Our effective tax rate was 6.8%40.9% for fiscal 2024,2025, resulting in income tax benefitexpense of $7.5$6.3 million, compared to an effective tax rate of 2.1%6.8% andresulting in income tax benefit of $27.6$7.5 million for fiscal 2023.2024. The increase in effective tax rate in fiscal 20242025 as compared to fiscal 20232024 is primarily driven by non-deductiblean goodwillincrease impairedin duringearnings and a decrease in the amount of compensation associated expenses not expected to be deductible for corporate income tax purposes in fiscal 2023, in addition to a shortfall in tax deductions resulting from the exercise and vesting of equity-based compensation awards.2025.

For information on fiscal 20232024 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 AprilMarch 3,31, 2024.2025.

Adjusted EBITDA is not a substitute for net income (loss) income,, 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.

Acquisition and divestiture-related integration 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.

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.

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

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 FebruaryJanuary 1,31, 20252026 was $681.4$724.2 million inclusive of cash and cash equivalents of $165.8$256.7 million and $515.6$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 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 FebruaryJanuary 1,31, 2025,2026, 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 FebruaryJanuary 1,31, 20252026 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 thea 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 FebruaryJanuary 1,31, 2025,2026, our purchase obligations and commitments were $321.1$372.8 million of which $270.5$319.8 million is considered short-term.

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) income 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) loss; and the effect of changes in operating assets and liabilities.

Net cash provided by operating activities was $177.7$314.1 million in fiscal 20242025 compared with net cash provided by operating activities of $215.7$177.7 million in fiscal 2023.2024. The decreaseincrease in operating cash flowflows waswere primarily driven by a decrease in inventory purchases, lower salescash paid for operating leases, lower cash paid for income taxes, and thelower timingoperational ofcosts, invoicesuch payments.as consulting fees. This was partially offset by decreaseslower in inventory purchases, advertising, freight,sales and cashhigher paidpayouts forof operatingprior leases.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 compared with $346.0 million in fiscal 2022.2023. The decrease in operating cash flowflows waswere primarily driven by anlower increase in inventory purchases, higher payrollsales and fringethe benefitstiming asof wellinvoice as increases in cash paid for interest and operating leases.payments. This was partially offset by an increasedecreases in sales,inventory effectivepurchases, managementadvertising, of accounts payable,freight, and lowercash payoutspaid offor prioroperating year accrued incentive bonuses.leases.

Net cash used in investing activities was $123.9$124.6 million, $207.4$123.9 million, and $320.3$207.4 million for fiscal 2024,2025, fiscal 2023,2024, and fiscal 2022,2023, respectively, and consisted primarily of capital expenditures supportingto support our growth and initiatives.business.

The decrease in capitalCapital expenditures were relatively even between fiscal 20242025 and fiscal 2023 was primarily driven by reductions in new pet care centers and hospitals.2024. In fiscal 2025,2026, we expect to spend approximately $130 million to $140 million in capital expenditures.

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.

On December 12, 2022, the Company amended the First Lien Term Loan to replace the LIBOR-based rate with a SOFR-based rate as the interest rate benchmark. Interest on the First Lien Term Loan iswas 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 iswas the greater of the bank prime rate, federal funds effective rate plus 0.5% or Adjusted Term SOFR plus 1.0%. The applicable rate iswas 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 arewere typically $4.25 million quarterly.

Comparing the thirteen weeks ended MayAugust 2,1, 2026 with the thirteen weeks ended MayAugust 3,2, 2025 (unless otherwise noted), our results included the following:

an increase in net sales fromto $1.49 billion to $1.50 billion, representing period-over-period growth of 0.2% and a comparable sales increase of 0.7%0.6%;

operating income of $24.6$47.8 million, inclusive of a $6.8 million net incremental tariff refund, compared to operating income of $16.4$43.0 million in the prior year period;

net lossincome attributable to Class A and B-1 common stockholders of $15.1$38.7 million, compared to net loss attributable to Class A and B-1 common stockholders of $11.7$14.0 million in the prior year period; and an increase in Adjusted EBITDA from $89.4$113.9 million to $97.3$122.2 million.million, inclusive of a $6.8 million net incremental tariff refund.

Thirteen and Twenty-six Weeks Ended MayAugust 2,1, 2026 Compared with Thirteen and Twenty-six Weeks Ended MayAugust 3,2, 2025

Net sales increased $3.3$0.7 million, or 0.2%,million to $1.50$1.49 billion in the thirteen weeks ended MayAugust 2,1, 2026 compared to net sales of $1.49 billion in the thirteen weeks ended MayAugust 3,2, 2025. TheNet sales increaseincreased primarily$4.0 reflectsmillion to $2.99 billion in the twenty-six weeks ended August 1, 2026 compared to net sales of $2.98 billion in the twenty-six weeks ended August 2, 2025. Sales during the thirteen weeks ended August 1, 2026 reflect a temporary disruption from a stronger-than-expected response to our membership program relaunch. However, we continue to experience 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.

As a percentage of net sales, our gross profit rate was 38.4%39.7% for the thirteen weeks ended MayAugust 2,1, 2026 compared with 38.2%39.3% for the thirteen weeks ended MayAugust 3,2, 2025. As a percentage of net sales, our gross profit rate was 39.0% for the twenty-six weeks ended August 1, 2026 compared with 38.7% for the twenty-six weeks ended August 2, 2025. During the thirteen weeks ended August 1, 2026, the Company received substantially all refunds related to tariffs previously paid under the International Emergency Economic Powers Act ("IEEPA"). The period-over-period increase in gross profit rate was primarily driven by the net benefit of $6.8 million relating to gross refunds, net of an investment to propel the repositioning of new assortments for future growth, as well as incremental cost pressures related to fuel and tariff expense during the thirteen weeks ended August 1, 2026. 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.

As a percentage of net sales, SG&A expenses were 36.7%36.5% for the thirteen weeks ended MayAugust 2,1, 2026 compared with 37.1%36.4% for the thirteen weeks ended MayAugust 3,2, 2025. The decreaseincrease in SG&A expenses between the periods was primarily due to lower payroll and consulting costs, partially offset by an increase in advertising expenses.and depreciation expense, along with an increase in certain employee fringe benefits, as the thirteen weeks ended August 2, 2025 included improved actuarial results from employee benefits optimization initiatives. This was partially offset by lower payroll and other compensation costs.

Interest expense decreased $0.7 million, or 2.1%,2.2%, to $32.8$32.6 million in the thirteen weeks ended MayAugust 2,1, 2026 compared with $33.5$33.3 million in the thirteen weeks ended MayAugust 3,2, 2025. Interest expense decreased $1.5 million, or 2.2%, to $65.3 million in the twenty-six weeks ended August 1, 2026 compared with $66.8 million in the twenty-six weeks ended August 2, 2025. The period-over-period decrease was primarily driven by a lower aggregate outstanding principal balance of indebtedness, partially offset by higher interest rates during the thirteen weeksand twenty-six week periods ended MayAugust 2,1, 2026. For more information, refer to Note 3, “Senior Secured Credit Facilities,” and Note 4, "Senior Secured Notes" into the Notes to Consolidated Financial Statements included in Part I, Item 1 of this Form 10-Q.

Loss on extinguishment and modification of debt was $11.8 million for the thirteentwenty-six weeks ended MayAugust 2,1, 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 of debt for the thirteen weeks ended MayAugust 3,1, 2026 or the thirteen and twenty-six weeks ended August 2, 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 (Benefit) Expense

Our actual effective tax raterates waswere (17.068.5)% and (135.1)%, resulting in income tax benefit of $15.7 million and $13.5 million for the thirteen and twenty-six weeks ended August 1, 2026, respectively, compared to effective tax rates of 5.1% and 34.9%, resulting in income tax expense of $2.2$0.7 million and $1.2 million for the thirteen weeksand ended May 2, 2026, compared to an estimated annual effective tax rate of (4.5%), resulting in income tax expense of $0.5 million for the thirteentwenty-six weeks ended MayAugust 3,2, 2025.2025, respectively. The change in effective tax rate for the thirteen weeks ended May 2, 2026, was primarily driven by a $13.4 million reduction in unrecognized tax benefits, including accrued penalties and interest, following the successful completion of equity-baseda compensation not expected to be deductible forfederal tax purposes,refund alongreview with a change in pre-tax earnings andby the applicationJoint ofCommittee ouron actual effective tax rateTaxation in the currentquarter periodended comparedAugust to1, 2026. As of August 1, 2026, the useCompany’s ofliability ourfor estimated annual effectiveunrecognized tax ratebenefits inwas the$3.5 prior year.million.

We define net margin as net lossincome attributable to Class A and B-1 common stockholders divided by net sales and Adjusted EBITDA margin as Adjusted EBITDA divided by net sales.

Our primary sources of liquidity are funds generated by operating activities and available capacity for borrowings on our $546.0 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 MayAugust 2,1, 2026 was $654.4$781.1 million, inclusive of cash and cash equivalents of $166.8$293.5 million and $487.6 million of availability on the ABL Revolving Credit Facility.

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 usedprovided inby operating activities is impacted by our net lossincome adjusted for certain non-cash items, including: depreciation and amortization; 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 usedprovided inby operating activities was $31.0$130.6 million in the thirteentwenty-six weeks ended MayAugust 2,1, 2026 compared with net cash usedprovided inby operating activities of $15.5$70.4 million in the thirteentwenty-six weeks ended MayAugust 3,2, 2025. The decreaseincrease in operating cash flows were primarily driven by the timing of interest and rent payments, a increasedecrease in inventory purchasespurchases, asand wellthe asnet timingimpact of invoicetariff payments.refunds. This was partially offset by a decrease in cash paid for interest and lower payoutstiming of priorinvoice year accrued incentive bonuses.payments.

Net cash used in investing activities was $37.8$69.3 million and $27.1$58.1 million for the thirteentwenty-six weeks ended MayAugust 2,1, 2026 and MayAugust 3,2, 2025, respectively, and consisted primarily of capital expenditures to support our business.

Net cash used in financing activities was $32.6$36.2 million for the thirteentwenty-six weeks ended MayAugust 2,1, 2026, compared with $0.3$4.3 million used in financing activities for the thirteentwenty-six weeks ended MayAugust 3,2, 2025. Financing cash flows in the thirteentwenty-six weeks ended MayAugust 2,1, 2026 primarily consisted of payments of debt issuance costs and borrowings and repayments of debt in connection with the February 2, 2026 refinancing transaction discussed under "Sources of Liquidity" below. Financing cash flows in the thirteentwenty-six weeks ended MayAugust 3,2, 2025 were not material.