Why Petco Stock Is Falling Today

What happened

Petco Health & Wellness (NASDAQ:WOOF) met analyst expectations for the fiscal second quarter ended July 29, it reported today, but warned its full-year numbers would come in below expectations. Investors were in no mood to stay and as a result the stock is rolling over, with shares down more than 20% on Thursday.

So what

Petco runs a chain of more than 1,500 pet supply stores and animal wellness centers spread across the United States, Mexico, and Puerto Rico. The company earned $0.06 per share in the quarter on revenue of $1.53 billion, matching analysts' expectations.

Comparable sales were up 3.2% year over year and up 7% from two years ago.

"We continue to focus on execution through an uncertain environment, delivering our 19th consecutive quarter of comp sales growth, with ongoing strength in consumables and services, particularly in vet," CEO Ron Coughlin said in a statement.

Petco also said it is looking to cut costs by $150 million annually by the end of its fiscal 2025.

Now what

That uncertain environment Coughlin referenced is expected to eat into results in the second half of the year. Petco cut its guidance for full-year earnings per share to $0.24 to $0.30, down from $0.40 to $0.48. The revised number is well below the $0.42 per share Wall Street had been expecting.

Similarly, Petco expects revenue for the year to come in between $6.15 billion and $6.275 billion compared to the $6.31 billion consensus estimate. CFO Brian LaRose said, "the shift in consumer spending and pressures on our discretionary business mean we're revising our guidance accordingly."

Petco is doing what it can, trying to cut costs and using its cash flow to pay down its debt and make it easier to weather whatever storm clouds are up ahead. The company should be well positioned to survive, but given the outlook there isn't much reason for investors to get excited about the stock for now.

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Lou Whiteman has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.