Episode Details

Petco (WOOF) Q2 FY2026 — It gapped more than 20% higher on the print and handed the whole move back within the session. Petco reported second-quarter net income of $38.7M against $14.0M a year ago - but $16.5M of that $24.7M increase is the income tax line, which swung from a $0.7M charge to a $15.7M credit. Strip the $6.8M IEEPA tariff refund the company quantifies and operating income actually fell 4.7%. THE CALL: HOLD (3/5, MODERATE) — base-case value ~$3.00 vs ~$2.57 today. KEY METRICS: - Net sales $1,489.2M, +0.05% YoY - below the ~+0.3% Petco guided in June - Comparable sales +0.6% - a second consecutive positive quarter - Adjusted EBITDA $122.2M vs a $110-112M guide; $115.4M without the tariff refund - Net income $38.7M vs $14.0M - but $16.5M of the $24.7M rise is income tax - Operating income $47.8M; ex the $6.8M IEEPA refund $41.0M, down 4.7% YoY - H1 free cash flow $60.8M vs $9.9M; net debt $1,186.4M = 2.80x adjusted EBITDA - FY2026 outlook reaffirmed at $415-430M adjusted EBITDA for a third time What to watch: the Q3 release in late November - does adjusted EBITDA clear the $100-103M guide without a tariff refund, and does the reaffirmed full-year range finally move Also on YouTube: @ChargedAlpha DISCLAIMER: For informational and educational purposes only. Not financial advice. Do your own research before any investment decision.