Petco Shares Soar After Surprise Q2 Profit, Raised Outlook
Investors cheer a significant earnings beat and improved margins, overlooking a slight dip in quarterly revenue.
Shares of Petco Health and Wellness (WOOF) surged in after-hours trading Thursday after the company posted an unexpected second-quarter profit and raised its full-year earnings guidance, signaling progress in its ongoing business transformation.
The pet supply retailer reported earnings of 5 cents per share, decisively beating Wall Street's consensus estimate for a loss of 1 cent per share. The positive result sent the company's stock climbing nearly 18% to $3.81 in extended trading on elevated volume.
The investor enthusiasm came despite a slight miss on revenue. Petco announced quarterly revenue of $1.48 billion, just shy of analysts' expectations of $1.49 billion and representing a 2.3% decrease from the $1.52 billion reported in the same period last year. Comparable sales also saw a modest decline of 1.4%.
However, the market focused on signs of strengthening profitability within the business. The company's gross profit margin expanded by approximately 120 basis points to 39.3%, a key indicator of improved operational efficiency. Operating income saw a substantial improvement, rising by $40.6 million year-over-year to reach $43 million.
“For the second quarter, we once again delivered against our commitments, enabling us to raise our earnings outlook for the full year,” said CEO Joel Anderson in a statement. “The first half of this year established a solid foundation for our transformation as we continued to strengthen our economic model and improve retail operating fundamentals.”
The stronger-than-expected profit performance and management's increased confidence in its full-year outlook provided investors with a new catalyst, suggesting the retailer's strategic initiatives are beginning to yield positive results on the bottom line.