Petco Health and Wellness Company, Inc.

Good day and welcome to Petco's first quarter 2026 earnings conference call. All participants will be in a listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. Today's earnings call will last 45 minutes, including remarks from management, followed by a Q&A session. We ask that you please limit yourself to one question and one follow-up. To ask a question, you may press star, then one on your telephone keypad. To withdraw your question, please press star and then two. Please note this event is being recorded. I would now like to turn the conference over to Roxanne Meyer, Vice President, Investor Relations and Treasury. Please go ahead.

Good afternoon and welcome to PECO's first quarter fiscal 2026 earnings conference call. Joining me on the call today are Joel Anderson, PECO's Chief Executive Officer, and Sabrina Simmons, PECO's Chief Financial Officer. In addition to the earnings release, we've posted a slide presentation on our website at ir.peco.com. I'd like to remind everyone that on this call, we will make certain forward-looking statements which are subject to a number of risks and uncertainties that could cause actual results to differ materially from such statements. These risks and uncertainties include those set out in our earnings materials and SEC filing. In addition, On today's call, we will refer to certain non-GAAP financial measures. Reconciliations of these measures can be found in our earnings release, presentation, and SEC filings. With that, I'll turn the call over to Joel.

Thanks, Roxanne, and good afternoon, everyone. Thank you for joining us to discuss our first quarter results. Our strong Q1 results provide an encouraging early validation of our phase three Reach for the Sky strategy. We returned the business to a positive count for the quarter while expanding our profitability, performing better than our quarterly outlook for both top line and adjusted EBITDA. We were particularly pleased to see the improvement in our consumables business, while our differentiated services business once again delivered strong results and continues to be a growth engine for us. This solid start to the year gives us deep confidence that our growth initiatives are taking hold. It speaks directly to our innovation pipeline, rigorous execution, smarter marketing, and most importantly, the advantages of our wholly owned omnichannel ecosystem. In light of our solid first quarter, we are pleased to reaffirm our full year outlook and remain confident in our ability to drive consistent top line results. Sabrina will take you through our financial details shortly, but first, I want to spend some time updating you on the progress we've made across our strategic four pillars, which are positioning Petco for long-term profitable growth. Let's begin with our first pillar, compelling product. While we are still in the early innings of evolving our product mix and the flow of our merchandise, we've begun to introduce real newness to our aisles, and we are seeing evidence that it is resonating with pet parents. Specifically, you should now see several of our main dry vial end caps converted to new product and identified with a yellow new logo. From a top-line perspective, we saw outperformance in the cat category this quarter. We anticipated the recent spike in demand for cat products, and as a result, we invested to make Petco the destination for cat parents. It was a key contributor to the improved sequential trends we saw in consumables overall. You will see cat newness ramping up even further in Q2 with exciting additions in areas such as furniture, beds, and bowls, but also in novelty items such as cat trees. We also continue to lead in the fresh frozen space. During the quarter, We added significant incremental freezer capacity to support the momentum in this category. We hold a distinct advantage in this category, driven by the breadth of our offerings, our key brand partnerships, and a wide range of price points. We have positioned Petco as a premier destination for pet nutrition, which we believe will serve us well as the pet humanization trend continues to pick up speed. Our expertise and dedicated in-store teams offer a level and type of service that you simply cannot find at grocery stores, big box competitors, or online. As a reminder, those that buy fresh food from us make over four more trips per year and spend over 50% more annually than dry food only customers. Further, we experience strength in seasonal categories, specifically in flea and tick We saw our strongest start of the season in five years. While this was partially aided by weather patterns, for Petco, it's an ecosystem story. We capture over-the-counter sales, vet sales, and grooming through our flea and tick packages, all supported by a cohesive marketing push. In addition, as we previously announced, we launched our new Gardening with Your Pet earlier this quarter. This performed above expectations with live houseplants performing well. Looking ahead, we have an exciting pipeline for both Q2 and the back half of the year. In consumables, we are leaning into emerging customer trends like high-protein diets as well as new treats for dogs and cats. We've also recently launched several new supplements categories, such as for hip and joint care, liver health, and a holistic care line based on the growing trend of health and longevity in the pet space, which we see as an important extension of the humanization trend. In supplies, we are introducing newness across categories, including grooming, toys, and collars and leads. Within the grooming category, we relaunched our own brand, Well and Good, which was completed last week. This represents the beginnings of our investment in private label starting to show up in our stores. It includes new formulas without harsh chemicals, as well as fresh packaging for our shampoos, conditioners, and balms, all supported by marketing. And finally, in June, we'll be rolling out sports-inspired collections celebrating the World Cup and USA Soccer. Moving on to our second pillar, services at scale, simply put, services are an important growth engine of ours. They are a massive point of differentiation and a competitive advantage. Through our wholly owned services model, we own the entire pet journey. And it isn't just about our vet hospitals, which continue to see solid gains in sales productivity. It's also about our clinics, grooming, and training. Grooming is a strong annuity business for us, and continues to perform well. To build on that momentum, we expanded our care reminders directly into our app late in the first quarter. A highly effective and frankly obvious way to drive what is already a sticky repeat business even more frequently and consistently. Another call out was the puppy dog package. We began to offer in the first quarter. in which a significant number of the customers that came in were new. We'll continue to offer this throughout the year. In the second quarter, we are driving excitement with the rollout of our well and good grooming products I just referenced, as well as a new Disney Stitch grooming package, which includes scented shampoo and spritz, conditioner, teeth brushing, nail buffing, and a seasonal bandana. Together, these initiatives are intended to ensure that our salons, remain a premier destination for pet parents and a highly dependable driver of reoccurring foot traffic. On the vet hospital side, the strong performance we are driving today helps fuel our future expansion plans, which are on track to resume in 2027. We continue to see improving productivity across our footprint, and we are on track to optimize about 25 significantly underutilized hospitals this year. Crucial to this effort is our veterinary team, and we are pleased to share that doctor days, which is a combination of hiring additional doctors and adding hours per doctor, continues to improve. Because of our scale, depth of expertise, unique ecosystem, and the flexibility we offer, we believe Petco is an employer of choice for veterinarians and vet techs looking to build long-term careers. As we discussed last quarter, cross-selling continues to be a major and largely untapped opportunity between our clinics and the rest of the store. A great example of this clinical presence driving our broader business is our vet diet category, which performed extremely well this quarter. tying beautifully back into our veterinary ecosystem. Looking ahead, we believe we have several strong catalysts and opportunities in Q2 designed to drive ongoing traffic to our clinics. In mid-April, we launched the new Vetco Clinic packages, which offers bundles of services such as routine shots, which we're excited to see gaining early traction. Additionally, to drive traffic, and care during National Pet Month in May, we offered free microchips, with the number of pets getting microchips up 71% versus last year. Looking beyond these near-term drivers, we are incredibly optimistic about the long-term growth opportunity within our wholly-owned vet business and the immense value it brings to the Petco ecosystem. Our third pillar is our trusted store experience. The work is underway to build our basket size through better cross-selling and customer engagement. For example, we are now empowering our groomers with customer data to facilitate sales across the entire store. They can see a customer's last food purchase history. This allows our partners to have informed, personalized conversations that drive cross-category sales and, importantly, can help enhance customer satisfaction and loyalty over time. In terms of customer engagement, we feel in-store experiences are how we best appeal to our core customer, the passionate explorer. This quarter, we hosted popular events such as Pictures with the Easter Bunny. We continued that effort with weekly store events throughout May to celebrate National Pet Month, including Mother's Day photos and weekly brand tasting events. Finally, our fourth pillar, an integrated omni-channel model. We are pleased with the headway we've made in our ongoing work to improve retail fundamentals in our omni-channel model compared to last year. By removing friction from the online checkout process, we have been seeing improved digital traffic. We achieved sales growth in omni-channel even while lapping the non-productive, unprofitable sales We were still generating through 1Q last year. Looking ahead, we see ongoing opportunities to increase site speed and optimize shipping windows for our customers. The key call-out is BOPUS, which was up strongly year over year. This is our differentiation in action, building loyalty through e-commerce, but physically bringing the customer into our stores to experience our services, community, and the cross-selling opportunities our partners provide. Speaking of loyalty, I'm thrilled to share that we are relaunching our loyalty programs later this quarter, officially branded as Petco Perks. During our pilot phase, our biggest learnings was that simplifying, removing friction, and making the program distinctly customer-friendly had a massive impact. Petco Perks uniquely leverages our entire ecosystem, spanning both merchandise and services. The program will be heavily focused on personalized offers based on factors like shopping frequency and customer lifetime value, a strategy that successfully drove higher sales and stickiness during our pilot. In conclusion, the first quarter served as an initial proof point of our inflection to growth. While the broader macro environment remains dynamic we remain hyper-focused on controlling what we can control. And our results prove that our self-help strategy is successfully navigating this environment. We are executing on our phase three reach for the sky strategy. While we are pleased with these initial results, we are still in the early innings of what is a long, exciting journey. We have immense opportunity to deliver product newness, capitalize on cross-channel shopping, grow our differentiated services business, and provide the most personalized experience possible to the Passion Explorer and their pets. I want to take a moment to deeply thank our teams across the organization. Your hard work, adaptability, and passion for pets are what make these results possible. Our focus remains firmly on driving sustainable, longer-term top-line growth and on delivering shareholder value. As we look ahead, we are pleased with the momentum our initiatives are generating, positioning us to continue to deliver positive comps. I look forward to our second quarter call and sharing with you the continued progress we are making with our Reach for the Sky strategy. With that, I'll turn the call over to Sabrina to take you through the details.