Actuals vs. estimates

Revenue — API Ninjas actual does not reconcile with a unique Quartr consolidated revenue

EPS — actual sourced from API Ninjas, not the company release

Verdict

• Net sales of $1.5bn beat the $1.4928bn estimate by roughly $7m, up only slightly year over year, with comparable sales of 0.6% marking a second consecutive positive quarter.
• EPS of $0.16 beat the $0.0707 estimate by $0.09.
• Adjusted EBITDA was $122m, or 8.2% of net sales, but that figure carries a $6.8m net tariff refund; stripped out, normalized adjusted EBITDA of $115m still landed above last year and above management's own outlook.
• Guidance was affirmed rather than raised -- full-year net sales flat to up 1.5% and adjusted EBITDA of $415m to $430m are unchanged, with Q3 sales guided to 0.4% to 1% growth and Q3 adjusted EBITDA to $100m to $103m against the $122m just delivered.
• The one thing that matters: the flat top line was self-inflicted and one-off -- the Petco Perks relaunch let members redeem points far faster than modeled, costing mid-single-digit millions of net sales concentrated in services, while profit ex the tariff refund still beat plan at $115m.

Guidance & KPIs

Management commentary

• The CFO sized the membership drag directly: sales were tracking above the roughly 0.3% outlook before the national rollout and came in about flat, so "if you do that math, that delta gets you to kind of a mid-single digit millions of impact."
• The CEO said the total customer base inflected in Q2, growing slightly, and framed the larger opportunity as migrating existing infrequent customers across digital, stores and services rather than adding new ones.
• A seven-store new-format market test launched in May is producing a lift in new and reactivated customers, higher transaction counts, larger baskets and better margins; a few more remodels have been pulled forward this year with broader rollout decisions in 2027.
• Vet hospitals delivered double-digit growth in total pet visits and double-digit expansion in doctor days, and remain on track to begin opening new locations in 2027 -- though management no longer breaks the hospitals out separately.
• Second-half supply-chain and fuel pressure was described as a normal, manageable headwind, with the affirmed EBITDA range giving room to both absorb it and keep investing behind the merchandising reset.

Quality of earnings

• The profit beat is real but flattered at the margin line. Adjusted EBITDA of $122m includes a $6.8m net tariff refund recognized entirely in Q2 gross margin; without it the gross margin rate of 39.7% was about flat year over year rather than up 37 basis points, and adjusted EBITDA was $115m.
• Expense discipline, not sales leverage, carried the quarter. SG&A of $543m was up only $1m while lapping an approximately $9m actuarial true-up benefit in the prior year, so underlying expenses fell about $8m -- that is what moved operating profit to $48m from $43m on a roughly flat sales base.

Gotchas & watch items

• The $6.8m tariff refund is a Q2 event, not a run-rate item, and management said a portion of the broader refund was already spent clearing legacy inventory through more aggressive clearance and write-offs -- the sales those markdowns produced sit in the same flat top line.
• Q3 adjusted EBITDA is guided to $100m to $103m against $122m delivered in Q2, while the full-year $415m to $430m range is unchanged, so the second half absorbs both the reinvestment and the supply-chain and fuel headwinds management flagged.
• Comparable sales rose 0.6% while total net sales were roughly flat, the gap being store closures -- one net closure in the quarter, 1,377 stores at quarter end, and 15 to 20 net closures guided for the year.
• Net interest expense was cut to about $122m from $125m only because of the $75m voluntary debt prepayment made on September 1; the improvement is balance-sheet action, not operating performance.