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Thank you, everyone. We're going to get started. Good afternoon. Thank you for joining us. It's my pleasure to introduce Petco and moderate our fireside chat. Today we have with us Joel Anderson, Chief Executive Officer, and Sabrina Simmons, Chief Financial Officer. Thank you. Thank you so much for joining me. Thank you very much for having me. Thank you all for joining you today. Thank you Kate. I feel like you guys have so much going on, and it's kind of fun being here a year later, because you came last year, and you were still in your phase one, entering phase two last year, and now we're fully into phase three of your new strategy. Yes. And so I thought we could maybe start there just now that you're in the reach for the sky, phase three, shifting from cost cutting to driving top line growth. What are some early signs that you're seeing that's allowing you to get more confidence in the story? Yeah, well, I'd start by saying I'd be remiss if my person next to me didn't remind me that phase two never goes away. We're always focused on efficiency and getting better there. But it is much more fun to talk about phase three, right? And getting back to growth, right? Then we call it reach for the sky. And I think so much of our growth, Kate, was really trying to figure out you know how is petco different how do we differentiate ourselves and and through that you know four pillars emerged and behind that several building blocks and so while we're still in the very early innings of it um it's nice to now have reported you know two quarters in a row of positive comps um and doing so with with healthy margins so I feel like we're a really nice balance and making a lot of good progress on it. So talking about the differentiation, I mean, the pet space is so fragmented still, I feel like. Maybe could you walk us through, you have the four pillars, but maybe in terms of like as you discover things along the way, what do you think is some of the key parts of the differentiation of Petco versus everyone else? Yeah. I mean we'll start with that we have services. and and what's unique about our services is that they're wholly owned so grooming hospitals they're all part of Petco and I think one of the mistakes we made in the past was that we kind of ran them separately and so one of things we've uncovered is bringing it all together one Petco way and and that really allows our our groomers now to see you know what product they're buying or for are veterinarians to recommend product. And so that's just one example, but it's an example of it's a point of differentiation we weren't taking advantage of. You look at our companion animal business, we're the only national retail that does saltwater fish as an example. So we've got a real big focus on differentiation, both in the services side and the product side. So those are just a couple of real good examples. Yeah, I know when you first came into the role, you were very excited about that and and services in general um because at a minimum it's a traffic driver right um and so maybe what are some of the improvements you've made in in those services in particular maybe leave that for a little bit later but on the grooming and training side you know one of them was what i was just alluding to and it was uh in some ways just a technology on lock and that was really arming our our groomers with more information and so up until a few months ago they couldn't even see, you know, what food that, you know, the people, the pets they were grooming were buying. And so they might uncover, you know, itchy skin or something wrong with the coat. And now they can actually see what food they're feeding their dog or cat. And they can recommend, you might want to try this instead of that. And so that's just an example of, you know, really trying to be a bigger NSPAC, fully serve our customer in a greater way than we have in the past. And in that vein, I think getting much better at enabling our customers ease of use to make appointments and reminders. I mean, we weren't doing any of that a year ago and we're still pretty early in the journey of using the data to actually enable ease of appointment and more frequency and visits. Yeah, you go on the app now and services are right there front and center. You can make all your appointments there much easier than you could before. So it's that a whole unlock to making it easier to interact with Petco in many different ways. Great. That's great. I think one thing that we get a lot of questions on is just what is happening in the pet space in general. So not the competitive stuff, but just the industry. And I think the trend that seems to be emerging is growth in cat adoption, maybe flattish dog adoption, or maybe still down a little bit. And so we wanted to talk through that a little bit. Okay. And how you think if this were to be more of a secular trend where you do see more growth in cat versus dog, is there a different lifetime value associated with that and how do you manage that? Yeah, you got it pretty right, pretty close to right. Dog adoption is down a littlebit this year and cat adoption's up. But, you know, I think any, you know, great retailer, especially specialty retailer, you've got to be really good at uncovering trends so even within dog while it's down in terms of adoption one of the trends in dog is is premiumization fresh and frozen and we talked a lot about on our last call the rollout of of hills in quarter three here all the freezers we added in the first half of the year that will now support new products so I think even when there's a down area you still got to look for the bright spots within that as it relates to cat um yeah that that is growing and it's an area where kittens for the first time have passed puppy households um new puppies versus new kittens and and it'S an area we've been leaning into for a while um and the the merchant team's done a great job of tracing that trend um we're seeing a lot of adoption in in treats and our new cat shop candy shop which has been great and so that's just a good example of us being really good at being better and then more nimble about you know chasing new trends quicker. I think something that comes up too with regards to just the the competitive set is just all the price investment and I think this came up on your quarterly call too in terms of you know you've had these tariff refunds there have been a couple retailers out there talking about price investment it can kind of go across the board, right? It might not all be in pet necessarily, but there does seem to be some more focus on that. So could you maybe talk a little bit about your pricing strategy, how you're managing promotions, what you're seeing in the environment when it comes to just price competitiveness? Well, there's probably not a week that goes by that Sabrina and I don't talk about price. But having said that, it is, you know, as a specialty retailer, price is important. It's important to our customer. We watch it every week, but it's not how we're going to win. So we've got to stay close on price, but it's a winning strategy for us to go up against Amazon and Walmart and try and lead our way through price. We believe that Petco, you know, through differentiated product, integrated services, the knowledge our pet partners, our store partners have, that's how we're going to win. And so as long as we stay competitive in price, it's those other areas that are the points of differentiation for us. Yeah. And then I think, you know, along with the price, from a competitive standpoint, speed is the other piece. And I know Petco has always had a very robust omni-channel strategy. And again, digitally, it sounds like there's been a lot of improvement there. So could you maybe walk us through um what you've brought to the omni-channel strategy how that has changed um how you do you compete on speed when it comes to more of the consumables piece of the business well it's important that specifically when we talk about that pillar kate we call it integrated omni channel and we're intentional on that because you know from an nspac perspective somebody that shops us both you know center store services and online is five times the for us and you know we as we've uncovered that um we we know we had to make our omni-channel capabilities more robust and so while we improved a lot of profitability last year auto ship's a big piece of it now uh our in stock on auto ship is you know approaching 100 meaning like somebody's really counting on that auto ship order we've got to deliver it on time we've added bopus capabilities so you know you can now have your auto ship sent to the store that's something that's a point of differentiation from a pure play and if you think about it you're sending fresh food or you you live somewhere where you're not going to be home when it's coming in, having that convenience of picking up at our store on your time frame is a real point of differentiation. So we're adding in all the omni-channel capabilities, but it's really about unlocking, you know, bigger end spec for our customer. That's really where the focus has been. That's great. And would you say there was any friction on the auto ship side of things as you've gotten, you knows, that to be a bigger percentage of your revenues? What have you improve there? And where do you see that going? Well, let's start with, we changed the name to Autoship. And that's really being relevant to where the industry is. That's becoming a common industry name. And, that alone has really changed the perception of the customer. Oh, I didn't know you offered Autoshop. And so, there's that piece of it. We've improved the speed. We do a lot of our Autoshot fulfillment from the stores so that we can get it to the customer quickly. and then we've improved in stocks and so i think that's something we really learned was really a important concern of the customer is like the reliability that my my monthly or bi-monthly order is always there on time and is in stock so those are some of the big pieces of it unlocking the friction improving the customer service has been another piece of it i don't know if i left anything else and i would just add that the the really exciting thing is that you know, we did all the cleanup, especially online last year. And so we're seeing really healthy regrowth in that channel, but at great margins, much healthier. So the plan that we set the journey on last year to execute is working. In other words, that we're regrowing that business, but with much healthier margins. Great. That's great. Maybe if we could just go back to the stores. I jumped to digital. But with stores, I think you're still expecting to close 15 to 20 stores this year as part of your optimization strategy. Can you maybe talk to us a little bit about where we go beyond this year? Are there still stores that you're looking at to close? Are these stores that are closing unprofitable? And just how much has it contributed maybe to the improvement that you've seen so far with a healthier store base? Yeah, I mean, I think our fleet overall is in a very healthy, great position overall. So some of the closures we're doing is what you would expect naturally is cropping on a 1500 store fleet, just cropping some of underperformers, which occur in retail over time naturally as some locations become less traffic than others. So we look to relocate or in some cases close those stores. But again, I think the fleet overall is in a very healthy position. We're really focused on, over time, hopefully the net becomes a net positive. But the foremost focus area is really in improving sales per square foot and productivity and comp. And I think we're well on our way on that path with the two quarters of positive comp and focusing on all of our operational improvements and all of the four-pillar work with assortment, et cetera, that's going to drive, you know, sales improvement inside that box. Great. And then, Joel, you had mentioned that you are testing a seven-store prototype that's shown great results in sales and margins. I know it's very, very early days, but there's been a lot of curiosity about what those stores look like, what you're seeing out of those stores, and then how you're thinking about the rollout or potential rollout one day. Well, if I piggyback on what Sabrina was just talking about, as about half of our fleet comes up for renewal in the next three years, you know, one of the options is certainly closing. You know, that number is getting less and less. But we also are looking at relocating. And when you relocate, you want to move forward with your newest and best thinking. And I think any specialty retailer or any physical brick-and-mortar retailer, the physical environment is really important. And so we've been doing a lot of experimenting on a new prototype, and we're really pleased with the results we're seeing. The NPS scores have improved dramatically. The average order size is up. Transactions are up. So we're reactivating customers in the market. We've done a much better job on impulse in the market. But at the same time, when you're doing remodels, you want to make sure you get it right before you go deploy that capital. So we're going to be very disciplined in that. You get economies of scale when you start to roll out. But one of the other benefits you get from a new prototype is you get learnings that can be deployed throughout the rest of the chain that might not even be capital intensive. little nuggets of gold there that you want to deploy out. So we're really pleased with it. It's really early. Eventually it will lead to a remodel strategy, but we're going to make sure we get it right before we roll with it, but early results have been really good. We're going test a few more stores this year still and some other standalone markets to make sure we're getting the right reads, but early result are good, Kate. Great. That's great. The size of the store, is it pretty comparable? Pretty comparable, yeah. We didn't change the footprint, and we used a pretty, you know, steady market that, you know, represents kind of the fleet, and so, but yeah, no change in size at all. Okay, and 50% up for renewal. I know Sabrina just mentioned that. I mean, I don't, that's a big number in terms of the next three years. How do you, how are you thinking about relocations? again like are you looking for similar size real estate are you looking to really drastically change anything when relocating I think we bring that up and please add in Sabrina more of just to give everyone confidence like we have flexibility you know and so that just gives us the opportunity that when you've been in a market you know DMA or a spot for 10 years 15 sometimes the centroid moves And so just that flexibility, you still might want to be in that spot, but it might be a mile down the road or a half mile down the road, or a different center. And so we just have a lot of flexibility without having to break leases or do anything that's pretty episodic. So it'll be a very smooth transition over time. And it might be a remodel, it might actually be going back to the landlord for some TA money to help us in the remodel. So there's just a lot of flexibility going forward. Yeah, and I think we've been really successful in having those opportunities to open up a conversation around negotiation. So we've done pretty well in the last couple years together regarding rent and how we're renewing and making sure we're getting really good fair rents for the location and the traffic, et cetera, and getting that equation. As everyone in retail knows, so much of the equation is about rent. And so the team's done a great job, I think, of really using the opportunities that we have with the renewals to have those conversations and kind of right-size that. Yeah, you know, Petco is a differentiated player in a strip center. And, you Know, people forget, like, it brings a lot of families. And so, the landlords like having us as part of it. And so that, to Sabrina's point, gives us some leverage. That's great. Okay. Back to services again. I know I said we maybe would set veterinary aside, but you have the wholly owned vet hospital model, which I think is still around 300 locations. And it's a pretty major differentiator as you mentioned, and you just posted double digit growth in visits. I know you've looked at this as a crown jewel since you started, Joel. So can you maybe talk a little bit more about the challenges of the vet model, how you're thinking you can go beyond the 300 stores, what you need to see, and then we'll follow up. Yeah, look, I think it's less about the challenges and it's more aboutthe opportunities we've uncovered. And obviously, one of those was the point of differentiation that they're all wholly owned by Petco. The other point was the employment opportunity. And I think, you know, since COVID, you know, if you're a new veterinarian coming out of vet school, you got to think twice about, do I want to take on all the capital expense and the debt of owning my own hospital? Or is this a new alternative that Petco could offer to me? And what we've really built is a nice labor model that we've got now full-time vets, part-time Vets, shift Vets that only want to do surgeries um that's don't want to do surgeries just see pay just see pets and so that suite of offering and there's 300 stores you can move geographically and we have opportunities across the country and then we take care of all the you know financial side of it you know you don't have to worry about you know paying your debt down and all that it's a real nice alternative for a a new vet to consider Petco as opposed to, you know, doing it on their own. And so between the labor model now being at scale, wholly owned being differentiated, we also had to then unlock for our vets information about the other services in our store, you know what what food the pets are using. And so all that's been unlocked now. And, you Know, we'll start to build upon that going forward, Kate. And I think I would add to that the beauty of where we sit right now is, as Joel said, we have these 300 vet hospitals, we have scale, but we have within that 300 a really healthy runway ahead of us to continue maturing those vet hospitals and actually improving the return. So without adding any capital, we just see a great runway to continue optimizing, mostly through what Joel said matching the labor supply with the demand and really honing that. We've learned so much over just the last couple of years that we're applying to all of the stores, but that these are lessons that we'll take with us as we think about growing the fleet some more into the future. And so you did talk a lot about the labor support, which sounds very healthy with all the flexibility that you give. What about the customer awareness and the brand awareness of the veterinary service is there any friction there that has to be corrected or fixed no i mean look i think um we always can improve awareness right and and a little bit of what sabrina was saying is you got to match your um your labor demand with you know the a number of appointments you need and that type of thing but i think we um are now at a scale enough that people are starting to know the vet offerings we have. There's certainly more we can do on awareness. We're starting to spend, you know, more in marketing on our, not only our vet services, but our grooming services as well. But that optimization is just continued upside we see in the services space. And then from a pharmaceutical standpoint, a pharmacy standpoint, can you remind us where you are in terms of what you offer and where that business can go and grow? Yeah, I mean, we've got a full script offering. In fact, I think that was one of our other unlocks with the vets is we were letting too many scripts go out the door, not fulfilled by Petco. And so that's another change we've made in our keeping those scripts in-house for us. And not only is it important we do that for our top line growth, but it actually is important for the customer because now our vets know what scripts that their pets are getting. I mean, they're coming to see us for veterinarian services. They want to be able to check in on them and see what scripts they're using, as opposed to if you let that go out the door to some other service provider, then you've lost contact with that. It's another one that's really kind of in an early phase. I think we have a lot of opportunity there, and it should be margin accretive, and it's very customer-friendly to fulfill all their needs so they walk out done with the appointment completely with the script as well. That's great. I want to make sure I asked about Petco Perks. Okay. Just because the recent relaunch sounds very exciting. I know there was a surge in redemptions that impacted Q2 sales a little bit, but it sounds like that'll be a good thing in the long run. So just how will this more simplified program drive the repeat visits that you want to see? And are you anticipating or have you quantified any conflict associated with this specifically? Yeah, look, we needed to redo our membership program. Our old program was antiquated, had too much friction for not only our customers, but for our store partners as well. And so Check the Box, very successful there. It was hard to load points. Customers couldn't see what points they had. You know, our associates couldn't See it. So that we improved all that. Branding is much better. It was called Vital Care. Now it's called Petco Perks. Makes so much more sense. But the real unlock of our membership program is the next phase, which is really about loyalty, right? And it's about personalization. And now we can really see across all the ecosystem, you know, what services are they using, what products are they buying, supplies. And you really, with Petco Perks now, we can reactivate old customers. We can incent, you know, grooming customers to buy food from us or food customers to use our vet services. You talked earlier about awareness of vet. Here's a great way to build that awareness. We know every customer that walks in a store that has a vet but hasn't used our vet surfaces. Let's share that knowledge through our Petco perks and entice them to use vet services, so really excited about where Petco Perks is, but, you Know, as we've said a couple times, early, early innings to it, the reel unlocks the membership or the loyalty and personalization part. I think what's so impressive about your story is that you've really been able to make so many changes in a non-capital intensive way because you've had a good amount of debt that you've Had to focus on. And you just recently made a voluntary $75 million debt payment in September and you're getting closer to this two times leverage target. So what does that unlock eventually for you? Again, being able to make all these great changes without really having to spend. Now you have a little bit more flexibility. How should we think about that? Sabrina deserves all the credit for getting our balance sheet back in order. And I'll let you talk a littlebit. Yeah, you know, I think the important point to make is that because of where we were at, the debt wasn't really a constrainer to investment. Because like we said, we had a lot of assets that we adopted on our balance sheet already that we've had the opportunity to optimize and get the return on. So we didn't really, it didn't require a large amount of capital. It still doesn't require an amount of money. It doesn't really require a large amount of cash. So that's the good news. And we've been able to balance, therefore, by getting our economic model in shape, which is, of course, driving sales with healthy margins, leveraging SG&A, and having profit growth in excess of those sales, which generates a lot of cash flow. We've been able, with the excess cash, to pay down this $170 million in total within nine months. So we've gone from a 4.2 net debt to EBITDA just as we started 2025 to 2.8 today. So, we're making really fast progress toward our goal. I think that timing's really nice because when we get to our goal of two times, we'll have much more flexibility. We can start to discuss shareholder distributions. And we'll have, with that cash generating model and machine we will have built, we'll Have more opportunity to invest in things that we will have fully tested by then, like our remodels, and start to be able to roll them out. So it's kind of been nice timing in terms of how we're making our progress. Yeah, no, it's been very impressive. Just in our last a few minutes here, we're asking for questions of every company that joins us on stage. And again, because you guys have so much going on, I didn't even really ask you about the health of the consumer, what you're seeing from the consumer. So the first question is just what are your expectations for the consumer environment in the second half of 26 versus what you saw in the first half? Yeah. I mean, not surprising the consumer is under a lot of stress, right? And, you know, gas prices have remained high. I think a lot of us thought the war would be over by now. And so I think as we've, you know, built in our guidance and the forecast, we haven't assumed anything significant improvement or worsening. So I think it's a little bit, unfortunately, more of the same. Yeah. Our second question is on pricing. Do you expect prices to be higher, lower, or the same in the second half of this year versus the first half? Yeah, as it relates to the pet industry, as I said earlier on, we watch price a lot. And so I would say it's been rational and we expect it to kind of remain that the balance of this year. And we'll see what happens going into next year. But I think for right now, we expect to be pretty stable. Our third question is around margins. Do you expect to see more margin headwinds or tailwinds in 27 versus 26? Well, it's a lot. It's very early to be speculating on 27. And especially for Petco, you know, we talked to you a lot about it being a self-help year. And so regardless of the macro side of margins, there are a lot of improvements we're making to margins ourselves. And I'd call out specifically own brands. That's an area we think we can grow and return back to growth. And that has a very different margin profile. So I think we're in a unique situation versus where the bigger macro is as it relates to margins. But we still believe we've got some areas to improve our margins. So we'll be focused on continuing with this economic model that has worked with us, where we don't compromise sales for unhealthy margins, but we grow our sales with healthy margins and then, you know, leverage the SG&A. So we're going to do our best to continue on with that model. That's great. Maybe if I could just deviate and ask about own brands, because since you mentioned it, you have very strong brand awareness, I think, with your own brands. Is there anything that you're doing, again, to kind of reintroduce it? Is there any kind of reformulation? Just how are you thinking about own brand from here? Because it is pretty much creative. To be honest, Kate, we had too many, and so the first thing we're doing is rationalizing our brands and bringing it down to seven, and a large segment of the smaller ones are going to be rebranded under Petco, because as we've tested it, the Petco name really resonated strong, a stamp of approval, so to speak, and also, when you have that many different brands, you've got to put marketing dollars into it. So this will make our marketing spend more efficient. And then as it relates to it, think of it as a rolling rollout over the next, you know, 12 to 18 months. But we're really excited about the own brand strategy. The team's engaged and our well and good, which is our grooming own brands, has already started to roll out. And we're seeing really good results from that initial rollout. So really, really pleased with the progress so far. Great. And then our final rapid-fire question is on AI, which we have to ask about. Do you expect a significant increase in the efficiency or in the company's efficiency as a result of AI this year versus, I'm sorry, next year versus this year? Look, AI is important in everything we're doing. We're already starting to see efficiency, especially like in customer service and chat and the involvement there. We expect to, you know, I expect to leverage AI as really part of our strategy going forward to really drive productivity. And so I don't see it being a, you knows, hockey stick change for us, but I definitely see it playing in 2027 more than it did 2026. And someone brought up today, you know, there's AI for efficiency, and then there's the revenue generation part of AI. Or is Petco anywhere near thinking about that piece of it? We're definitely thinking about it. I would say the adoption on it is still very much in the early, early innings of it. And, you Know, we've been experimenting with the Gentech, and we've been watching it, but the customer adoption to it is still very, very small as it relates to our space anyways. Well, thank you for joining us today. We appreciate all the time. Thanks, Kate. Appreciate it. Thank you. Thank you, Kate, for being here.