For hundreds of Petco employees, 2025 will bring an unwelcome change as their stores close one by one. The company confirmed it will shutter about 25 U.S. locations this year, which is necessary to withstand mounting financial strain. Rising tariffs on pet products have put pressure on profits, forcing these tough decisions.
While the closures represent only about 2% of Petco’s nationwide network, they mark a noticeable shift in strategy. Executives insist this isn’t a retreat but a recalibration, trimming weaker stores so the more than 1,300 that remain can stay strong.
A Snapshot of Petco’s Store Network
As of mid-2025, Petco operates 1,388 stores across the United States. The coming closures follow a net reduction of 25 stores in 2024. While the number may sound modest, the strategic pruning points to a broader trend across retail companies: they streamline their physical presence to cut costs and redirect resources.
By focusing on underperforming sites, Petco is leaning into a strategy other retailers have used: keeping the strongest stores while reducing exposure in weaker markets.
The Announcement That Set It in Motion
During its Q2 2025 earnings call, Petco confirmed the closures, with executives outlining about 25 net closures for the fiscal year. CEO Joel Anderson described the year’s first half as laying a “solid foundation for transformation,” signaling the company’s intent to reshape its operations for long-term profitability.
Leadership’s message was clear: This is less about contraction and more about creating a leaner model to protect margins and prepare for ongoing economic challenges in the pet retail space.
Tariffs Taking a Bigger Bite
Tariffs on imported pet products—many sourced from China—are hitting Petco hard. CFO Sabrina Louise Simmons noted during the earnings call that these tariff impacts would impact Petco most heavily in the fourth quarter of 2025.
Analysts say this timing explains why the company is making cuts now, aiming to soften the blow later. The rising costs of goods are forcing tough decisions, and store closures are one of the most direct ways to ease pressure while preserving healthier parts of the business.
Not the End of Petco Stores Nationwide
Despite some headlines suggesting otherwise, Petco is not disappearing from the retail map. Leaders have stressed that closures are selective, focused only on stores that no longer meet financial or strategic benchmarks.
By exiting weaker locations, the company says it can better reinvest in stronger markets. For customers, this means most stores will remain untouched. For investors, it signals Petco is trimming fat rather than dismantling its entire retail presence, a distinction executives have worked hard to underline.
What the CEO is Saying
CEO Joel Anderson has framed the closures as necessary in Petco’s evolution. He said the company is “leaning into a leaner, more efficient retail model” by moving away from stores that no longer deliver.
His words reflect a broader industry trend: changing shopping patterns and higher costs force chains to rethink what physical retail should be. For Petco, that means staying nimble, trimming excess, and building a foundation that can withstand the shifting economic climate.
A Mixed Bag of Financial Results
Petco’s second-quarter earnings painted a complicated picture. Net sales dropped to $1.5 billion, down 2.3% compared to last year. But there were bright spots—gross margin climbed by 120 basis points to 39.3%, thanks to tighter pricing controls and cost cuts.
Adjusted EBITDA surged 36% to $114 million, showing that efficiency gains are paying off even in a slower sales environment. This mix of lower revenue but more substantial profit margins helps explain why the company is doubling down on structural changes.
The Weight of a $75 Million Loss
Even with operational improvements, Petco is staring at an estimated $75 million net loss for fiscal 2025. Analysts attribute much of this to tariff-driven margin pressure and a dip in overall sales. This looming loss has pushed management to act quickly, sharpening cost-cutting initiatives and accelerating store closures.
For Wall Street, the question isn’t whether Petco can survive; it’s whether it can reinvent itself quickly enough to compete in a pet retail sector still dominated by high demand but increasingly thin margins.
Workers Feeling the Impact
The news is personal for employees at closing stores. Hundreds of workers, from retail staff to managers, are expected to be laid off. While Petco has said it will try to redeploy staff to nearby stores when possible, many roles will be cut outright.
Labor experts note this is a familiar pattern in retail downsizing, where local communities feel the brunt of corporate restructuring. For workers who’ve spent years in these stores, the closures mean sudden change, with limited options to stay in the company.
The Criteria Behind Closures
Petco hasn’t named all the specific locations yet, but executives explained how decisions are made. Stores with consistently low sales, high overhead, or too much overlap with other nearby outlets are usually first on the chopping block.
Closing them helps cut losses and allows investment to flow into higher-performing regions. It’s a surgical approach: remove stores that drain profitability and strengthen those that still deliver value. This type of restructuring is becoming more common in U.S. retail as companies seek resilience.
How Rivals Are Responding
Competitors provide helpful context. PetSmart, for example, closed just 11 stores in the same period and has no additional closures planned for 2025. That contrast shows Petco is taking a more aggressive stance.
Industry analysts suggest this reflects Petco’s sharper exposure to tariffs and operational costs. While both chains face similar economic pressures, Petco’s willingness to make deeper cuts highlights the urgency of its turnaround strategy and its determination to get ahead of worsening financial strain.
Services Still at the Heart of Petco
Even with retail closures, Petco continues to embrace its service-based business model. Veterinary care, grooming, and training services remain central, with most surviving stores expected to expand these offerings.
Executives see services as more resilient than product sales, especially in a high-cost import environment. For many customers, these in-person services are a key reason to visit Petco over competitors or online retailers, which makes keeping them strong a critical piece of the company’s future.
Keeping Customers in the Loop
Petco has reassured customers that loyalty programs, gift cards, and rewards points will remain valid, regardless of local closures. Shoppers can continue using them online or at any other store.
This continuity matters as loyalty programs are a major driver of repeat business, and executives are keen to prevent alienating their best customers. Petco hopes to keep trust intact by ensuring rewards aren’t disrupted, even as it trims back its physical footprint.
Positioning the Brand for Reinvention
Executives frame the closures as just one part of a larger transformation. CEO Joel Anderson has said Petco has a “unique opportunity to reinvent our iconic brand,” focusing on efficiency, customer experience, and long-term growth.
That reinvention includes finding new ways to deliver value in a highly competitive pet market. While closing stores may sound like a retreat, leadership insists it’s about shifting resources to areas with more substantial potential. In their view, this is renewal—not decline.
The Crucial Holiday Quarter Ahead
CFO Sabrina Simmons warned that Q4 2025 will be the most challenging stretch of the year, with tariff impacts peaking and potentially forcing further action. Holiday sales will be a key test, as strong results could ease pressure while weak ones might trigger additional closures.
Investors and employees are watching the year’s final months to gauge whether Petco’s current strategy is enough or if the company needs to cut deeper.
Sharper Operations, Leaner Inventory
Petco has been working to streamline day-to-day operations. Inventory dropped 9.5% year-over-year, reducing excess stock and improving in-stock availability. Management says this reset enhances customer satisfaction, with scores now averaging above 90%.
Operational changes—like adjusting product assortments and tightening supply chains—are helping Petco save money while better meeting demand. These moves highlight a shift away from just growing bigger to growing smarter, something executives believe will pay off in the short and long term.
Pullback in E-commerce Focus
While online sales are still an essential part of the business, Petco is quietly dialing back on e-commerce to strengthen in-store fundamentals. Executives explained that e-commerce profitability has improved but now needs rebalancing.
Instead of chasing digital growth at all costs, the company prioritizes foot traffic, transactions, and services that can only be delivered in person. It’s a reminder that even in an increasingly digital age, Petco sees its physical presence as a key competitive advantage.
Analysts Take a Cautious Optimism
Market analysts have generally welcomed Petco’s moves. Despite falling sales, the company’s tighter margins and cost discipline have outperformed Wall Street expectations. Analysts see store closures as a necessary correction that could stabilize the business long-term.
They caution that success depends on whether Petco can maintain momentum through the holiday season and manage ongoing tariff costs. For now, investors seem reassured that the company is acting decisively, with stock performance reflecting cautious optimism.
What the Future May Hold
Even as it closes stores, Petco isn’t abandoning physical retail. Executives say selective new openings could still happen in high-growth markets, particularly where customer demand is rising.
Expanding services and partnerships in digital delivery will also continue, giving Petco flexibility to capture growth opportunities outside traditional retail. The strategy is about rebalancing rather than retreating, ensuring resources are directed where they generate the most substantial return.
Closing Thoughts on a Transition Year
Petco’s store closures mark a significant turning point, but they are not the end of the road. The chain is deliberately trimming its footprint to weather mounting tariffs and operational pressures while strengthening well-performing areas.
Executives call it transformation, not retreat, and say the company is building for the future rather than cutting for survival. Whether this strategy succeeds will depend heavily on holiday results and tariff outcomes, but for now, Petco is betting on a leaner model to carry it forward.