Petco sheds 9% after double downgrade from BofA

Petco Health and Wellness Company (NASDAQ:WOOF) slumped in early trading on Tuesday after a double downgrade from Bank of America to an Underperform rating from Buy.

Analyst Robert Ohmes warned that Petco (WOOF) has lost much of its competitive bite, with its market share eroding to 4% from 7% in 2015. He noted that consumers have migrated to online sellers such as Amazon (AMZN) and Chewy (CHWY) with greater convenience and value offerings.

“We expect weak P&L for Petco to deteriorate further into the first half of this year, adding to eleven straight quarters of declining profitability… Another worrisome sign: Petco has slowed opening new vet hospitals, an initiative that helps lift sales and differentiate the company vs. peers.”

Looking ahead, BofA forecast sales and margin declines for Petco to continue into the first half of fiscal year 2025 on soft demand for higher-margin discretionary categories and consumer trade-down. While Petco (WOOF) was noted to have taken steps to reintroduce value brands, BofA thinks the margin impact should continue to more than offset potential customer retention and acquisition benefits in the near-term.

Bank of America’s price objective of $1.50 on WOOF is based on 17X the updated FY26 EPS estimate.

Shares of Petco Health and Wellness Company (WOOF) fell 9.13% in premarket action to $1.89.