Petco Health & Wellness (WOOF) risk factors, FY2026 10-K

Risks Related to Our Business

1. 01A decline in consumer spending or a change in consumer preferences or demographics could reduce our sales or profitability and adversely affect our business
2. 02The growth of our business depends in part on our ability to accurately predict consumer trends, successfully introduce new products and services, improve existing products and services, and expand into new offerings60% rewritten
3. 03costs. Any new product, service, or offering may not generate sufficient customer interest and sales to become profitable or to cover the costs of its development and promotion and, as a result, may adversely impact our results of operations, including our profitabilityNew
4. 04Our continued success is substantially dependent on positive perceptions of Petco, including our owned or exclusive brands
5. 05Competition in the markets in which we operate, including internet-based competition, is strong and if we are unable to compete effectively, our ability to generate sales may suffer and our operating income and net income could decline
6. 06We may be unable to execute our growth strategies successfully or manage and sustain our growth and, as a result, our business may be adversely affected31% rewritten
7. 07our ability to continue to upgrade our information and other operating systems and to make use of the data that we collect through these systems to offer better products and services to our customers
8. 08We have, at times, experienced difficulties recruiting and retaining skilled veterinarians due to shortages that could disrupt our business23% rewritten
9. 09We face various risks as an e-commerce retailer
10. 10If we fail to generate or obtain sufficient capital to finance our growth strategies, we may be unable to sustain our growth and our business may be adversely affected56% rewritten
11. 11We depend on key personnel, and if we lose the services of any of our executive officers, we may not be able to run our business effectively
12. 12The loss of any of our key merchandise vendors, or of any of our exclusive distribution arrangements with certain of our vendors, could negatively impact our business90% rewritten
13. 13We face various risks related to health epidemics, pandemics, and similar outbreaks, which may materially and adversely affect our business, financial position, results of operations, and cash flows22% rewritten
14. 14A disruption, malfunction, or increased costs in the operation, expansion, or replenishment of our distribution centers or our supply chain would affect our ability to deliver to our locations and e-commerce customers or increase our expenses, which could harm our sales and profitability87% rewritten
15. 15Our reputation and business may be harmed if our or our vendors’ computer network security or any of the databases containing customer, employee, or other personal information maintained by us or our third-party providers is compromised, which could materially adversely affect our results of operations
16. 16If our information systems or infrastructure or those of our vendors fail to perform as designed or are interrupted for a significant period of time, our business could be adversely affected
17. 17Negative publicity arising from claims that we do not properly care for animals we handle or sell could adversely affect how we are perceived by the public and reduce our sales and profitability25% rewritten
18. 18Our international operations and evolving foreign trade policy may result in additional market risks, which may adversely affect our business
19. 19issues or disputes arising with our joint venture partners, if any, in such operations; and30% rewritten
20. 20Our quarterly operating results may fluctuate due to the timing of expenses, new pet care center openings, pet care center closures, and other factors
21. 21Pet consumables safety, quality, and health concerns could adversely affect our business
22. 22Restrictions imposed in reaction to outbreaks of animal diseases or health epidemics, pandemics, and similar outbreaks, could have a material adverse effect on our business, financial condition, and results of operations
23. 23Fluctuations in the prices and availability of certain commodities, such as grains and meat protein, could materially adversely affect our operating results27% rewritten
24. 24Our real estate leases generally obligate us for long periods, which subjects us to various financial risks
25. 25Failure to attract and retain quality employees and experienced management personnel could adversely affect our performance
26. 26Labor disputes may have an adverse effect on our operations
27. 27Claims under our insurance plans and policies may differ from our estimates, which could adversely affect our results of operations
28. 28Resistance from veterinarians to authorize prescriptions or attempts/efforts on their part to discourage pet owners from purchasing from us could cause our sales to decrease and could adversely affect our financial condition and results of operations
29. 29Our results may be adversely affected by serious disruptions or catastrophic events, including public health issues, geopolitical events, and severe weather
30. 30Inventory loss and theft may negatively affect the business
31. 31Inflation has adversely impacted, and is expected to continue to adversely impact, our financial condition and results of operations
32. 32We use artificial intelligence in our business, and challenges with properly managing its use could result in harm to our brand, reputation, business or customers, and adversely affect our results of operations22% rewritten
33. 33We may not achieve some or all of the expected benefits of certain actions we have undertaken to enhance profitability and drive performance and such actions may adversely affect our business

Risks Related to Legal and Regulatory Matters

1. 34Regulation of the sale of pet insurance is subject to change, and future regulations could harm our business, operating results, and financial condition
2. 35We are subject to risks related to online payment methods and our Petco Pay promotional financing program
3. 36Our marketing programs, e-commerce initiatives, and use of personal information are governed by an evolving set of laws and enforcement trends, and changes in privacy laws or trends, or our failure to comply with existing or future laws, could substantially harm our business and results of operations
4. 37We face the risk of litigation resulting from unauthorized text messages and/or telephone calls made in violation of the Telephone Consumer Protection Act and its state law equivalents
5. 38Product recalls and product liability, as well as changes in product safety and other consumer protection laws, may adversely impact our operations, merchandise offerings, reputation, financial condition, results of operations, and cash flows
6. 39Failure to establish, maintain, protect, and enforce our intellectual property and proprietary rights or prevent third parties from making unauthorized use of our technology or our brand could harm our competitive position or require us to incur significant expenses to enforce our rights
7. 40We may be subject to intellectual property infringement claims or other allegations, which could result in substantial damages and diversion of management’s efforts and attention20% rewritten
8. 41We are party to routine litigation arising in the ordinary course of our business and may become involved in additional litigation, all of which requires time and attention from certain members of management and can result in significant legal expenses
9. 42We are subject to environmental, health, and safety laws and regulations that could result in costs to us27% rewritten
10. 43We may fail to comply with various state or federal regulations covering the dispensing and/or administration of prescription pet medications, including controlled substances, through our veterinary services businesses, which may subject us to reprimands, sanctions, probations, fines, or suspensions
11. 44Our initiatives related to sustainability, and our public statements and disclosures regarding them, expose us to numerous risks21% rewritten

Risks Related to Our Indebtedness

1. 45Our substantial indebtedness could adversely affect our cash flows and prevent us from fulfilling our obligations under existing debt agreements24% rewritten
2. 46limit, along with the financial and other restrictive covenants in the documents governing our indebtedness, among other things, our ability to obtain additional financing for working capital and capital expenditures, and for other general corporate purposes70% rewritten
3. 47The agreements governing our indebtedness include restrictive covenants that limit our operating flexibility, which could harm our long-term interests22% rewritten
4. 48placing restrictions on the ability of subsidiaries to pay dividends or make other payments
5. 49Despite current indebtedness levels, we may incur substantial additional indebtedness in the future. This could further increase the risks associated with our substantial leverage44% rewritten
6. 50To service our indebtedness, we require a significant amount of cash. Our ability to generate or access cash depends on many factors beyond our control
7. 51Our failure to comply with the covenants contained in the Indenture, Term Loan Credit Agreement and ABL Credit Agreement, including as a result of events beyond our control, could result in an event of default that could cause repayment of our debt to be accelerated
8. 52The amount of borrowings permitted under the ABL Revolving Credit Facility may fluctuate significantly, which may adversely affect our liquidity, results of operations, and financial position
9. 53Our variable rate indebtedness subjects us to interest rate risk, which has caused, and may continue to cause, our indebtedness service obligations to increase significantly
10. 54We will need to repay or refinance borrowings under the ABL Revolving Credit Facility prior to maturity of the First Lien Term Loan and Senior Secured Notes. Failure to do so could have a material adverse effect upon usNew

Risks Related to Our Class A Common Stock

1. 55Our Sponsors have significant influence over us, including control over decisions that require the approval of stockholders, which could limit your ability to influence the outcome of matters submitted to stockholders for a vote
2. 56the requirement that our compensation committee be composed entirely of independent directors
3. 57Certain of our directors have relationships with our Sponsors, which may cause conflicts of interest with respect to our business21% rewritten
4. 58Anti-takeover provisions in our charter documents and under Delaware law could make an acquisition of us more difficult, limit attempts by our stockholders to replace or remove our current management, and may adversely affect the market price of our stock
5. 59reflect three classes of common stock
6. 60Since we have no current plans to pay regular cash dividends on our Class A common stock, you may not receive any return on investment unless you sell your Class A common stock for a price greater than that which you paid for it
7. 61We are a holding company with nominal net worth and will depend on dividends and distributions from our subsidiaries to pay any dividends
8. 62The multi-class structure of our common stock may adversely affect the trading market for our Class A common stock
9. 63A ratings downgrade or other negative action by a ratings organization could adversely affect the trading price of the shares of our Class A common stock
10. 64Our operating results and share price may be volatile, and the market price of our Class A common stock may drop
11. 65other events or factors, including those from severe weather events, natural disasters, pandemic, pet disease, war, acts of terrorism, or responses to these events40% rewritten
12. 66Your percentage ownership in us may be diluted by future issuances of capital stock, which could reduce your influence over matters on which stockholders vote
13. 67A significant portion of our total outstanding shares may be sold into the market, which could cause the market price of our Class A common stock to drop significantly, even if our business is doing well
14. 68If securities or industry analysts adversely change their recommendations regarding our shares, or if our results of operations do not meet their expectations, our share price and trading volume could decline
15. 69If our operating and financial performance in any given period does not meet the guidance that we have provided to the public or the expectations of our investors and analysts, our Class A common stock price may decline
16. 70Unanticipated changes in effective tax rates or adverse outcomes resulting from examination of our income or other tax returns could adversely affect our financial condition and results of operations
17. 71From time to time, U.S. tax authorities, including state and local governments, consider legislation that, if enacted, could have a material effect on our effective tax rate
18. 72Additional impairments of the carrying value of our goodwill or other intangible assets could adversely affect our financial condition and results of operations