An unexpectedly high number of Petco Perks loyalty point redemptions weighed on Petco’s earnings in the second quarter of 2026, spurring the retailer to tweak the program and increase its emphasis on customized offers.
Surge in Loyalty Redemptions Pressures Petco’s Sales
During the launch of the updated Petco Perks loyalty program in the second quarter of 2026, Petco Health and Wellness Company was faced with an unexpected spike in reward redemptions. CEO Joel Anderson commented in Wednesday’s Q2 earnings call that redemption rates “far exceeded our initial projections.”
Chief Financial Officer Sabrina Simmons revealed that, before revamping the program, Petco’s sales were on track to outperform the management’s cautious 0.3% growth estimate for the quarter. But an unexpected “mid-single-digit millions of impact” from point redemptions kept overall sales stagnant compared to last year. Simmons pointed out that the underperformance stemmed directly from the heightened redemption activity among Petco Perks members.
Swift Program Changes to Address Over-Redemption
Anderson explained that leadership “acted swiftly to deploy post-launch guardrails on redemption velocity” in light of the excessive point usage. Company leaders believe the influx has subsided and don’t anticipate further disruption from redemptions in the upcoming quarters.
Petco intended the Perks redesign to be more convenient for customers and associates alike. Previously, the loyalty plan limited redemption options and reduced member engagement. The updated program, introduced in late June 2026, now grants 10 points per dollar spent on most merchandise and 30 points per dollar on private label products. Per the program terms, every 1,000 points can be redeemed for $1 off qualified purchases.
Signs of Recovery Despite Redemption Challenge
Although the surge in loyalty redemptions kept net sales flat, Petco’s Q2 report shows progress in other areas. Same-store sales rose by 0.6% compared to the prior year, marking the second quarter in a row of positive comparable sales following a year of back-to-back declines.
Looking to bolster sales further, Anderson announced that Petco’s next move will focus on enhancing personalization within Petco Perks. Stating that “the company will focus on improving personalization capabilities within Petco Perks to promote sustained sales growth,” the CEO expressed confidence in early results for targeted offers and highlighted personalization as a future growth driver for the remainder of 2026 and into 2027.
Outlook: Gearing Loyalty for Long-Term Gains
While the wave of redemptions pressured short-term performance, leadership is upbeat about the loyalty program’s long-term effects. Anderson remarked that “the balance of the year will be focused on these capabilities,” with measurable positive outcomes expected to appear in 2027.
With new redemption limits in place, Petco expects it has stabilized loyalty-related volatility. Management is now prioritizing a more individualized Petco Perks experience, aiming for more significant and sustained growth within the competitive pet care industry.