WOOF heads into its September 2 earnings release having shed 7.5% over the past month, with short sellers adding pressure and options traders leaning emphatically toward the upside — a split that frames the day's print as a genuine test of competing views.
Bears have been quietly building. Short interest has climbed to 8.2% of the free float, up roughly 3.3% on the week, with the trend pointing consistently higher since late July. Days to cover extend to 13, meaning unwinding the position takes nearly three weeks of average volume — a meaningful friction factor if the print surprises positively. Despite the accumulation of shorts, the borrow market remains relaxed: cost to borrow is low at 0.57%, and availability is ample at 450%, well above the 52-week floor of 225%. That combination — growing short interest but easy, cheap borrow — describes a bearish thesis that is gaining followers without yet tipping into a crowded or stressed position.
The options market tells a sharply different story. The put/call ratio has dropped to 0.29, more than a standard deviation below its 20-day average, reflecting heavier call-side activity than usual heading into the print. That is not typical defensive hedging — it looks more like speculative positioning for a bounce, perhaps anchored on the gap between the $2.58 stock price and the analyst consensus target of $3.59, implying roughly 39% upside. Evercore ISI raised its target to $4.00 just yesterday while maintaining an In-Line rating, a signal that even cautious analysts see more room than the current price suggests. The bull case rests on gross margin expansion — up around 120 basis points year-over-year — store rationalisation progress, and a forward EPS recovery that ORTEX models as dramatic in scale. Bears counter that comparable sales fell 1.6% in the most recent period, guidance points to continued low-single-digit revenue declines, and e-commerce rivals keep taking pet food market share from physical retail.
The ownership structure adds a notable wrinkle: Scooby Aggregator LP holds 64% of shares, a dominant anchor position that dramatically compresses the genuine float. Among active managers, Dimensional added shares in July, JP Morgan Asset Management built a position by over a million shares, and Vanguard Capital added incrementally — all constructive moves. Holocene Advisors and Two Sigma trimmed. Past earnings reactions have been consistently negative: the three most recent prints each produced same-day declines of between 1% and 3%, with five-day drifts in the same direction.
The print will test whether Petco's margin story — the only part of the bull case generating real numbers — is durable enough to offset continued top-line erosion and justify even a modest re-rating toward the analyst consensus.
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