Petco Health & Wellness Company, Inc. Fair Value Disclosure

9. Fair Value Measurements

Assets and Liabilities Measured on a Recurring Basis

The fair value of money market mutual funds is based on quoted market prices, such as quoted net asset values published by the fund as supported in an active market. Money market mutual funds included in the Company’s cash and cash equivalents were $204.0 million and $111.5 million as of January 31, 2026 and

February 1, 2025, respectively. Also included in the Company’s money market mutual funds balances were $12.7 million and $15.6 million as of January 31, 2026 and February 1, 2025, respectively, which relate to the Company’s restricted cash, and are included in other current assets in the consolidated balance sheets.

The Company maintains a deferred compensation plan for key executives and other members of management, which is funded by investments in officers’ life insurance. The fair value of this obligation is based on participants’ elected investments, which reflect the closing market prices of similar assets.

The Company previously held shares of Rover Group, Inc. (“Rover”) Class A common stock. The Company remeasured the fair value of its investment on a quarterly basis, and the resulting gains or losses were included in other non-operating income in the consolidated statements of operations. In April 2023, the Company sold its interest in Rover Class A common stock to a buyer at a price determined based on the daily volume weighted average price, in addition to a premium, over an agreed upon period. The Company's interest in the unsettled cash proceeds were remeasured at fair value at each reporting period, and the resulting gains or losses were included in other non-operating income in the consolidated statements of operations.

In February 2022, the Company amended a collaboration agreement with a vendor, and as part of the amendment the Company was granted a right to receive equity and warrants for common shares of the vendor that is subject to certain performance conditions and other contingencies. The warrants were exercised in July 2024, following the satisfaction of the related performance conditions and contingencies. Cash consideration for the exercise of the warrants was de minimis. The Company's interest is accounted for as an investment in an equity security without a readily determinable fair value. When an upward or downward adjustment occurs, the resulting gains or losses are included in other non-operating income in the consolidated statements of operations.

Assets Measured on a Non-Recurring Basis

The Company’s non-financial assets, which primarily consist of goodwill, other intangible assets, fixed assets and equity and other investments, are reported at carrying value, or at fair value as of the date of the Company’s acquisition of Petco Holdings, Inc. LLC on January 26, 2016, and are not required to be measured at fair value on a recurring basis. However, on a periodic basis (at least annually for goodwill and indefinite-lived intangibles or whenever events or changes in circumstances indicate that the carrying value of an asset may not be recoverable), non-financial assets are assessed for impairment. If impaired, the carrying values of the assets are written down to fair value using Level 3 inputs.

The Company’s trade name has an indefinite life. The Company performs its annual impairment test during the fourth quarter of each fiscal year, or more frequently when warranted by events or changes in circumstances. During the third quarter of fiscal 2023 and the first quarter of fiscal 2024, the Company performed interim impairment tests of its goodwill and indefinite-lived trade name due to declines in the Company's share price. Refer to Note 6 for further discussion of the results of interim impairment testing performed on the Company’s goodwill.

During the third quarter of fiscal 2023, the Company concluded that the fair value of its trade name exceeded its carrying value, and therefore no trade name impairment charge was recorded. The fair value of the Company’s trade name was estimated by management with the assistance of a third-party valuation specialist using the relief from royalty valuation method, which estimates the hypothetical royalties that would have to be paid if the trade name was not owned. The fair value of the Company's trade name reflected the Company's most recent revenue projections at the time of the analysis, a discount rate of 17.4% and a terminal growth rate of 3%.

During the first quarter of fiscal 2024, the Company concluded that the fair value of its trade name exceeded its carrying value, and therefore no trade name impairment charge was recorded. The fair value of the Company’s trade name was estimated by management using the relief from royalty valuation method. The fair value of the Company's trade name reflected the Company's most recent revenue projections at the time of the analysis, a discount rate of 14.2% and a terminal growth rate of 3%.

In fiscal years 2025, 2024, and 2023, the Company concluded that it was more likely than not that the fair value of its trade name was greater than its carrying amount, and therefore no tradename impairment charge was recorded. There were no indications of impairment of the Company’s other intangible assets or equity and other investments in fiscal years 2025, 2024, and 2023.

The Company recorded fixed asset and right-of-use asset impairment charges of $1.9 million, $8.4 million $2.7 million in fiscal years 2025, 2024, and 2023, respectively. Impairment charges are primarily related to pet care center locations and are recorded in selling, general and administrative expense in the accompanying consolidated statements of operations.