Dive Brief:
- Despite rising concerns over inflation and other economic pressures, Petco’s first quarter results proved consumers are continuing to spend on their pets. The retailer reported that Q1 net sales increased 4.3% year over year to $1.5 billion, while comparable sales rose 5.1%, marking its 14th consecutive quarter of growth in that measure.
- The pet retailer’s net income in the period improved 287% from last year to $23.8 million, while its operating income grew 5% year over year to $49.9 million, according to a company press release.
- Petco maintained its previously issued guidance for the fiscal year, expecting net revenue to be between $6.15 billion and $6.25 billion, adjusted EBITDA to be between $630 million and $645 million, and capital expenditures to be between $275 million and $325 million.
Dive Insight:
Despite concerns over inflation intensifying, Petco executives see continued growth for the retailer in the year ahead.
Pet retailers, which experienced a boost during the pandemic, have historically been resilient during times of economic uncertainty. That’s in part because as consumers shift spending away from discretionary purchases, they oftentimes will continue to spend on their pets.
“The pet category is positioned to grow even in today's challenging macroeconomic environment,” CEO Ron Coughlin said on a call with analysts Tuesday. “Pet is the embodiment of a defensive growth category. Why? Because for the pet category, consumables are the equivalent of milk, eggs and bread in human stores. And going to the vet and groomer is far down the list in terms of things that pet parents cut out of their routines.”
Other retailers appear to be trying to get in on the thriving pet market as well. Amazon earlier this month hosted its first “Amazon Pet Day,” which featured deals on pet products. And Kohl’s last week said it was mulling category expansions, which could include pet and gourmet food.
But Petco is continuing to prioritize health and wellness as it grows, something that may serve as a key differentiator as competition in the category heats up. During the quarter, the retailer opened its 200th full-service vet hospital and averaged about 1,100 Vetco clinics per week, a 10% increase from last year. This follows Petco’s March purchase of the remaining stake in its pet hospital joint venture with Thrive Pet Healthcare, which operated around 100 vet hospitals in Petco stores under the Thrive name.
The retailer has also made progress on its growth initiatives related to store concepts. Petco ended Q1 with 71 shop-in-shops for its Reddy private label and is targeting 100 by the end of the year, executives said. The retailer is also preparing for the launch of its rural store concept, initially announced in March, and expects the store to open next month.
