Dive Brief:
- Petco on Thursday reported third-quarter net revenue grew 1.2% from a year ago to $1.51 billion, driven by a 2.7% increase in its consumables business and a 5% gain in its services and other businesses. That growth was partially offset by a 2.8% decline in the company's supplies and companion animal business. Comparable sales during the period grew 1.8%, beating analyst expectations.
- Gross profit rose 4.7% to $575.8 million, from $550 million last year, and gross margin was up 38.1%, or nearly 130 basis points from a year ago.
- The company’s net loss for the quarter narrowed to $16.7 million from $1.2 billion a year ago. Operating income was $3.97 million versus a $1.23 billion operating loss for the year-ago period.
Dive Insight:
CEO Joel Anderson said during an earnings call that the company is focusing on three areas — merchandising, customer service and driving efficiency across the business. Anderson, who left discount retailer Five Below to become Petco’s CEO in late July, said during an earnings call that improving merchandise “remains the greatest near-term opportunity for us to strengthen profitability.”
Anderson said the company has identified opportunities to enhance its offering, including by creating more shelf space for faster-turning SKUs, while reducing SKUs in other categories to simplify decision-making for customers.
The CEO said during the call it has also implemented new labor and staffing standards that should enable store associates — and store leaders — to spend more time with customers and less time focused on backroom tasks.
“Stepping back, we're encouraged by the structural improvement we're seeing throughout the business,” CFO Brian LaRose said during the call. “The meaningful changes we've made in the first nine months of the year sets us up for a solid finish to 2024 as we build momentum heading into 2025.”
Wedbush analysts led by Seth Basham in a Friday note said Petco’s fundamentals are improving, the company’s leverage remains manageable and its turnaround strategy appears to be on track. Still, for the first nine months of the fiscal year, Petco’s net loss has persisted, posting an $88 million net loss for the 39-week period ended Nov. 2.
Anderson also shared Friday that Petco recently hired two new leaders. Joe Venezia was named chief revenue officer, a newly created role. Venezia is in charge of developing strategies for improving the customer experience and driving revenue across the organization, including pet care centers, services and real estate. Anderson also said Dan Calista also recently joined the company as chief strategy and transformation officer.
For Q4, Petco projects revenue of approximately $1.55 billion and adjusted EBITDA between $90 million and $95 million, inclusive of at least $10 million in turnaround-related consulting fees.
