Challenges in pet supplies and less expenditure drive Petco’s financials

Petco reached net revenue of $1.53 billion (€1.4B) in the 3 months to 29 July 2023, 3.4% more than the same period last year.

The company attributed its sales growth to a positive incline in its consumables business, up 6.8% compared to last year. Services and other business grew by 30.6%.

Digital sales increased by 9% year-over-year, while fresh frozen products noted substantial revenue growth of 10%.

However, the positive trend was offset by a decline in the company’s supplies and small companion animal business, which decreased by 9.4%. This drop has not gone unnoticed
and Petco shares dropped by more than 20% on 24 August.

Operating income decreased from $50 million (€46.3M) in the 3 months to the end of July 2022 to $24 million (€22.2M), representing a 52% decrease.

Uncertain environment

Petco CEO Ron Coughlin said to investors that the company continues “to focus on execution through an uncertain environment.”

Coughlin stressed that Petco is delivering its 19th consecutive quarter with comparable sales growth, “with ongoing strength in consumables and services, particularly in vet.” The company added 364 veterinarians to its ecosystem in the last quarter (+59%).

Chief Financial Officer Brian LaRose pointed out that a notable “shift” in consumer spending and “pressures” on the discretionary business meant that they are revising their yearly
guidance accordingly.

For now, Petco has maintained its outlook set in Q1 FY2023 with yearly net revenue of between $6.15–$6.275 billion (€5.69B–€5.8B).

The retailer, which recently announced its product expansion in Lowe’s stores, expects to build on its customer network by reaching 300 rural locations by the end of the year.