Petco earnings show signs of strengthening amid losses

Petco reported sales growth in the third quarter after a difficult year. According to the latest earnings report, net revenue grew 1.2% year over year (YoY) in the quarter ending 2 November 2024.

The third quarter of 2024 brought the American company $1.51 billion (€1.43B) in revenue, up slightly from $1.49 billion (€1.41B) during the same period last year. However, it’s a dip from the second quarter’s mark of $1.52 billion (€1.44B). Then, the company reported flat YoY revenue growth.

Comparable sales also grew this quarter, at 2% growth YoY following a flat second quarter.

“Our third quarter results demonstrate the meaningful progress we’re making to strengthen our retail fundamentals to drive sustainable, profitable growth,” says CEO Joel Anderson. “While there is more work to do, our improving results increase our conviction that we are on the right path to position Petco to win long-term.”

Net losses

The pet retailer is still facing net losses – $16.7 million (€15.8M) in Q3 2024. The company’s net debt, $1.47 billion (€1.39B), has remained relatively stable since February.

The earnings report blamed weak sales in companion animals and supplies for the company’s losses, down 2.8% from last year.

Anderson blamed low animal sales on broader supply conditions in the pet market. He also noted that discretionary spending—supplies like leads, pet beds, and toys—is down. He added that the company would have to focus on “innovation, newness, being trend-right and really driving impulse buying.”

Consumable sales have been stronger, up 3% YoY. These sales have the advantage of being repetitive, meaning that if a company can build customer loyalty, then sales continue to bring in money from repeat shoppers. The company admitted that a new inventory management system was likely the cause of growth in consumables.

Petco’s expansion into the veterinary space has helped boost numbers. It reported a 9% growth in service revenue, with strength in its hospital and mobile clinic services.

The company, which has a large brick-and-mortar presence in the US, has also struggled to adjust as more shoppers buy pet supplies online.

The road ahead

Petco officials said the company is in “self-help mode,” focusing on improving profitability even if market forces do not cooperate. That means focusing on optimizing Petco’s systems and using assortment strategies to ensure products are placed in stores where they are most likely to sell.

“We’re really focused on what’s in our control, and we don’t need the industry success to drive near-term operational and profit improvement,” concludes the CEO.

The pet retailer forecasts net revenue of $1.6 billion (€1.5B) for the fourth quarter of 2024.