MW Petco's new CEO wants to make these changes to its stores, as shares rally

By Bill Peters

'As consumers continue to be judicious in their spend, we have to meet them where and when they want with the value they're looking for,' new CEO says

When Joel Anderson took the helm at Petco Health & Wellness Co. earlier this year, he said he wanted to improve the pet-supplies chain's profitability. On Thursday, he offered a more detailed outline on how he plans to do it.

During Petco's $(WOOF)$ quarterly earnings call - for a period when the top- and bottom-line results topped estimates - he said he wants to open up shelf space at stores for the items that shoppers tend to snap up quickly. And he added that he wants to prune other selections to "simplify the customer's decision-making process," as many shoppers scavenge for cheaper alternatives.

"As consumers continue to be judicious in their spend, we have to meet them where and when they want with the value they're looking for," he said.

Anderson said he wants Petco to hone its approach to pricing to stay competitive, improve pet-care service, cut tasks for managers and find ways for staff to spend more time with customers and less time working in the back of the store. He said he also wants to better gauge the staffing needs at its pet hospitals and renegotiate shipping contracts, after negotiating new terms with its key suppliers.

Shares jumped 10.6% after hours on Thursday. The stock is up 42% over the past 12 months.

Thursday's after-hours gains came after Petco reported a narrower-than-expected adjusted third-quarter loss of 2 cents a share. Its sales over that period of $1.51 billion also topped FactSet forecasts for $1.49 billion. Same-store sales growth of 1.8% was above estimates for an 0.7% gain.

The results and changes were announced as some analysts over the past year have pointed to a "bifurcation among pet parents." Wealthier shoppers have spent more on higher-end food, while others look for bargains, as inflation over the past two-and-a-half years keeps customers cautious.

Meanwhile, the pet-care industry has consolidated over recent years. Prices in that industry have risen, as private equity scoops up smaller businesses and employers try to offset higher wages. Concerns, in turn, have emerged over burnout and the quality of care in clinics.

Petco on Thursday said it was "pleased" with the start of its fourth quarter, which includes the holidays. It forecast fourth-quarter sales of around $1.55 billion, below FactSet estimates for $1.57 billion, and adjusted earnings per share landing between breakeven and 2 cents a share. Analysts expected 3 cents a share.

The company also trimmed its capital expense forecast for the year, to around $130 million.

-Bill Peters

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December 05, 2024 19:20 ET (00:20 GMT)

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