In the third quarter of 2024, Petco experienced modest growth in net revenue, increasing by 1.2% year-over-year to $1.51 billion, largely driven by a 2.7% rise in its consumables segment and a 5% increase in services and other businesses. Despite these gains, a 2.8% decline in the supplies and companion animal segment tempered overall growth. Notably, comparable sales during this period increased by 1.8%, slightly surpassing analyst predictions.
One of the most significant highlights of the report is the substantial narrowing of Petco’s net loss to $16.7 million, down from a staggering $1.2 billion loss in the same quarter the previous year. The company’s gross profit jumped by 4.7% to reach $575.8 million, and the gross margin improved by nearly 130 basis points to 38.1%. Operating income also showed a remarkable turnaround, swinging from a $1.23 billion loss last year to $3.97 million.
CEO Joel Anderson, who assumed his role in late July 2024, underscored several strategic focus areas that the company aims to refine. Anderson identified merchandising, customer service, and operational efficiency as the primary focal points. In the short term, enhancing merchandise offerings remains a critical objective for boosting profitability. This involves optimizing shelf space to favor fast-selling stock-keeping units (SKUs) and reducing SKU counts in less dynamic categories, thereby simplifying the shopping experience for customers.
In addition to refining merchandise offerings, Petco is embracing new labor and staffing standards designed to allow store employees, including leaders, to spend more time interacting with customers and less time on backroom duties. This shift is aimed at improving overall operational efficiency while enhancing the customer experience.
Strategic executive appointments have also been made to support Petco’s turnaround efforts. Joe Venezia has been appointed as the chief revenue officer, a newly created role focused on developing strategies to enhance the customer experience and drive revenue across all facets of the organization, including pet care centers, services, and real estate. Dan Calista has joined as the chief strategy and transformation officer, further bolstering the company’s leadership team.
Looking ahead, CFO Brian LaRose expressed optimism about the structural improvements observed within the business throughout the fiscal year, suggesting a positive outlook for a strong finish to 2024 and momentum leading into 2025. Despite the optimistic outlook, the article notes that Petco’s net loss persisted throughout the first nine months of the fiscal year, amounting to $88 million.
Wedbush analysts, while acknowledging the improving fundamentals and manageable leverage of Petco, emphasized that continuous monitoring and adjustments are essential as the company progresses with its plans. For the fourth quarter, Petco forecasts revenue of approximately $1.55 billion and adjusted EBITDA in the range of $90 million to $95 million, inclusive of an estimated $10 million allocated for turnaround-related consulting fees.
Overall, the analysis reflects Petco’s gradual yet consistent recovery trajectory, highlighting strategic shifts in operations and leadership aimed at sustaining profitability and growth in a fiercely competitive market.
