Dive Brief:
- Petco on Wednesday reported third-quarter net revenues increased 4% year over year to $1.5 billion. Comparable sales grew 4.1% from last year, beating Wedbush (3.4%) and consensus (3.5%) estimates and marking the 16th consecutive quarter of comp sales growth.
- The pet retailer’s net income fell 61% to $19.9 million from $51.5 million last year, which it attributed in part to a $19.2 million non-cash charge in the fair value of one of its investments, according to a company press release. Operating income fell 22% to $48.1 million from $61.9 million a year ago.
- The company added 325,000 net new customers during the period pushing its total active customer base to 25 million.
Dive Insight:
As consumers pull back on discretionary spending in the face of inflation and other economic pressures, Petco is leaning into its health offerings and services.
While the pet category as a whole has historically been more resilient to economic headwinds, bolstering its services can better position Petco as consumers continue to tighten their budgets.
During the period, Petco announced a partnership with Nationwide to provide pet insurance, which will focus on pet care from Petco’s pharmacies, veterinary hospitals or clinics, and other health programs. Preventative care like vaccinations and unexpected medical needs are also included in the offering. This builds on the retailer’s growing suite of health and wellness offerings, including Vital Care, which it introduced in 2020 as an annual membership program that gives pet owners access to services like unlimited exams, teeth brushing and nail trimming. Petco has since expanded that program and on Wednesday touted that Vital Care saw weekly signups grow 50%, pushing total members to 400,000.
“We're even more confident that we've designed the right offering for pet parents sitting at the intersection of value and loyalty,” CEO Ron Coughlin said on a call with analysts Wednesday, adding that Vital Care members bring a 3.5 times higher LTV compared to average customers.
The retailer has also expanded its new rural store concept, opening its third location during Q3, and is on track to operate between six and seven locations by the end of the fiscal year.
For the remainder of the year, Petco lowered its full-year adjusted earnings per share guidance, now expecting EPS to be between $0.75 to $0.79 from a previous estimate of $0.77-$0.81. The retailer reaffirmed its full-year guidance for net revenue ($5.98 billion to $6.05 billion), adjusted EBITDA ($580 million to $595 million) and capital expenditures ($250 million to $275 million).
