As Americans splurge on pets and larger homes, Petco's CEO claims that the company's growth is inflation-proof.
A customer exits a Petco store in Clark, New Jersey.
Ron Antonelli | Bloomberg | Getty Images
In an uncertain economy, Petco CEO Ron Coughlin said on Wednesday that the specialty retailer has a key advantage: Americans spend on pets, even when their wallets are tight.
He stated the pet category is "resilient to economic downturns, resilient to inflation" at an investor day in New York City.
During the epidemic, he added, more individuals got pets as they moved into larger homes with yards and spent more time working from home. He likened the situation to a birth boom, claiming that the demand for food, veterinary care, and other necessities will outlast the global health crisis.
Petco wants a bigger cut of the market's expanding pie. It forecasts that the pet sector generated $72 billion in food and other product demand last year, and that this will increase by 7% by 2025, with double-digit growth in premium merchandise. In addition to selling pet products, competitors like as Chewy and Walmart have increased their involvement in the pet sector by providing additional services such as virtual medical visits and pet insurance.
Read more: Pet ownership costs are rising due to inflation, but consumers are still spending money on care.
Petco has beefed up its private label offerings, expanded vet care and other pet services, and wooed customers willing to splurge on everything from fashionable clothes to fresh and organic food as they treat dogs, cats, hamsters, and other pets as family members in order to stand out in a crowded field. It's also experimenting with a little Petco shop inside some Lowe's stores.
According to Chief Operating Officer Mike Nuzzo, the company has roughly 200 full-service veterinary hospitals at the end of the fiscal year and wants to increase that number to 900. It also encourages clients to buy pet products and services from its stores by offering a Vital Care membership service for $19.99 a month, which includes unlimited vet exams and discounts on food and grooming. The program was restarted in March.
On the digital front, the company relies on stores to fill online orders and provide same-day pickup. According to Coughlin, this makes the e-commerce industry more profitable, especially as gas prices rise, resulting in greater delivery expenses.
Petco had its first investor day on Wednesday since re-entering the public market in early 2021. In the midst of a larger market decline, shares completed the day at $19.45, down 1.32 percent. Petco has a market capitalization of $5.88 billion.
At the investor day, Petco reaffirmed its previous year-ahead forecast. On net revenue of $6.15 billion to $6.25 billion, the business expects adjusted earnings per share of between 97 cents and $1.00.
This is up from Petco's net sales of $5.81 billion in the previous fiscal year. This expansion is broadly in line with Wall Street's forecasts. According to Refinitiv, analysts predict 99 cents in adjusted profits per share on $6.2 billion in revenue.