In the same quarter one year ago, Petco reported net income of $7.4 million on revenue of $1.2 billion.
Petco attributed the good performance to recurring revenue, its rapidly expanding veterinary business and growth in the digital space.
The corporation closed the quarter with 1,451 stores, including 101 in Mexico. It operates 155 in-store veterinary hospitals. Petco also offers a complete online resource for pet health and wellness at petco.com and on the Petco app.
Analyst Expectations Exceeded
Adjusted net income in the recently ended quarter came to $67.5 million, or 25 cents per share, beating analyst expectations. Analysts surveyed by Zacks predicted that adjusted earnings would come to 18 cents per share. Ten analysts participating in the Yahoo Finance survey collectively expected adjusted net income of 20 cents per share.
Petco had a good quarter and has a good outlook, wrote analyst Seth Basham of Wedbush in an Aug. 20 research note. Although new customer growth of 1 million slowed modestly from 1.2 million during the previous quarter, “customer retention remains strong — about in line with pre-pandemic rates — even in the face of a surge in new customers last year,” he wrote. Customers shifted some purchases back to Petco stores with the economy reopening, “while digital sales still increased 14% y/y [year-over-year] against a very difficult comparison, also a positive signal.”
Growth in same store sales came to 20% (down from 28% in the first quarter, Basham wrote) while the business added approximately 1 million net new customers.
“We exited Q2 with strong momentum while lapping robust double-digit comp growth,” CEO Coughlin said. “… We believe we have significant runway for continued growth as we execute against our proven transformation strategy in multi-year growth areas across services, veterinary care, digital, and owned and premium brands.”
Looking ahead, Petco increased its guidance for the entirety of 2021. Previously, the company said it expected net revenue in the range of $5.475 billion to $5.575 billion. Now the company said it expects to surpass the top of that earlier forecast, with net revenue in the range of $5.6 billion to $5.7 billion.
Adjusted earnings, which were previously forecast at 73 cents to 76 cents per share, are now expected to be in the range of 81 cents to 85 cents per share.
The company reaffirmed that it plans capital expenditures within its previously announced range of $185 million to $235 million, but in its new announcement added that capital expenditures would fall near the top end of that range.
Also in August, Petco named Brian LaRose, 48, its chief financial officer. LaRose was previously the company’s senior vice president of finance. Prior to joining Petco in September, LaRose held positions of increasing responsibility at HP Inc.
He will succeed Michael Nuzzo, who will continue to serve as Petco’s executive vice president, chief operating officer and president of Petco Services.
With the promotion, LaRose’s salary increases to $575,000 from $425,000. His target bonus is increased from 50% of his base salary to 80% of his base salary.
Petco Health and Wellness Co. Inc.
CEO: Ron Coughlin
HEADQUARTERS: Rancho Bernardo
BUSINESS: Full service business supporting pet care and wellness
REVENUE: $4.92 billion in 2020; $4.43 billion in 2019
NET LOSS: ($26.5 million) in 2020; ($95.9 million) in 2019
STOCK: WOOF on Nasdaq
NOTABLE: Petco opened its first Tijuana store in 2019
CONTACT: (858) 453-7845