Monday, June 5, 2023

Pandemic puppies boost Petco profits, prompting public prospectus

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Add Petco to the short list of retail COVID-19 big winners just in time for its return to public stock markets.

The chain of pet supplies and services has climbed a wave of pet adoptions during the pandemic. That, combined with Petco’s big investments in e-commerce and store renovations over the past few years, led to dramatically improved financial results that allowed it to finally pull the trigger on an introductory filing. long awaited stock market.

PET Acquisition LLC, the parent company of Petco Health and Wellness Company, said in a initial public offering prospectus filed Thursday evening with US regulators that comparable sales have increased since the start of the pandemic, including a 16.3% increase in the last quarter.

It was the eighth consecutive quarter of comparable sales growth for Petco and the largest increase in that streak for Petco, which is on track to surpass $ 5 billion in sales this year.

And Petco’s operating profit nearly doubled in the first nine months of the year, which is crucial for a company owned by private equity firms and struggling with $ 3.3 billion in debt. CVC and CPPIB acquired Petco for $ 4.6 billion from fellow private equity firms TPG and Leonard Green in 2016, ten years after taking Petco privately. Media reports suggest Petco could be valued at $ 6 billion when it goes public, where it will be listed under the symbol “WOOF” on the Nasdaq.

Petco’s reversal of fortunes was not evident just a few years ago, as this current streak of accelerating growth followed a two-year period of decline. Petco was seen as having inadequate e-commerce, outdated stores, tired private labels, and didn’t offer enough services (like vets) to attract shoppers to stores (compared to PetSmart, Chewy or even Amazon).

But like Fortune detailed this in a report from May, which changed under CEO Ron Coughlin, who was previously atHP, where he ran the personal systems business selling PCs and tablets. When he took the reins in 2018, the chain of 1,470 stores become an e-commerce player a priority. Petco has gone from just 4% of e-commerce sales to double digits, and it’s growing rapidly.

Petco was able to quickly implement curbside recycling for nervous customers’ online orders once the pandemic started. This was essential in competing with Chewy, which was owned by rival Petsmart and went public last year.

Before the pandemic, Petco had started remodeling hundreds of its stores, adding high-end products, adding more health-oriented brands, revamping its own portfolio of store brands and adding warm touches like wood shelving panels, a Treatery rack for dog baked goods, and a station where pet owners can get nutritional advice, including information on Petco’s premium food brand WholeHearted. Petco is also making a deeper aggressive push into veterinary services, an area of ​​intense competition that includes PetSmart, Walmartand Chewy’s Online Pharmacy.

It will be essential for a retailer to maintain its place in a booming $ 96 billion US market.

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