Petco Health and Wellness (WOOF) 18 Nov 212021 Q3 Earnings call transcript

Good morning, and welcome to Petco's Third Quarter Fiscal 2021 Earnings Conference Call. All participants will be in listen-only mode. [Operator Instructions] After today's presentation, there will be an opportunity to ask questions. [Operator Instructions] Please note, this event is being recorded. I would now like to turn the conference over to Kristy Moser, Vice President of Investor Relations. ahead. go Please

much, XXXX very everybody, Petco's to Thank earnings and conference quarter fiscal call. third you welcome,

In addition at to and the earnings release, there for third XXXX on our infographic is download our summarizing website ir.petco.com quarter results. available a presentation

quarter. Ron Ron are Executive Mr. walk recent through and Petco's Brian call LaRose, Chairman Officer. Financial financial and Petco's performance Petco's Mr. will the and Coughlin, and for On In Brian Chief today Chief Officer; a the operating moment, us

begin risks future I we the law, we as you new in make Securities to remarks, we that on results and and forward-looking events results regards of number and whether and a include remind and other forward-looking and contemplated a Before future like uncertainties those of and to such Commission. date Except otherwise. obligation Exchange differ revise and filings cause forth set are to or no not of our of forward-looking beliefs, our would uncertainties in which required plans, events These this from materially events statements. will made our actual by statements are only release hereof. as earnings result update guarantees to by with These them, expectations, our information, of any to risks our call, are as current or factors performance statements subject undertake and that could the

our as filings in Securities the Exchange measures addition, measures included GAAP the release Commission. comparable financial the Reconciliations and most financial In measures. of these references contains to with presentation, non-GAAP with financial today's presentation and non-GAAP well to are our as earnings directly

it question of to limit During over let today's and Ron. turn me call, one please the follow-up. With question-and-answer that, one to yourself portion

a results two-year XX% third of Thanks, joining on morning. today. profit strong flow-through. comp growth, double-digit stack comp generating Kristy. sixth quarter Petco delivered appreciate quarter We our growth with us Good record you with consecutive

of Growth strength execute XX% We adjusted our I performance of business. our continue and EBITDA of our robust to of these the with supply differentiated growth, proud navigating chain, our unprecedented model so inflationary pressures industry. our strategy areas leverage. in operating reflecting outpaced all am are on team's year-over-year revenue impacting across that performance XX% every

to where on remains outpacing vendor focus supply, for XX-year we strong a Our pets of retailers delivering rate pleased millions and know nearly that my with are the as doubling greater customers than Correspondingly, our demand consumables, gain. share stronger. I growing, a of supply with particularly environment our spend per in an experience in acquiring like in our times gets and of these pet. enabling new relative the from more to industry, is

increases of positioned, on is the owned sales employee tight over This on we able an that seen seen holiday stock where mission we some the on of broader of XX% most merchandise The pass because that to we Halloween the are have and On Additionally, price labor. better DCs. a already focus year. stock compelling vendor of we our volumes. product for we a impact having a of is do well increase proposition through. last brands, in in unit XX% highly value aggregate, haven't in inflation, supplied marketplace, and And compared like heels stores have companies will to In high-end been competition in market, inelastic. pet is a the with category labor strength

of the Pet seeing quarter the the you you, XX% the applications, that love that versus in place. we're want third pets, about If our company in roughly which is to work cares Center beginning and for Care a increased year. Petco And

continued has pet we XX% to continued at Now a into comp stellar back team and lives in later. confidence growth. which We parents to pets, results purpose Petco. lapped with double-digit momentum half details quarter the tangible giving a provide those has to strong deliver Petco's -driven raise first great that in of of our performance, business the had And the the date, will improvements And combining to strong again Brian XXXX year. momentum guidance the QX, us business fourth in working with results, on exceptional business

including of continued and execution our a enhancements in Our the owned be our further on I firmly of of in is the exclusive growth competitive evolution veterinary advantages, sustainable our a differentiation retail focus category. next transformation, to expansion merchandise of one fastest the believe through against maximum long-term by history, of brands, in physical powered our prime expansions position we're footprint. leverage and powerful that leader digital

indexes. that was and along powerful with distribution talking has Looking capabilities. X.X. at just was over Petco through significantly of a shy brick-and-mortar Gen consumers. a Z-ers of players. march delivers Retail where XXXX's for combination, trends Sears now where by adoptions digital. the players realized with years of lifespan. strong. on continues combination We're cats strength of is seeing physical advantage. is footprint growth pets Retail nearly Pure-play in that very the the elevated online versus move hyper pet though that new particular to year with business the mega we've history were its LTV call cat, it simultaneously of stores levels, a source be like is eventually retail back consolidation about a per value-added absolutely continuing and and this of Category the customer humanization accelerated all we're strategic of and X.X and digital mass lack chapters, back to industry's relative I mid-XXXX. though, blossoming expectation The X.X average, millennials, spend And growth, to omni-channel supply. moderated to promise And adoptions a would The on outpace best-in-class historic dogs, driven XX% was last been experiences, strengthening the up in now roughly competitive longer assets pandemic over and continues the upward remains all Adoptions stage to Petco retailers of is by Retail of slightly from

a analytics both Our CRM. than larger to new net count customer XX.X total existing households. be quarter, new and XXX,XXX more advantage QX, we're million acquisition and customers, In value our engine across driving bringing to from per end pet and at added personalization, enhanced base competitive customer continues of active increased through customer the that third we the active

supply system vet they're higher the continues the pets to are a XX, year where on on is health food life are between out reduction with months, welcomed sales seeing care seeing in last up boomer and The The cycle growing become, the after the for the households the XXX significantly demand there new more pounds we a and loving similar pet year. first end millions into to way X, generation. consume. adding Additionally, pet category. in play X until larger life, of of higher XX and last approaches see they prescription, life, initial the and Correspondingly, the the the new X adopted homes. across they XX, of category puppies over a The year up past the of spend all we're does X when pet's end their kittens the stock quo status year year of

Petco's have In Importantly, higher These last the recurring fresh, teens like delivery penetration, personalization, an it's in a any supplies also source as winning the acquired larger strong revenue a growth headroom of available. of higher-growth our of sizes. Live share customers we enabled low on than category, again of customers growth, our XX% in of estimate we of more the an rates excluding for margins posted grew incredible brands fair revenue, what We've year. powerhouse while in year-over-year or to than with same QX, delivery segments and XX%. how our assortment a business we nearly super-premium growth, consumables destination has we customer choosing is digital that basket with digital double-digits, XXX% retailer, grown valuable XXX% are driving the We've of surged, quarter, develop the the more versus by from these consumables highest when the Repeat day of year-over-year which ahead. our in standpoint, same-day repeat gain supplies taken believe digital which our increase and brands. either share XX% benefited expanded of show new a developed continue QX generated favorable significant that have X-year back we we to our traction, and such gains kibble and growth one prior from posted is We've enabled own differentiated From category margin parents revenue the Aquaria. delivery LTV benefited our better pet WholeHearted. We of have sale versus customer. XX% attracts BOPUS, is in of is and share. strong This headlights hand

by momentum online-only point was $XX Our X And And from ecosystem grooming, more marketing said transition. last revenue than drug and partner, up conversion every training, brick-and-mortar users times been third and we pet to QX, This that non-promotional growing in quarter which in new growth, stacked accelerated downloaded capabilities us. was Vetsource, prescription In with month the highly e-mails. headroom the largely In transitioned almost market, for we and a capability launch, doubling food are since quarter proud discussed and delivering includes driven is delivered active it of billion a we say a last prescription drives XXX%. In rated million where the XX% unique we now smaller a billion rapidly. has the we've well QX, the as great app significant business the began. more. we technology, QX, care at year. hands-on competitors local growth offer prescription match. has experiences as reminders focal in rate This And is and app been Xx since significant to I'm advantages. for $XX health category, veterinary insurance, And cannot strategic prescription care, almost app-generated with our

or is we revenue filled in Pet or via perform Centers TAM billion XXX our doctors now to stack. $XX have services scripts, strongly getting writing market, versus the petco.com. we upside with example, ago and X-year which vet on Care substantial. The For up XX% here growth in Petco year a continue In a are either hospitals, XX%

and at groomers to advance. in and groomers grow doctors veterinarians most weeks to in And of booked our rising many meet demand the history. have as we're We our continuing are

hospitals; to time fill XXX just On year. market way proposition tightest roles history. in this outperform November after continues XXX of today, vet and XX On we is the resonate, the this In XX of XXXX, and hospitals hospitals, by continues vet a had our quarter, XXXX, XX one to the the delivered the open to XXX value industry. in we had the build-out While had our On expected in practice an Tangible and end our of the XX, we day, today, we we in milestones to of day, Texas recruiting vet closed hospitals. fastest quarter. the the have had end acquisition on that markets hospitals. and XXXX, labor

deliver organically-built be will expansion Our continue forward. owned focus results going to our and primary incredible hospitals

that the up that margin. with adjusted to put continue to mid-single-digit within EBITDA X-wall store addition economics in we lift see Importantly, hospital, hospital, we attractive XX% center model where

exclusive continues Vetco Our platform last up doctors beginning the X,XXX at of about hospitals. a the complemented and accelerators optimized was double our are from Reddy with merchandise York's neighborhood, unique with brand. foundation the XXX be earlier the across New on clinics great for X-year a sticky in many X Petco's Reddy major been of year. hospitals were business outperformance business. introduced digits. location high-end SoHo in all year-over-year stack, growth of flagship Pet feeder and I The built brick-and-mortar that to for categories, by in and footprint particular XX% a fashion-forward, XX% the clinic a great Strategically, our Care brands system now consumables of on quarter, Centers, a up are supplies In by Care stylist which the of capability, up brick-and-mortar years. we strong complemented Owned are of Centers. shop-in-shops in is revenue our has omni-channel trendy the spoke over These Pet

are also Second, creates and versus online driving mass not and shift we're those generally premium This access. or brands, mixed up consumable super to competitive a which as towards distributed premium brands grocery year. insulation almost last were tend limit XX% in

broader to that a XX% up frozen like Dogs, we fresh Third, benefit the frozen dynamics #X wonderful for remain category, retailer brands trip pet frequency and exceptional Today, was spectrum and Instinct. the in Just the Food year-over-year with specialty of Freshpet fresh close with full and enterprise.

is now Dogs nationwide ability been locations that to is for and probably growth our space. ramp saw we're and exciting our customers handily almost we're in programs on grew vendors in customer last drive expansion Just Many data maturing our our bring released parents. of progress by analytics business, to our and in Food We've from recurring up XX%, pleased recurring total support for our year-over-year. exemplified loyalty our roughly is revenue and with fresh fresh base XXX in loyalty XX% infrastructure our customer this frozen our revenue our engagement I Care Just and footprint. revenue refrigerated Food demand as over Pet point track supply and their week. increased from by you outperformed of inflection believe ability results customers that Well, of in total complementing by scale. X This brand year-end, in into to and and XXX Dogs' was revenue to Centers, Recurring an driving pet capability reaching value leadership best our programs. and exemplifying our

these from members, Vital have Care Grooming & about base higher XX% nearly multichannel, by average customer, loyalty new subscriptions spend, million our customers Nutrition being X the programs, launching driving spending end roughly Our QX. XXX,XXX and almost with up which Petco. reached since multi-category Once double-digits. last Xx are Perks year, we of are average over an at XX% to grew customer reached again,

our results, we remain Petco are Therefore, to said purpose-driven committed addition we lives pet and to own I in business of Partners. earlier, pets, to improving As performance. committed delivering parents

on progress recognition Lost, lives, software under-resources facial help over save Love loving pet pets. pets We across through to relationship X,XXX continue their to to preventable is Love our X.XX with diseases end Petco in returning first distributed Petco communities million Merck, our vaccinations the mission to parents nation. through life-threatening for to their And pets

million wages X years certain also investing are average of work premiums investing costs. over to in the those the benefit care We improve increasing and lives over absorbing hourly health who at last $XX Petco, while

partners Center Additionally, QX were staff highlighting Care do bonus payouts the than better. company XX% for target, roughly as higher Pet that will does better, our

in pet above As we investments standard ESG and a the our Earth sustainability. Coalition our and for result were remain recognized to continue these Pet Award application XXXX And people, by agenda the the of the levels. in hiring XXXX we Sustainability progress with industry setting other on well Hero disclosures, as

incredibly We are an exciting Pepco. proud. very This is for time

parents long ecosystem strategic our and built executing for health Our growth. is wellness comprehensive pet and exhibiting strong see powered it have growth, sustained people. relentlessly of We're our products me entire digital only differentiated from industry's to a runway strength Brian. turn in passionate operating our against advantages, and the organization priorities, a of we market and and by over our services that, With a position let

Thanks, and morning, Ron, good everyone.

revenue execution market. competitive the both the X share I'm net another inflation, and that a and strong operational that billion, on Ron the positive on yet strongly and is execution quarter cost in resilience taken the As actions business pricing pleased trends advantages with up transactions our stack, basis, have were for and XX% this quarter. basket and record $X.XX our traction and average to On we offset XX% terrific against Ron truly strength is results. differentiated third how into of with of of to X-year QX a sales comparable outlined. In year-over-year, X-year highlighted, quarter strategy, financial increases. strategic the of you one transformation demonstrated XX% was input reflecting or our select regards to manifesting

on been in methodically. pricing has strategy seen we've not And Our units. an aggregate, executed impact

in We unfold. year-over-year. pricing in Animal, Supplies and been and market to XX% have XX%, X-year the Companion comparables on stack increasing, up category a In XX% consumables Other on year-over-year XX% flexibility dynamics Momentum quarter, an as a X-year our grew lapping the adjust benefiting from inelastic has prior X-year XX% at growth heavy was and our programs. third basis and Services nicely X%. of expansion subscription year in and the and membership

have through which these inventory in deliver results during continue our we cost-and-supply steadfast environment, management We cost-mitigation to dynamic and efforts. remained a

that and With exception, versus exclusive retail, well, is chain no the much advantages supply set. representing While Petco, healthier is have across lastly, pet pet is super do. are the owned brands environment challenging typical our specialty their of receive and highly extremely importantly, we others we team certainly way and our executing and and of redirecting available. premium mass our roughly product players. the narrowly only competitors with smaller we alternative exited of in regional And status which PCC And available half space distributed partners artificial don't naturally of shifted and brands, premium pet not space XXX-pound more are with in in some products the online products. gorillas We priority compete when specialty our the our have adept outside healthier, with towards assortment, products on customers ingredients is products those to means competitive at

generally our DC same versus online product positioning is This mass naturally advantage is by advantage as and auto-store with many grocery, of While also an pet and to week, center this up Dallas per pleased it advanced of drive complemented I'm down knowledge versus the who we and cost partners. the are don't running. our to players, report system. in that Columbus Petco depth quarter. last see new discussed robotic that earlier DCs an as launched we distribution expansion Dallas have that And our network our

and manage beyond. automation investments, we to planning dollars with product investments bulk logistics else initiatives investments compensation, business, environment key has logistics well beyond. deliver retail, price it We pressured us XXXX quarter and continued And costs. the for allowed and through in as select These in vendors, our and impacted to everyone although in gross labor margin profit efficiency are the enhanced optimization in current DC ourselves additional rate. Like positioned gross freight, well increases, has coupled as have in growth import fourth

the consumable profit or down driven XXX acceleration year to marketing of margin $XX Moving Gross continued moving X/X XXXX. sales share Gross points $XXX of was P&L. life continued from exceptionally as X, assortment and decline million strong and down pet QX to by was increased loyalty cycle of mix the of XX.X%, growth, Ron expansion of earlier. XX% from million. Over X basis impact the our and our year referenced to programs, due the

an than this We and most increased While term, digital are this did supplies' customer in unique that seeing indicated, is see customer. towards impact a chain near as in supply is consumables gross the the time, shift significantly margin impacts the the costs we acquired higher LTV remaining of mix and services.

$XXX demonstrate XX.X% improved margin model. an to QX XX.X% continuing or of goods strength towards services than marketing, through basis, invest a mix-driven sits offset a Long But to roughly cost infrastructure we expense in our that revenue SG&A On as from really the SG&A services was gross towards percentage levers shift sequential a total growth company, to services and pressures. QX manage margin prior margin. to and across term, feel adjusted labor leverage by mix our been the has future On in in in EBITDA in continue up basis, primarily absolute SG&A, $XX our in XXXX, our to from of XXXX of ability sold given gross sustained geography historical is in was P&L X% Given as pressures line with issue. shift support year, mix million rather million, of growth consumables. we outsized our services people. confident driven margin shift the

year, to allocations outpacing gain $XX following on a EBITDA mark-to-market million and improved fully revenue $XXX on an growth. adjusted effective rate million based weighted as in by XXX QX our or tax shares excludes normalized additional XX% $X.XX was their EPS of million, Rover IPO. This of increase diluted from Our well XX%. XXX% investment QX as a $X.XX equity prior adjusted average from

Pet Turning the Pet Center Rico, X,XXX ended United quarter. We and in to base. from Care with Care States our the QX Puerto Centers X down second

quarter and from the Mexico XXX online, venture market in-store Our to joint and Mexico third the be quarter. to for ended with Centers, leader continues performance Pet the X expectations. up second Care quarter continued exceed the

our strong cash credit with have liquidity, to million $XXX revolving million equivalents of million, $XXX continue facility. quarter availability inclusive and ending cash the We $XXX and of on

Looking strong robust prior at we $XXX $XXX of generated expenses. had $XXX cash free In from in flow. generated million capital XX% year. period, million cash of and operations million, the Year-to-date, up we same versus cash flow

by ratio year-to-date Our XX% XXXX. net or to in leverage reduced X.X X.Xx

at and interest XX%; million million chain based the range, the shares supply of to outstanding $X.XX XXX of vet innovation and capacity response X quarters enhanced net of a Looking rate debt the adjusted on million build-out to execution, million year effective we sales strong performance forward, $XX on and billion and expense, from for $XXX the expecting and EPS $XXX an EBITDA XX% digital, excluding a billion to between $X.XXX XXXX: investments $XXX capital XX% extinguishment, XXXX; loss in our to and in first adjusted our expenditures or to million XXXX; now given are $X.XXX increase confidence between full our from XX% in revenue or $X.XX, $XXX growth. of XX% strategy incremental and million hospitals, of following net our inclusive tax in increase

the be fourth strength on level, line-item continued gross business, we of we consumables While expect to margin don't the a typically given QX in with XXXX. quarter roughly guide line

Relentless the in in to guide that, set With comp pet, QX for our and areas fourth revenue phenomenal Ron our our looks dynamics, us digital despite deliver XXXX confidence now take macro against be of confidence exclusive and the like percent Petco. will and brands. broader Petco ability quarter strength initial ecosystem that apart unique the to our your owned reflects continues strategic our to I guidance to and X-year revised completing health execution to Our strategy against proven a and trends and what for gave questions. a high-XXs wellness

will We Instructions]. [Operator question-and-answer the begin now session.

Our first Wintermantel question comes from today Oliver ISI. Evercore with

was My ticket versus question regarding quarter. traffic the in

maybe was If out more and ticket how it and in do you could what driven? what And were traffic the fourth inflation ticket break you quarter? trending to traffic in quarter? be the that expect or Is

Thanks, Yes. Oliver, it's Brian.

up opportunities of let pricing impact during week, to partnership average all, aggregate look we benefiting our that basket are Relative we payment and are both and Transactions inflation, we continue volume, which say from a and from ago. And larger pricing any took quarter, basket year and tell First haven't with to look were Klarna, our actions me I'd we'll went baskets. vet benefiting going at versus up. to live on platform, earlier the this trends size. for forward. we to you that expand seen transactions continue our We're strongly also

I as as just both add were the Yes. present well on would our digital. Right. basket This that PCCs traffic increases Ron. is and in

the in decline just then you points The a year-over-year? that as basis rate And Got or it. the Is same the said gross third is margin that the Q. clarification.

can in on you And as wants rate. gross we're unique that's spend would I And drive experience. pulling as and to asked much driving call, the consumer the expect lever on sacrificing be we're But to margin we dollars. we're said, QX, is And customer and you the time. said Oliver, in we Yes, with as a margin that to we what every focused as more, QX. line tell without

comes with question Citi. from Zaccone Steven next Our

I wanted a on the gross bit. margin little follow up to

gross So just the a in And right. this talk pressure? pricing then factors transitory taking I'm what gain And much mix the a given to are decline get bit and you as you here you're continued consumables in with help supply nature you that XQ, margin curious a the for of up there, here, sense on the of maybe dynamic about rate? could view how right, can defense

be should towards own a seeing brands. You benefit

So defense protect think do to about into year? next factors have we some get of especially you the rate, as how we

for Thanks Steve. question, the

margins. from by of So let part reminding $XX me what of I'll the start gross I'll take breaking EBITDA it But XX in release, increased just second said. margin our our million. points, terms the basis dollars by the rate first by Brian down gross

unique, are We to a in more The consumer money. spend time. wants unique

very levers gross we gross to we are dollars, the So X #X impact though focused are mix. driver margin rate. pulling margin on on gross year-over-year, actively margin components consumable the is

share So than was rate we of our business our expected. we year twice did far better And gain what saw a ago.

supplies LTV. Consumable LTV XX% better our So than this is are is very good for Consumables is sticky. roughly our business.

we off this customer. better LTV get a So

a pressure LTV Yes. and now? margin strategically standpoint, it's it a good Does But thing again, it's So an us. provide good here for thing. from

is to supply the talked cost call enterprise. of as retailer chain are a there's on the about is but there's element. EBITDA which that, into The in mix the total neutral finally, basically mix shift we really Brian Beyond P&L piece component, COGS geography sales, that services. every And is services seeing.

And the a further. bit them, I on but couple a on Steve, you little just go Yes. hit levers, I'll think some of of

that of to expanding mix, are fulfillment up. and new this engagement the lower are you, funnel starting They're tell a driving AOV online, more front options. pricing, the customer hospitals of channels our targeted hospitals enhancing showing cost our premium getting our fulfillment already continuing services higher economics Steve, own-brand and is the optimize that through So coming mature. PTCs and towards digital bed to vet I where would lot digital investments, our of see realizing and our

rate sort of services of for rate margin was up rate was up gross rates at the year-over-year. in some you If look Consumables Digital year-over-year. up subcategories, year-over-year. was

mix So categories. the across driving are within that rate we increases dynamic,

Okay. question, higher-level maybe a It's Then very Ron. helpful.

years. X Where you brand's you've for the guess progress. public. forward? Like the over company Petco? really talk of about more when at for as you consumer's you to what's improvement feel Company's go customers? thinking there the about working opportunity been Just I How do perception now is

a it's say so story ahead. come we've so I'd we of much far, headroom but have

go shock way a of the been color the decision is If XXXX, get the the company successful. training made The us water premium wellness of helped was because to ingredients. vet clearly has we has our actually started really well. or feel giving for rid can to has health they upstream a has come we've it was or company And it company our -- and underneath it of helped into on get us fresh moment then that, XXX us now whether kibble you artificial company. up us to debt that served look Petco and business that into rid consumers of to space muscle. services, like successful. at really positioning and vets health or wellness to for brand like in consumable all And super a businesses repositioning so training the And go positive for surgeries, the that Whether gotten credibility to October repositioning marketing getting higher-end

just because whether strength. And we with the of this second marketing, could is of seen campaign because fundamental that's we all to couple questions January -- the let's life. that half. year And it with you've we brought promise that in or year right, are to of lap, in I of it lapped so results. strength. really our the we both offering, lap last -- when January didn't we really the but launched of marketing, our mean And our And brand there performance brand

Our with Lasser next from comes UBS. Michael question

And this expected year? that script Ron, just this you a industry strong. on the made all given in an year a your have would inevitable typically pet the down the step in about you be that Why occurred is of do has ownership think last the step drag adoptions and point really is? been the second year, next down industry of strengths delaying one have that yet to that year, happens and

Yes.

you eating a down conversation X, There no is the X, a year this annual year up. But towards we year of pet terms between is of year you're life, Yumi, dynamic your have supplies, you're X, getting because X, XX in and spend crates, prescription about we're X leashes, X, pounds Rx dollars, probably way where the X, The between know year you're X, he a -- higher year clear, step lot beds, year lot getting in Year and added in is supplies and change time XXX% only the in my getting year had out. total pet, be and me you in per The collars. let is get all Lab, to equivalent. X X, a all I Yellow don't end a year but of was talking about IPO So bounces process. food. more is that the

you X, year up the the So versus pick consumables see supplies.

getting on growth create hyper year XXXX both we're gaining here doubled, share the year crossover. but new On growth bit does that, because and segments. our if rate dynamics, But that it rate you for conversation. of which supplies. for business create now, consumables hyper is the great on our of optics for the those a of in hyper against into margin gain the business, share top So of growth of we're look pressure those In pets, at a was consumables. progression, XXXX,

over the talked Yes. at years. that And CAGR market. over-indexed add a of X would to not grow multiple and areas are as And grow about at with a thing overlay over-indexed. X% that's our of where direct is as X the we at Mike, the a are multiple is expecting services And will digital, last We're portfolio which on to well. market the I that parts that in growing part next that that we've vet a X, of our market of is build-out

dynamics it in we've consumable at X, continual you right the mix And Ron's X X, the at we last year-on-year. seeing look of talked although closing to [XXX] XXX. increases is and add, that of supplies this hospitals, are spend our thing in would year year per pet puts vet If build-out, after, I year about the point, shifts the with year

the pets. majority Z-ers by new and the the Driven adopting question. Gen for millennials Thanks of

probably tight probably next some persist, last very assume and the well consumables, mix of normal, labor balance more market do gross Understood. of that maybe SG&A offset Including wage the and chain you next the have if the over have the to the manage a of quarters to but that, in supplies the quick in and costs, persisting the inflation into between we follow-up, year, been persist ability a it in little drags like is margin light lever year? bit supply few it's services

can I one, Michael. take that Yes,

to So first say costs I'd we've all, continued of our manage aggressively.

at X look continue by in SG&A you what the almost points happened we this to improved while business. invest If quarter,

into cost-out like like we'll ROI. continue lean opportunities. drive to marketing, And through the we to and areas leverage where SG&A continue growth we operating So initiatives

are to designed have also We leases. greater leverage. there's structure give components our operating and SG&A cost reduce to OpEx fixed, of And formal and that programs our us such as

expenses, And get close first associated we growth to rates to we PCCs. versus consumables, there's as those on expect closer your past QX. leverage so We with have to together remain know come consumables those start while do natural to On strong, volume. we we point supplies, expect X,XXX

question Our with from next John comes Partners. Heinbockel Guggenheim

the vet a degree? me a going Care track outside Vital accelerate you of how customer? you to I will but And terms know something customer do Vetco the remind there's rollout? certain the let So you with, think Care rollout non-Vital to rate Vital value Ron, us when if about with and do that growth can in early, with its how know of it's partnerships. -- you think then vet Care their their and the it can spend don't start or I forward, And relative lifetime just

Yes. the John. Thanks question, for

growth. Care, our with ahead Vital expectations. So We're of we're happy the

tangible long-term some But fantastic spending to average customer. Xx Care and impact plans have to are that underneath our scale are for customers have be on Vital our business. These a We ad dynamics. design

Vital -- or food to -- services are Over customers So Care are us. us. with of for XX% new Vital Care with new XX% Care us, so of grooming to Vital customers customers example, with

will every doing it drive in tell mean I how in pocket share we of to. wanted thing. that I terms we of the on So Petco wallet of job the is you, is this Vital linkage Care,

because Care I've our So And as I in. call. I'll are, Center, in our our tell our the Center last up up Vital are go vet been think folks of They fired are. quarterly Care who trust Pet because groomers, the and Vital groomers, are most fired actually, Pet as grooming the in you people get probably Care And you folks discounts about XX since Care.

organization from the across as thing accelerate you will is it us. Vital see forward we And for here. Care go So

a then quick And maybe Okay. second.

from the use business more Is drive In pretty first you terms to Reddy. supplies you Obviously, I accelerate there business, Where those Reddy -- locations? impressive. you is -- it of to Can how kind driving think How think right, do of to easily Reddy? where supply about do the shop is some think through supplies a of do that online? the going engagement now? do you more it Reddy way is in about

Yes.

very of brand of like it. we're supplies profitability tight it, focused part we Reddy We on the owned end-to-end. and and the like So

which, a if is on Consider now. do for or store, Christmas up for that in We something it right call. looking presents going it why Reddy, and invested are launched consider a flagship which love by anyone store for -- stores have go Reddy. to great for year You you we dynamic year have X we to is store. -- advertising, encourage X the way, flagship New for presents in York the we But the launching pick crew we holidays, on down Hanukkah or the

the we a store, you out. take normal do So build and

store add and that in also we're Reddy seeing over the last store a significant the ones in done lift. a year, we've We

We our will a holiday end, as Halloween supplies -- high the entire talked as supply. everyday supplies. up we're sorry, but to I continue drive taking Reddy line, about that's also a as whether supply

no have this stuff And in believe XXXX, CBS. OTC, to a XXXX. there you see is at reason then at industry will great. on vibrant see us -- then will you Our holiday end year more the and what similar a XXXX into after a into us significant go way I And would our opportunity actually and can't QX in in that looks relaunch why OTC. see going you of Pet also

Fadem question Next comes Zach from with Fargo. Wells

channels? your vet you to vet vaccinations you OTC And talk today market the care rollout? about scripts whole, them? prescription could opportunity, versus or much that labor extent vet tight at differentiate industry channel filled how for Ron, and when talk or the you how by could what a of impacts the are you then And as about vet look

can Brian in leave anything I then that and start, I'll Yes, out. add

our to at In gotten week well And as put what part QX So as we Pet of XX% a standpoint. the let's shift focus Vetsource. about since growth Vetsource. which we We look significant can talked in week quarter, saw sell Rx take doing of headroom business, billion because the first our we're Rx in was the it on digital QX. progression, momentum food saw we is XXX% that's to on now, the the growth Centers the our in last market. one it, over build, we And better business, if started $XX then every business from the -- pieces business script we of off, vet, a really did we and over ever what Care our obviously, has time and

was winning So a that move.

billion. And $XX that so we're after going

or in hospitals, Vetco writing Center in vets now think about XXX the X,XXX fulfilled Pet -- we clinics, in it, either our Care have scripts assets. get that in in digital the You

across with our have have on ability an to not ecosystem So live vets that able may don't we're effect bets. people hire that ecosystem drive the other to that

call, our really averages. working. is on fill value is proposition below to time the industry said As we And our

We that offer -- practice that. the and hours, hiring we roll-ups vet what's companies valuable, what companies at the doing And Is look medicine. the business offer happening know we valuable very That autonomous you offer. you If working flexible offer to which do working not if and do, stock, is aren't them. in profile, We that ability most days. to

proposition, which we better is fill time to to So components is attractive averages. very why than value have our our industry

clinics. we too other talked about our The Vetco is haven't thing that much

capability. a I don't X,XXX tap sign vets, life Vetco the into future X,XXX anybody think number else vets, Vetco do clinics. hospital We industry one, can who for those We clinics. Those as their are filling on system that But has us. importantly, have for maybe vets shifts feeder shifts change. for our up circumstances in

on we're doing vets enables fill-in that us of clinics our And we're our pure how for tight can the vets. shifts. terms vet market, number it a well we growth executing that's of So our what drive to market, have That do but doing said, cadre we're proposition. sign value up is that hospital I recruiting, of and like a but this that in in I like tight

flow curious, I'm low it. is been Brian, incremental helpful. for relatively Got at profit extent flow-through, And your through? about double-digit this business? a the today it's this being double-digit when external to Or long environment term, about this what think low the I That's opportunities the inflation, constrained what are EBITDA level way I perhaps to look the growth year at by is initiatives? margin. of think your And right consistent But to as some improve

we've of you going EBITDA not quarter been guidance, we've read Zach. driven but the points made, XXXX, in will investing thanks question, to 'XX we've margin I'm the consistent future what growth. -- where over some into Well, get I expansion in forth pulled each and for adjusted specific that levers while

I'd word rather adjusted expanding EBITDA. against are So I we execution did. wouldn't in constrained use as balanced you our the say

year into than revenue, back while If you to the for continuing invest is our adjusted growing EBITDA guidance, at full look our faster business.

as those advertising. like investments lean standpoint. we'll the we that. marketing continue ROI, We and and continue highlight a ROI like acquisition to long investments to areas at also into from the on look We expanding to while And LTV as those customer

comes next Paribas question with BNP Our Exane. from Chris Bottiglieri

probably more for you pet to your CRM of you just for prepared data. It's the kind Can tough kind us comments. shelters, and track It's have like there, Ron, data have in what you adoption seeing? you, if the of elaborate So that the adoption you hard on analytics. you're hit too,

give maybe trends? sense can pet us the quarters how and pre-COVID comparing ownership you hoping the last several a over cadence like like for of to So that's

Yes.

Chris. question, the for thanks So

So pet you I look had at HP from the background, -- your in data, come a background data if near-perfect PepsiCo a where and you categories.

is So perfect a industry the pet data. not

sources. of industry time, from the triangulate in they Love the pets to resources. Petco terms triangulate We one from triangulate same we is person. We are ways So of -- At with online people rescues. person biggest source

we're give the rate you adoptions. seeing will is What caveats. those in category terms pet of at I So continuing an elevated

relinquishments. I heightened does same case increase. continues to heightened that this seeing to return not Spend not trying people Thank are per ahead relinquishments know more there's pet of relinquishment. We heightened of it but stories work. are God, get been in to when we're at point, we

Gen As and said, are trend. more. They we spend Z-ers the humanization millennials leading

that they're hands, more pets wearing, them puffer their folks' go those vest into are walking box are more the and wearing. next the So

is moderated a what triangulation that what slightly positive trend. saw we from in our is but Overall, showing. is elevated, So 'XX again, it's

of sounds guess, like I and same-day? so helpful. of sales sequentially, And the you as, it split the of, just would of then especially digital us store, and guess, growth. for how Got been you these I options? process DoorDash. like I your kind consumers economies Can give fulfillment you outpaced a sense the overall reopen XX% be Can understand us you. BOPUS trending said kind return your And that's that online BOPUS -- stores That's digital help helpful. better think like are to and

Yes.

same-day. competitors available, they can't break said or are choosing when them, right? do have at the So So they day, can't not BOPUS momentum customer you XX% do let BOPUS, capability that curbside, data when do same think is online can't down are where which me is shared. about we available, same-day X:XX highlights because they're o’clock, do they we What can't our there have, that do we

curbside competitive an that or XX% to inventory FedEx environment we advantage Care same-day in particularly BOPUS, and through because fulfilled are UPS provided where close costs have our we Pet our Centers, are again whether going the orders statistic, ship-from-store, in Here customer, of our that's delivery, up. e-commerce

So revenue delivery only the recurring are we business the of programs. those over as offers, of think I have the the repeat and out, did we also say, things. e-commerce XX%, Specific in up XX% we broke X is is to in past numbers the our shared

is few I thing as on leverage Chris, just would add the questions last a here.

options that, us. advantage It associated with leverage for being to the gives give labor is our on And our team the run real excellent packaging. -- has packaging faster the leadership fulfillment. fresh. what fulfillment with profitable our PCCs up it the customer-facing us It's fulfillment store shows amount fulfillment because We've in The It's model model. job more out to a PCC math the We've that it delivering for an the our process our on gives done advantage a of time. Further, addition at done PCC, task minimum In fresh across for us a we're more and leveraging in the to from an driving customers, advantage. us have customer. of delivering fresh. costs with much

why, fresh we're we're today, we -- the Xx Which online in size or is Xx leading frozen. estimate competitor roughly of

Liz with America. Our Bank next question Suzuki of comes from

and on fair beat be behavior X-year just XQ uncertainty conservatism the like amount raised the the in ahead? around mostly in looks through seems some baking sales of given in to It growth the Are implies a months a flowing just basis. you consumer heightened guidance deceleration

Yes, Liz.

XX%. guidance that from direct the say would the the feel high-XXs we about that. I think based math a in in first, and flow-through call, And There a guided. stack And a far year, for QX. comp; what we're to if percent out, you top on where the was of So add do as X-year guided Ron of not I incremental we QX, indicated full so we on good X-year just of was seeing

then nicely. And is like inventory up Great. store looks it per

any categories difficult it the where And procure as unit of much inventory that due opposed how enough to found to strong volumes? demand? there higher to inflation you meet are Just to is

and levels, with and start maybe Let the the inventory second can me then I Ron tack-team part.

stay I a QX, stock staying continue in but half, Liz, you which levels our a But with to front a demand. chain sourced that say the products front minority of supply some in is broader revenue also to I reflecting we like U.S. So I more relative I'd And function normalize will to a back of of would the that out of the positioning QX. that opportunities in are a us outside you in from out tell holiday, for of the tight, On question, to demand. market. There's inventory would up highlight our tends of is look to seasonality bit

They positioned. do a PCCs So PCCs, like micro advantage. We job well and that leveraging redirecting our our our in optimizes at a about. we as our result. products, tell great store, feel in we model brands And centers, are alternative distribution as substitutions like which talked strategic you we're just also of partners a customers as I'd to

They're settings, redirect whether is folks. has Care add we In don't supermarket a Center or they another that and a digested Care knowledgeable, can Let to Center sale they a me "I that food it ours, trust Pet track color just to their have be need lost. attribute. product properties." into right? that the You say, that, coming mass normal that and has them And product. have online, they or most customer our same In Pet

on we're showing is that earlier. share up sale, we about capture able So gains talked we consumable to believe which I our think that

products it's XX% drove and in in In specific market market, or I we think terms had is of fact a that be to nimble. the big But out that that stock, of been trends. volatile growth we've we're source

question Jefferies. next with comes Stephanie Our from Wissink

can if talk could the that be into coming great. out you This dynamics QX, little you wanted Then bit those and you Steph. with investments QX if and the is behind talk Corey about I made? about more on of some COVID would SG&A ask for puts takes to costs a

for I said. Corey, the I thanks I'll the of question. mean, some reiterate things I Yes. mean,

Our points was down year-on-year. leverage SG&A X

there that continue we we Although invest dollar ones areas our The X being model. growth, labor to are in. saw biggest

marketing. make we're So a that two Number against have we labor we've got that is that right. executing model long-term and to model sure advertising

lined rent fixed ROI But of the We lean have PCCs. of and those going to very in. we line associated are a component and have SG&A with have continue that we close I continue we're up. sight big X,XXX we're cost of to. our cost those there's to predictable, like The seeing, to we to that mentioned

as that's into you, you can So Corey. are tell get I leverage much we but and would advertising, for color investment about overall. areas But labor that as I the have

comp? Got it. terms goods? the the mix COVID is in of higher QX, and expect see a then in And And you would this difference year seasonality typically adoption of supplies to hard

across. I differences would X this say that there's year

indicated have you momentum So that a a supply expect of why we said, that that's call we QX. in into and on up continue lot in to That yes, momentum we typically, bump see consumables, quarter-on-quarter. the

XX%. X% look in at was if consumables, and you XX% supplies companion companion growth X-year growth supplies the this Now you rate, and quarter, growth had animal, in

very growth year. last So we had strong

in QX, So consumables stay a year-over-year the closer you've the still growth dynamic but lap rates to start come together. got would we expect strong to to supplies, and in pending to

are versus trajectories. X some biasing in dynamic by heightened their those is normal that pet in influenced thing normal from the The the year-over-years this is in add, sequentials year numbers 'XX, adoptions year I'd of 'XX, 'XX the Corey, of in X normal

Basham comes question Seth next Securities. with Wedbush Our from

what you grew on basis? additions Could mentioned, that a provide XXX in Ron, you My is net quarter. you the question on customers gross customer the

We that. provide not did

our at of net acquisitions. our of key of competitor, model, many customer well believe going as adds significantly at led And quarter, as almost with QX, adds, annuity the had of Xx strengths look the you adds. our this. in in market the And we If the the kind like more last continue we look flex reflects you than that if we terms We're the to to We it of QX marketing. strengths adds.

where we stuff difference spend pet, we we and not about the we're more. But pleased customers are, about spending we with a no was with per millennials the shift. If and upon Z provide based So there number. Gen gross POS talked of just no, that we're did QX, talked It going pleased was a back in to serve. we the some the in categorization we're

our no business. that So had impact really on

a follow-up that. just Got on it. And

to base quarter your next. those On look? X in a attrition this customer last, changing quarter for isn't net basis rate the from do So the really the adds, year-over-year relative how for to

The look net seeing in cohorts, terms similar basically buying We're is you historical in what And it's adds If the XXX. the gave retention, I cohorts. of at in retention is the line patterns. terms flat. we with roughly been of

all cohorts. is these in which prior new retention great pets, but buying is line, retention brand you you So think up different have because line they pick the might habits, with is in

question Our comes Benedict today with Baird. Peter last from

XX% base. customers, or How different, of do to million where penetration of all, out if And over your guys first next of maybe can that you some kind years? the newer I that think think among you multichannel the XX%, one, That's younger guess questions. active Two pencils your I penetration first take that X.X is question. at few my customers?

Yes.

and on. multichannel, increases, better I focused This drove of on third consecutive been double-digit at something we're getting this. So our better a We mean, increase. quarter double-digit and it's we've is

analytics, across people the across the the drive recall, offerings. building earlier portfolio talked on capability and we CRM One across and when what year about capability ago, even we Petco If call year a and on you Peter, building to we portfolio talked in

quarter; X the same at more been right? customers this strength last that. seeing we've are At rapid rate, with a prior We such quarter. and adding million more customers XXX,XXX customers time,

happens [XX%] what customer so a you perfect then is that example with your you And is And Vital a to get new -- enterprise. them XX% and cited, Care over in, move across supplies. I

is offering So that our to feeder we're seeing. in is multichannel a system dynamic what general,

just you're Dogs then if share And bit on maybe encouraging how very is ticket? Just success that for profile you having the or that next basket of Obviously, category? curious maybe size sense. can I'm on within my include Freshpet Can the a relative typical Food and your you the makes here. the around anything expand question traction the transactions That is Yes. consumables. or margin to maybe compares fresh

Yes.

seeing you higher from we're what is see So a fresh frequency. frozen hiring and you see

for is analysis actually, because on Dogs has frequency the part we building and in that we look the entire So at Just benefits is Just benefit, these of enterprise. when is look of runs enterprise-wide for We Food the lug look at to particular, just not which Food at pantries we're these why financial underneath the out what Dogs. effect

parent like includes my that channel for that significantly we and is I higher. a I guy, a frequency of Food higher frequency see pet Dogs being that It's what know Just the So lot.

higher hitting it's prior we've future kind which a in your a millennials of with to swelled last prospects. years and question them given on age bit acquired of generally the Just of being kind second, Z-ers, bunch a cohort, for Gen the multichannel by

this how at a Any compares sense. you fresh a us year couple maybe Or your to the years food run business ago? within or penetration of makes that ago a and it point? No, give what's of maybe chance frozen

that for we'll is XX% would that? that How you I about What I we we tell tee on would grew what -- Analyst business. is Day. up said

I'd to back like some our Ron closing to Coughlin for concludes over the call session. question-and-answer remarks. This turn

you. Thank

bottom pulling So we up, both line on flow-through. and back delivered exceptional the with results top strong

has incredibly and is challenging compelling navigating its labor chain nimble and unique our market. supply effective team and advantages working. been proven our strategy, in with executing model this We're Our

That, QX, confidence reinvest in on our again their year. us Thank raise focused combined and gave people. momentum for with our our business as levers our sustainable growth, Looking to guidance we're joined thank forward, the us who our while that, investors for we're optimizing today. seeing in we us well driving as the remainder margin want the of everyone very you With I to much. in the confidence early

any be Conference Call. you call That after questions. if concludes Petco's will Quarter the Earnings Investor XXXX Relations have follow-up Third available

you the now has presentation. Thank and attending Ladies today's conference for gentlemen, concluded.

now disconnect. may You