Petco Health and Wellness (WOOF) 8 Mar 222021 Q4 Earnings call transcript

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

welcome, Earnings Petco's Conference and Fiscal Quarter much, XXXX Year Call. very everybody, Fourth to and Thanks

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

Chief Ron Financial Officer On and moment, Officer; the In Brian Nuzzo, Chief me Operating Mr. President you recent Petco's with Brian of through a Mr. call year. performance financial are Mr. Mike Officer; the Coughlin, will walk and LaRose, and Services. and Ron from and today Chairman Executive Petco's Chief our quarter the Petco's operating

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

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

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

phase us evolving moats joining next of XXXX significant today. player for competitive the definitional appreciate performance and of omnichannel service health a plus Good We're our ecosystem. having progress Kristy. you one-of-a-kind of full strategic and while a offerings, retail X.X, to record encompassing year continuing robust impact. into was and our positive we Thanks, We end-to-end Retail that leverage strengthen morning. in call a advantages, wellness deepening Petco, all

brick-and-mortar experience and better better. Our gets

the Full all and innovate again quarter, with when, growth assets market more needs which are Our share with experience, results. pet and and year And team year. XXXX fourth competitive growth to hands-on advantages. reflecting our operating apart want. translated in digital meet combined strength leverage. the our of same sharp and is where growth that executed to In ability of personalize profitability adjusted Petco pet combined capabilities XX%, customers' the our was the how with powerful model, incredible EBITDA, execution services, we These continued all delivering parent revenue with XX% once rigor the they our can Petco and drove sets

we that have best category. strategy the working. believe is in differentiated fundamentally model Our We the

with on growth another delivering growth, a team two-year outperformance double-digit of quarter yet delivered comp quarter comp XX%, Our consecutive of seventh XX% of stack. our growth

there you double-digit of are have including quarters look the XX comp. top at retailers, delivered who consecutive If seven only Petco, three,

pet pleased and deliver tangible will delivered strong digital gained And difference. impact growth, the in with saw January, share make with It improvements that a XX and We outpacing share double-digit in supply parents remained quarters we retailers, there and business I working with repeat seven those who those of combining those and had XX% only Consumer me what quarter. later Let is on that. top have remained call. again, the And one in we growth, demand is of results Petco. tangible we purpose-driven February. gained pets, consecutive we once ago are lapped plus where share performance in a strong three Of year results stellar in the overall, share brick-and-mortar. Petco. lives in at lives Petco, To to in purpose the gained we're

Our team with partners labor working chain an executing is than in and supply nimbly executing, environment ever inflationary pressures. closer and supplier tightness, addressing of our

best their acquiring remained model we took versus we delivering an a on for advantage demand and parents, impacts and pets, of larger from see we them players. QX. available remains not decline percentage customers the of online-only did On focus impacted for guiding our in in where and pet given higher-end the largely Our our to our volumes options the unit quarter, aggregate, in both QX actions favorable for product realized SKUs. customer inelastic pricing In pricing,

of hospital, evident the growth to We've powered share of leverage our us long-term, store-in-store the efficiency, reinvest as to and continue off to growth And grounded growth million repeat expect Our for Combined advantage of in our above-category drive loyalty with above-market our million dollars operating discipline, we're able by a JustFoodForDogs us drive base. pantry, continued initiatives. competitive the capture uniqueness both a confidence and the $XX a step results consisting is enabling distinct drop years driven to a to In ready growth. and proven our of to $XX ecosystem, of our consistently even for that drive of is is our fuel grow, for that addition contributes cost leverage we come. and brick-and-mortar, about can greater annual relentless offering build in first execution growth and greater wallet that playbook, we we to to bottom cost line. That a veterinary guidance. growth to enables drive to greater against strategic

XXX,XXX net engine end the active to existing of new nearly million continues added customer pet customers, advantage total competitive count across XX.X households. new bringing quarter, Our a XXXX. fourth our both the at be we acquisition In to customer and

upward Spend to back these expect pet per significantly we where of furry another of millennials, sustainable impact Importantly, Petco like repeat of as to well driven strengthening initiatives, over-indexes, as our for growth a continued said and source or, trends and by humanization on Care. customers the march come. the Zers years Gen way, its a annuity be Vital delivery

stack, drive XX% to services continue and or year strong growth on rate with the consistent year. a growth across a XX% with We revenue in quarter trend ago, a throughout versus the the growth two-year vet

time, best industry. operating costs. will Total within playbook, hospitals synergies build our to more week with demonstrating health us elaborate, in This milestone built joint venture. this wellness in hospital know, you pet and us recruit one and support the hospital this team, Petco last into Care, stake hospital integrated hospital the a and teams but As transformational high-quality, Thrive care one announced our is even providing veterinary entire give hospital journey, to the And and will joint exciting, the important opportunity veterinary in operate remaining commitment we purchase services. transaction our deep parents subsequent XXXX. transaction full-service our This be With our centers capabilities optimize since will Brian culture. that Vetco one pet rebranding, the both to and network in tremendous venture we business launched an for driving

results, our excited this continued own hospitals Total veterinary key to and be incredible as to Vetco element forward, focus to expansion we are very for services shareholder be deliver Our for generating primary continues tremendous a Care going value.

continuing Vetco over history, mobile X,XXX of ability full-service vet one XXXX, reached veterinary addition As hospitals clinics, openings in XXX of goal our testament to in we hospital the a year-end fastest year, of team's execute. to build-out the the XX to in achieving

now been key success. attract professional focus At had scale veterinary to and it, badge vets the at groomers veterinary professionals. from with and working we've over Petco Make have mistake the X,XXX has more market, joint and boomers. we Our a X,XXX, are our driver ability talent love acquisition, no to venture And now in Petco. about never vets retain of we

ahead of vet industry benchmarks. satisfaction value to Our a XX% with with proposition rate, resonate continues well

in XX% from vets. work a had at to we fact, recommendations In increase our Petco

some was Moving industry, highest of revenue once our X-year of as where, excluding digital Aquaria, precision revamped XXX%, In of we We've digital to richest it our was gained than basis. the health by, a the been XXX-degree increase up repeat well our Live the business. were year-over-year. another last drive bookings, life leading first share. In scaling services X digital, category the destination delivery control to customers years XX% an one market of QX, nearly give brings leverage really on quarter the in we've again, and the we delivering more sale X developed in to a in to last data full driven gains which digital as has program to year-over-year as we This that we years, as doubled digital growth for the as and share marketing. the over doubled pet time, outpaced XX% offering, parents of the

our higher driving due price driving and we're to Second, larger AOVs, largely algorithms, sizes strategic of increases. personalization basket

fourth BOPUS Third, we is we're extended which our improving experience cost and available. customers when choose driving advantage, innovation, XX% And same day continuous further it and either times on the has more of our enhancing our flexible almost or fulfillment options. XX. million we'll X.X Day on from app-generated with the share users Fourth, quarter last active year. revenue app doubling March downloaded Analyst about been launch, since

an customers, ramping app of enabling PAW And Our program, almost driving app of business. the customers Petco digital most nicely, AdWorks. for acronym finally, revenue double our spend It's have customers from non-app growth expansion with for and users. being become margin some that our valuable

ecosystem better better our is parents than even than and before. levels recent most historical performing because needs the ever cohorts digital integrated we're Our engagement, pet are serving of driving

gobbling and now both our with up in as Rx grew growth year-over-year, to food pharmacy. strong Moving We're XX% business share prescriptions.

absolute an significant across towards $XX deepening billion consumables drove we supplies as companion category. had a as pet while see both brand, margin upside mix have X-year XX% revenue year-over-year and and right merchandise, competitive Within well this XX% our we Within center strong consumables driving on of succeed in expansion. own and and supplies, stack. care our We animal, We moats. further shifted growth to both

And about surge, of these higher proud health LTVs the and to business, for acquired team great Our supplies. the is long-term margin mix-driven consumables pressures. which I'm more how have XX% the continued consumables offset than of customers a as

our in leadership as we've A investments we've win location, strategic of growth we significant the successes we result, our And delivery made towards retailer, premium, XXXX, continue and double-digit the selective. added ship-from-store remained are added getting were have to where customers. And down both competitive digits year, LTV double X last versus we X,XXX insulation. which and to and with strategic key started. XXX portfolio, a PCCs, term. and the that new passing about Friday dynamics We're our and with XXXX supply And expanding be the drove Monday, customers, enabler inflation #X up long generated year-over-year. expanding years, same-day is pet the activity margin locations, versus partnerships we're both curbside improving In millions the Cyber We leading rational, strong advantages. mix past X,XXX just us to specialty low fresh Promotional pickup through the which shifting of these differentiation our for given is rapidly market Black continued the locations. net innovation category, positions and exception we've where of frozen and our disrupting

codevelop to In we total of expanded Petco. expanded expertise between addition relationship one further to we designed announced drive stop our add brand, for And partnership with they, and trusted We'll with addition X industry excited with partnership Last I very and our pets committing I'm Care customers in leaders a select and that create into frozen home transaction new previously, services. ecosystem convenient product is support WholeHearted, points. partnership JustFoodForDogs, solution XXX in with to boarding Lowe's. discussed at Vital brings their sign-up build attract both store-in-store January, Lowe's, products, the week, And human-grade and program pilot elevate which more will walking owned Rover locations. complete and fresh for pet home and Thrive in turn, line the to awareness. under services at a receive that new additional new distribution care Lowe's a This center brand marketing our we'll our about,

Petco, you program most one JustFoodForDogs comprehensive an the them Care care equity, Care services more for of X.X, Care Diego be of the Companion day Padres; will with optimal Protect; Center, of and including Rover.com; in health, Baltimore pipeline who Vital LTV. program the for San every whole a to Additionally, and will rich of it Care. affordable for rescues, omni-channel Jacksonville a and Vital for spring Petco Friends Garden execution the XXXX sign-up, driving better Care warrant successful the Animal recurring partner receive Center category. From Pet; several and additional for and beginning and loyalty X.X to this supplies opportunity pet delivery at drive pets Rescue list acquire of better including integration the version enhanced for plan, new keep road. including today, the Hill's; the affiliate Vital the multiple we that more equity & tied the wellness a pets' place, repeat Vital Earlier makes announced Humane easier Center; Animal our the Vital exciting redemption, customer features Central need health, launch Care Pima in partners who nutrition that will spend, your to and all launch pets to down with enhancements, an

This These increase We in pet to tangible days, XXX,XXX early while from a since good parents, where customers for for pets rolling centers Care three there program quarter strong. spending good with been program reaction has also enhanced cat builds have has been That's subscriptions the care in Petco. the a sign-ups, XXXX. the Vital weeks and And X.X at XX% Over exiting purpose-driven driving exciting cat part of nearly the focused the times been initial very on out are far, and is have more ago, coming expanded for over customer. and our the center to to announcement Petco. pet share today's Care Care's XX% average proposition, of Vital members validating these new are both services, the is parents Petco. on value for and of of customer food than effectiveness three I go-forward Vital new in performance. Thus wallet performance parent.

and vaccine we're over support devastated our in pet or Now we station mistake shelter. neighboring let animal offering shelter X,XXX over subway lying every in Love, know for Merck refuge. leveraging including pets a no as improving the commitment. a X.X tow reunited after free that Ukraine. what year the this we with pets, the committed we a serving with it, international pets with of Together with pet searchable bag as morning unfold people partnership in and partners countries Love million photo have QX own pets, Make of our bomb country nonprofit with saved communities Petco vaccines in and our parents alone, under-resourced XXX,XXX ongoing to in love get needs our lives welfare to loving up Petco million that me about discuss purpose. in have to and coordinating We And whether the Ukraine database in pet over sleeping of with single their another part family, partners. pets parents pet the distributed including parents our X seen of our XXX,XXX customers, Petco we're And X,XXX nearly Lost leaving Ukrainians locations. And are photo, is by all in seeing their lives

Our and all those the thoughts violence. Ukraine impacted pets people are with of and by the

and standpoint. committed managers and application of company staff And conducted half have care all hiring public these does why better. offering; their one us due of skills center our half, a competency employees; X.X at the of a our why was and do of bonus hours over the lives PCC received why every benefits pet above We the why to and improve is and from stock into above cost of for other XXXX, another absorbed time our those execution. and general The investments people, receive partners yet will million QX, entering in labor first that significantly I work increases of in XXXX our training; Board second positioning well on Petco. the our better, result company the in as also average target at who invest as well This in XXXX we to exceptional

Our day. the for serving the parents across outstanding strategy are environment. women out the the and that the I'm priorities. amazing the throughout our to truly and the International navigated team we country an growth, that of entire in and around with improve love each I in health even to business, that's drive world team been has Petco leading us about see want seeing team who Petco Women's we're end IPO relentlessly The the amazing to never with tremendous focus delivering Petco, is safety. customers today as every across our against stronger has the capture driving rapidly The It's our our them opportunities. XXXX. how year, and an supporting now talked strategic in year. year company category they of on job up members advance this of After partners scale single did promise Day, a at call quarter of a past with growing regardless we our grateful our executing spike customers continued delivered TAM in to pet for momentum fruition. teams come Omicron the showing the And and and XXXX participate the incredible reengineered our We already being

customers one let our that, are entered Brian me LaRose. members, ecosystem are with year in sustainable, advantaged industry's We working, our space. turn and And the and it most by powered all the with more passionate growth have CFO, team to With the great over omni-channel predictable an us. of our team our We wellness best more in who than and investments spending only comprehensive offering. health ever

morning, good everyone. and Ron, Thanks,

fourth one quarter that leaning was scale. the the the year remaining built our purchase owned pet record highlighted, outperformance Ron example how of yet to of executed. the joint revenue products ecosystem services. stake competitive Petco was team venture in and way It demonstrating moats differentiated I industry our positioned hands-on and couldn't no our Thrive latest else has And is a decision our we've quarter in with more into integrated a with do is As We're that. the services of pleased of be profitability, through to another premium in and

As is ownership we control full and operational close to part take expected the XX of of in locations. venture May, will which transaction, joint hospital

linkages learned we with our were next-level Although, a platforms. overhead elevated Thrive and that driven strong, with experience, hospital Also, venture with data the increasingly enhanced create our own acquisition joint our by us give will connections our with optimize. as we to scaled that hospitals duplicated we support membership model, this technology, own chance synergies the

overhead the year $XX and So year benefit expect this factoring operating savings million adjusted enhanced breakeven roughly EBITDA and and the expected in and costs and be adjusted one of to synergies associated to with two EBITDA the that will excluding in hospital one-time accretive from transaction we in roughly deal integration, beyond.

average venture vets Momentum opened Importantly, performance model. XX will the us business part more veterinary to the sales progressing openings an two-year we record of our to and with ecosystem, are half to of of consistent year, transactions early $X.XX opening this outperform the into first in XX% XX Diving stimulus-driven entire will to and enabling a and the XX% to billion, proposition or our prior our yet late comparable and stack planned XX%, per in from on our and the this XX% be a in programs. value basket strength With XX% opening. venture and integrating the across operations XX plan QX to up year. results, run of integrated including two-year early continued XX% year lapping stack shift other our XX% on year-over-year. is a continued, hospital And return near-term focusing across quarter new our QX, expansion up Momentum annualized to quarter, companion with this and maximize membership QX at we grow year-over-year that be to on the year. our as use the animal resonating, another basis on, HR joint two-year hospitals growth own elevated hospitals. consumables joint XX grew year-over-year XXX. XX% is in was and In one serve our for net nicely, subscription integration benefiting we in with a delivered a our vet We quarterly on new rate platform modest Supplies revenue and way trends. business, comparable. Services of on to two-year in teams XX and the and will XXXX

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

exception, to is environment competitors the Inflation be extremely executing as we our team structural continue Where While retail our continue with store pet our real contributed and offset across sales to through challenging terms through advantages no versus input passing increases that price partners certainly we've increases. is marketing merchant we quarter. is last our leverage worked discussed and investments. to we and well, in comparable effective possible, to

help cost on aggregate, in the offset material select we've mentioned, increases. As a product actions impact we've And Ron input to units. pricing taken seen not

$XX was mix Gross to a XX down Moving XX% chain down from degree, the or and year-over-year increased by XX%, consumables, year-over-year. services profit a strength growth to supply driven Gross basis higher was million. and primarily P&L. points costs. margin decline digital in $XXX million lesser The

SG&A points, leverage XX.X% was responsible improved up as in across management businesses services. benefiting QX margin in from Importantly, QX cost improving percent most these our customers. QX across XXX across demonstrating basis, of while and for XXXX, our by late gross SG&A gross revenue of pricing delivering actions driven taken the basis by and XXXX improvement XX.X% offset QX impacts to XX basis points business, or like continue prior supported future increase was was we basis, model. On absolute and QX adjusted marketing sustained from an our EBITDA in as $XXX $XXX million, our up $XX our infrastructure invest through XX% based year, million prior XX% to growth. to average expense or million revenue XXX diluted from growth growth people. and $X.XX tax improved as effective million, a XX% from expansion on well in margin in outpacing QX rate a as an and normalized weighted our adjusted digital were in gross $X.XX of fully consumables, XX%. year, quarter-over-quarter EPS shares On margin core of by a materially

infrastructure points, well demonstrating year to and increased the or our revenue sales marketing as to XX%, XXXX trends SG&A versus full our continued from or an for turning billion, $X.X supported million and leverage business sustain to improved Gross full shares invest in profit revenue through XX% billion. rate $XXX million from average growth up was On total $X.XX year XXX for increase XXX% XXXX of diluted to growth by EBITDA prior adjusted Gross Now XXXX, on year. referenced model. from with XXXX or year driven XXXX, as $XXX net in XXXX percent XXX based last as across our XXXX of fully the improving earlier. adjusted as major people. last XX.X%, $X.XX $X.X grew by $XXX by with I down million we to XX.X% XXX the in XX% absolute a all of XX%. expense million, basis transactions from million SG&A positive outpacing XX% future year, improved year XX% $X.X weighted revenue points of across and prior EPS billion basket same or from year. was normalized and up parts comp our basis, strength to XXXX and tax margin a basis dynamics effective an again, was $XXX that XX.X% growth. the

to Centers of Centers XXXX down in prior Puerto our and strategic Turning We United footprint timing XX the ended base. closures year, by driven Pet with the Care Pet Rico, Care our States from optimization. and X,XXX

Our ended with Mexico venture Centers, XXX year. from prior Pet joint the the XX up Care quarter

Care and to we approximately started XXXX, in US we with Puerto Pet to Rico continue Mexico, footprint flat X,XXX expansion leader. the market where be we in in forward remain Looking expect our to XXXX across at roughly where the Centers further

continues later offline trajectory, business position extending number online Mexico this double-digit and plan expand Chile year. its to its Our one and into

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

Looking prior same at up cash robust X% million while to increased million sustainable In flow. had and million, as $XXX flow the we year-over-year generated by We of in from reinvest generated free expenses. continue $XXX future of we strong operations growth. cash period, $XXX year, cash we capital CapEx XX% versus in

for I insight allocation our Analyst upcoming our provide we X.Xx Day. reduction ratio of are in know net leverage into you year-over-year, a months. Our XX% will at long-term capital debt with at looking by XXXX reduced XX significant plan, in our over which many last the

we net to strong or from XXXX. EBITDA outstanding effective full billion, adjusted Looking $X.XX X% continued million confident of to a with between XXXX; we $XXX to and of revenue adjusted between X% tax million interest $XXX to in in our $XX deliver an of are million of based a increase from XX%. forward, and growth and XXX increase $X and EPS building drive on expense, million, rate on performance X% XXXX; X% execution, expect shares in $X.XX billion $X.XX XXXX, net share year a and XXXX market gain track In our to record or ability

gross to seasonality. we to don't that provide QX QX typically helpful While it's specific gross guidance, note than due margin has margin lower

XXXX, the supply expect response and first enhanced to million sales. investments in of driven Last, supply of of the digital, quarter in innovation we growth. from chain inclusive the higher $XXX out sales capacity Additionally, build hospitals, range, margin expenditures $XXX vet million gross benefited in to our stimulus at incremental capital

We more XXXX two this on in will our share weeks at Investor Day.

to Our our apart current continue deliver against like revenue health brands cost that, our proven and that in earlier, continues exclusive take strategy discipline around Ron the and wellness and significant owned now set priorities strength of questions. inflationary well I the we your trends year ability to our unique expectations against programs. ecosystem relentless and confidence With guidance costs, And digital reflects as Ron, as strategic initial ahead. as vet, Petco XXXX and the our savings finally, mentioned and our confidence our execution Mike to will looking us cost in our give

Thank you.

with We And be session. question-and-answer Zaccone will [Operator Instructions] now question first will Citi. Steven the from begin Please the ahead. go

to taking the Nice my Great. the business. Thanks strength question. Good morning continuing in see for everyone.

I had within just line full was question pricing top year expectations First on guidance. the

to some able the pass industry, gave mass more promotional the you've year? especially channel You commentary more gets But curious, your price. on pet within little about maybe of do think a rest was if how you bit the positioning I broadly, this been

Thanks, question. Steve. Appreciate the

Let go I'll me then forward. land, just into give a lay of looking the

of before relatively is sit, frequency. The customer Premiumization growth that the we've we covered the great continuation In multiyear about outsized ring, or we're XX% by exclusive best where thing And this fresh and even see end higher is we trends. where about inelastic. where higher the has of of product and trip better that. other talked is pricing see we in owned, One way, its by have trend. our either been example frozen, things is environment. seeing a the macroeconomic relatively frequency it's today, immune is to pet we a And higher

we pretty to other could in came, exposure the And through. than for as is to most said if make we more Brian have call, that, we there haven't our But unit seen passed sure businesses. offers that we feel customers. on was pricing decline pricing a want confident that all volumes. be said, That So less

the fresh So at the top. we frozen have

high-end kibble. We have

kibble. have mid-range have We also Care a provides customers. And that for comprehensive we Vital program to value

have majority mass exposed the So is the we that rational. our we're to we the dynamics, supply see of less brands rational, really doesn't the And And with. demand we business continuing probably anticipate competitor. do channel given and of than market the really other many any but be

line. follow-up top Great. on helpful. That's And a then very the just

as think cadence the just in the of Thanks as the think revenue margin or gave You same-store about year? general as year. growth through we Is mind much. we about anything about gross think there some very we sales to comments keep cadence

one QX QX growth Remember called XXX XX% year, on to in say, in where benefit comments year, companion last The we that supplies point grew was basis I'd last which to made Steve, Yes. similar in animal, is point we by a And outsized I XX%. grew we stimulus. marked QX out the seasonality. from basis thing to XXX

about reminder quarterly other wouldn't on last I than the out a just that, but So stimulus. comments call year any dynamics,

guys. Thanks, Perfect.

Thank you.

The go next Lasser Please will ahead. Michael be with from question UBS.

XQ? in X% a given embedded morning. question. Good Thanks into lot inflation the for the And in increase to outlook your sales my much like contribute growth much how to rise inflation have you How for same-store taking XX% did grain, X% inputs XXXX?

impact single-digit QX. with was into increases as cost pricing a And bit about to associated Thanks little any the on I that What won't call quarter. input increases pickup just Yes. input our actions. saw. the Michael. forward, that in cost earnings inflation which for I comp, elasticity as we as and we that line was a mentioned tell get would We is tell I current we low see we total going in then year, the expectations no But the question, did will you in our for on well. factored call, you on QX bigger our in mentioned impact, the of specifics

of account in recent see weeks into to to the and take how coming prices that you're some going the that the did to months? going that's And in Brian, move costs? translate And commodity

Yes, correct.

current understanding the remains look, market, fluid. -- Our Michael,

with good our relationships really vendors. have We

job team managing through great our the a of last year. think did I

and focused remain in expect we staying out terms our of on front guidance demand, to continue We of pricing. reflects inputs and cost what in

price it increases. Okay. was of along is, question the And promotions passing part like gross being the follow-up with improvement in as driven some quarter-to-quarter in the by well strategic margin of more my part sounds as

stabilizing overall first there the shift where you're lower of still of of a have gross even businesses outside that difficult to sight with the expecting operating gross some better-than-average the quarter, to margin? a line compare, the a margin is margin So

did let We we're on I Yes. expanding me a it question, it reminder, mean, start as good It's in XXXX. focused We a XXXX. with, margins. did EBITDA Michael. in

that Our guidance reflects in XXXX.

me You in mix bit make us but in little of fundamentals dynamics, a ground the a good let of terms here. point

services that's great consumable Our we managing fulfillment, Relative with than in all More really point our channel it's at we has business team than year margin we I else, quarter-on-quarter, share cylinders, ago. and do we digital a And gross have anything geography. gains Xx of your We better QX, you, leverage. neutral. and brick-and-mortar which all our our then done with on business with cost across and P&L businesses. firing vendors. improvement dynamics on is margin really expected saw the a basically did would job EBITDA some given impacts margin partnerships kind those saw what management But tell across to

guidance. was services get QX, QX two year. play, year-over-year dynamics better. the was benefit the was last then call won't gross into in and mentioned And on I specific consumables better. But stimulus and any So better. Core normal margin more from Digital as seasonality I earlier,

Thank Okay. much. you very

you. Thank

next come will Andreeva ahead. Please go with The question Needham. Anna from

you any continue be of morning, Great. net And customer would color of performance we had from -- channels? on a any great. how and a color think maybe channel you then Really on customers quarter. question And on any Good the coming these XXXX think look the additional in And for follow-up. the strong year? are adds, terms where cohort additional that do congrats. guys about to with for We just result. Can really you share us nice Thanks. number had

our -- In at the millions our had a customer approximately a three question, that, quarter. million us quarter, or Yes. multiple last the the at delivered online we're that We're strategic something new with about that's built growth in for the we of very XXXX, end so concept. of and And future. more proud this to do our with the today of. We're getting better wallet. continue better per And about They're we're share the talked getting drive our helping furry and we've before I've adds competitors, robust new spend better quarters, annuity key Thanks speak rather. customer. analytics capability to driving that Anna. and adds and we meetings, better of at the analyst we'll to as at XXX,XXX capability net adds pleased of for talk at had XX.X taking driving in

customer days ability with I of add spend we're pleased QX, that muscle So it's compounding we're we're customer. what this we've far. thus built with seeing per to drive early but would now add our

of terms both question, your XXXX channel vis-à-vis tell you I even customers XXXX; was In will we're across adding brick-and-mortar channels. that stronger.

-- return So existing going up to but it our return to a happen. brick-and-mortar, We in we picked our brick-and-mortar of the not to brick-and-mortar. the of a of didn't a new didn't weren't fear saw only return customers lot customers, just people

picked We also a up of customers. lot new

get want can only a you our get if one delivery in get to places competitors. that you where of If delivery, to we're want can't because the both same-day you a same-day you get online

across both strength So channels. saw we

just rollout a the pet an partnership, you curious incremental distribution brands. Ron. as mix I owned of on road? great. get opportunities new I a in third-party how us of early see And appreciate could Really down I'm care or that. typical center to do very so give on for but the Thank compared merchandise helpful, additional terms you to update the that is will how much. Lowe's differ Okay. the days, And proceeding? location, whether it's partnerships just That's you still know follow-up

symbolic. we're Yeah, excited me about. something is great both ladder and it's an It's up. would first I question. Lowe's really to initiative

we're who that looking high a an in and base Zer customers, that incremental our innovation give have that DIY partners has Lowe's higher-end have access provide space. to a base. density of they new us have customer experience, example We being and millennial great Lowe's, brand, pet dedicated great are a are partners a focused We're me, and services is of fantastic ours. are, culture, for leader customer supplemental we and been, our to And to appealing to to a Gen great parents, who lot of that.

and grew in that's to and And I going came only on One and of WholeHearted. like ability we to brands distribution letting just to I I PepsiCo more, this more walls early you'll four and kids I the of broader building that it the that robust, And at academies. been the customers But days products and our -- us it And partnership. it promising the build up at amazed other have great this It's ability for see this about of take on was and brand one things this incremental take when and building house love all partnership, us build I into is are more that terms in ready capability products. made outside leave would revenue. products incremental results is stage. like see brand our say initial house the I

you best Thank luck. of great. so and that’s And much

you. Thank

And John ahead. Please from Guggenheim is Partners. the with next Heinbockel question go

Okay.

So Vital Ron, I start X.X. Care to want with

that in say, above years? time, to shake the let's monthly then fee a out period be, what Vital can let's and formulating that, say, As you you about tiers five of think the think in additional do $XX? marketing And put next as current do think three Care how big you the reasonable will you

million by if, and get we're probably team, my I'll punched isn't but The Yeah. to when. legal get question going customers. it's one IR to

Mike It most of that grounded the about fact But so by half the made owned, years comprehensive on are that pet of the manifestation. bet. many, manifestation way, owned one-stop an pets. in the XX% are Thrive, want that the on the I to their different do. care and And bet And the go JV, we Care to bet. elaborate see going made of to our bet a big me, of shows is the way, it -- we're the that a upon. facing bet ecosystem. up is got what care just going bet parents that which can ways. that that their with was acquisition that is of shop pet. And bet. the To of manifestation which take comprehensive we And those lot made And customer a by many stronger in ecosystem. But the the as partner spending highest pet other parents Vital Thrive we customers, And a was big ago, the Four we delivering

when, one question So to not if. is we million. get The will

terms Care X.X, cat. are the Care immediately The pet feed are launched surprised once really additional like what love Vital We Vital Actually, expansion We saw Colgate-Palmolive, our X.X initial cat. like love us sign-ups an accelerate capabilities. And that percent like at the better. care care to help In pleasantly centers. partners the And we're Care tentacles Rover, and of this Vital we we then of shelters, in vital multiple Hill's, going they're partners sign-ups, more feeding too. and the program, acceleration I affiliate it.

they're In spending is terms three LTV guidance. XX% average new This an for of is an services, into customer. our us. it's times food, This financial XX% baked to LTV play impact, and new to play. our

our for great is this So business.

$XX.XX. off We to have move plans no the

making great Our that customers focus experience. we're is sure providing monetizing those a and

part Yes, the Care of Ron, all the benefit Vital offering. important time We too. the vet how add, is I would hear as just

of one so transaction, to Vital unify of elements the our programs was Care. under the Thrive And

Thrive our clients more able access Care Vital to way. So, in be will hospital a seamless

And another transaction. so the that's of really part exciting

point. Great

bringing Vital different a one in membership of had into Care synergies Thrive that, on program. build that the is This to program. revenue this, Just is our

at that. just you customers, right, maybe Vital then your look overlap, the do And -- with when wallet I most share on sits follow today? that that to you demographics, Care The up your demographic. And with attractive of where think imagine best

share this Care, those wallet natural with customers? an one a builder, Vital should be easy So

highest-value the category. entire in pretty the much Care are Vital customers customers

category that. the on I'm So category in or that's customers driving highest-value category. so of -- probably They're customers why highest-value one the focused the in the

highest-value the driver now we intent the in at of in early Care. a wallet Vital Our share absolutely was and have we gave over the about at XXX,XXX the of this the talk the the us. from And of reminder we at And a know and that share at well some point, just That we'll customers now Analyst quarter is IPO, this wallet is documentation it growing. for Day, category.

So some of share capturing And ways, it all it's is us. upside to a their in think upside about more way is TAM for for us. wallet, TAM of all

our much very is that focus. So

great it's a So question.

you. Thank

you. Thank

is from The McShane Sachs. Please ahead. Goldman question Kate from next go

question. folks Good for morning taking our Hi.

growth take You trading mentioned response in the from needed down was impact increases a had we from But your have that wondering, some or we more were result? label to private neutral. just elasticity of any price own you the seen brands as if and

answer for two the it thanks in would I question. different Kate, Hey parts.

First, is I've talked multiyear march. about premiumization a that a march towards

that seen not abate. have We

to Taste drive takes continue the whether whether our that within and ORIJEN form like high-end the we of Wild. frozen, So form premiumization portfolio, of fresh that the takes of kibble

brand driving that. And fashion definitional kind side, continuing are of towards supply supplies. the the -- pet fashion on we highest-end So Reddy, in see to

which So continues. of is is strong. that WholeHearted, from Separate the that growth

penetration price would brands WholeHearted. WholeHearted WholeHearted from a would consider down consider not WholeHearted. shifting into are or trade. in commodity a active We into lower I I similar driving

strategy, an a explicit and taken working. as we've in of brands So to strategy those is shift commodity lower-value lot that into WholeHearted customers actions

Thank our digital helpful. then, second on is question That's And you. the fulfillment.

with You've same-day but limitation BOPUS fulfillment. been and there's the had a fulfillment, the lot of success inventory the some availability, with I same-day know especially on

and terms of can you're for over changed day, the how expect what wondered the for availability XXXX. offering what just I has So that inventory year we same customer in

Yes.

day. as a reiterating are it very, And online our it's of XX% strong. center. our by digital some in it of NPD the start XXX%. competitive care what versus very quarter. fulfilled and XX% seeing all pet very I'm our versus every shows of look performance was your It's a model. of about over me the And I single speaks fulfillment advantage from number that good growth To question, data, in at competitors, digital one the digital if the let rate, retail. think orders kind of to I best So a talk up the We digital through

has customer that for they of an time, comes opportunity factoid do you. choose And the online on XX% cannot website our BOPUS XX% time app and day, same or or our that's Here's the a when to the it. to something of do. amazing competitor

of million In that had elevated today. kind not inventory. in inventory, XXXX one for XX XXXX, vendors There our in plan we've in elevated terms pets of challenges new of is all and

getting of So bad and good out, better. situation news. they're capital adding labor is, all kind stretching news the they're The is

centers. trucks full our and improvements, pet going more and the see are out care we So to more

things for pet advantage you're tract In trusted centers like we we of one don't is, to of to exact buying, think another center them you're care ours the into that of get and that might coming sale. they cat terms of the any an into our care a gaps, your product is if urinary channels, pet used where can lose other and that folks product so we that shift in are product; one have our you

if vast So than the majority. And look and I it's it getting numbers, better. hasn't but been at XX% XXX% perfect, you say, we're better growth growth, would the doing

in Yes. terms I would to just we staying demand, not front of do which abating. remain out add, in opportunistic Kate, of that see we're going

you. Thank

Thank you.

question from Evercore come And ahead. Wintermantel the go next with Please ISI. Oliver will

had -- question I to the integration. morning. a Thrive Good follow-up Yes. question JV

X% first to to X% that -- trajectory the overall, Is how is in add accelerate also, I then breakeven that your Thanks. is and rollout? And think, or vet? said revenues, Yes. that or year. included Brian, -- in the Would the that you it's overall, in that neutral change EBITDA will it will guidance?

Yes.

to then over financials, me it terms in talk turn Let Mike strategically. I'll and of

of revenue results already no we direct terms financials. our revenue, in there benefit in consolidate those So of is the sense into

that the the out eliminations are adjusted gets -- and add-backs. share revenues of EBITDA in, and through our the adjusted the already JV gets So Thrive

all the X%. in. terms we store touched the that the which into Mike What you will Care in we enhanced; heard transaction some think that's earlier be which actually to the from So X% this on of already synergies get expect think uplift, to we be baked expansion, was revenue center is of enhanced, the will Vital

pure already to strategically Mike, results. fits. that's about in I'll more can of turn talk it our who revenue, where terms vet And over In it the

out them, Oliver, the and working for team. the business, our the first We referenced, and happy the call they've love where, performance I'm of as on built business of in hospitals this vet it's teams. scale, and transaction. center acceleration, and I'd with the bond with number we Yes, is Thrive for thanks a excited about Talk the question. created with you care about a with potential really pet great your really this that about your fronts vets. the we've with that been all bonds links together

now -- over vet we clinics. vets engage our X,XXX we with around So X,XXX mobile have

importance significantly They're model to not professionals We will then, excited the our our XXX board add XXX referenced ability help branded now improve us what vet player. teams. major best-in-class our vet staff. bring will learnings. go And field network to have to of in about owned for model. as over market I understate They to Ron ability this space, our And to vet script, hospital we're us and really excited on to in going really national one And that. I'm the the capabilities,

playbook, one culture, referenced face it customer. one he So perfectly, the one to

links This to really operational going are of I They to reach ecosystem, whole script. of think, higher our the membership this our think of programs. We connection transaction. referenced And part elevation today. able that's really another owned referenced be operations, hospitals technology, synergies a advantages. I with the strategic experience we customer in is course, with it And the our in our the our see our important. through really, then, we data,

bring Thrive that to really to we're hospitals. so And excited benefit the

Got very luck. good it. and much Thanks

Thank you.

go is Please Wells Fargo. next Zach The with ahead. question from Fadem

Hi. your as through Good question category think XXXX, gains? category funky growth and comparisons, your first you Ron, with versus I'm share as as price. both pretty X% terms you drivers industry are assumptions in on broader if X% some broader pet talk well as in company-specific growth whole, And growth, to to when the a on morning. volume we're dealing curious, you what attributing about of then, could

for the Zach. Thanks question, Yeah.

Yeah.

category. me growing we and be resilient. an operate large, amazing It's Let clear,

look and If the they're lot them. to of with People there And standpoint, you are on the the at downturns, economic a category time are more more lot continues from any capitalize pets pets. fact And humanization their And adopted that upturns, were good. adopted consumer pets. new spending a spending more a perform. time spend really by only to on and premiumization on pressure we're pet, majority that puts upward well And the positioned talked trends is of per I've the millennials Gen Zers which about. these

In terms see we continued XXXX, growth. of

As said, we spend numbers. I customer up And our see growth. seeing continued per we're in show that

of share lot a have we digital, share. faces gained in In brick-and-mortar. share share. the So And we gained We ability and we share. gain our and Overall, we another report category last got to week. gained

we're that in. So we have a share strong category gaining

the for Got up-tick remain a the detail? of flat and mentioned, you you year-over-year. will Mike, can the CapEx store Brian And it. talk As bit pretty in drivers little about then more base

you're the for typically recent store over could number what planning past relocations you about remodels you're remodels the from up-tick year? Thanks. talk of of XXXX. perhaps of or your And seeing some So then, type

Yeah. Good question.

range attractive CapEx the Analyst you remodels, stores. million within year-over-year. them. no one, build-out it I'll just of and of $XX have into in but to tell fresh So, you, our spend detail as that, Zach, to touched runs Day, of going extension is investment. Suffice say this and vet go the we on frozen pantries the more this. The say the for areas saw about is our a at I We our shortage we're on today, will midpoint the increase

invest innovation, to chain, We supply have investing get also areas cost in area like and automation where pick. reducing efficiencies. an where we're in investments you per That's in

So of operating of investments. if terms forward, a what leverage think do our in lot CapEx about we you going

CapEx have And of investments. about invest on overtime. P&L a lot relentless those in our return -- we efficiencies ROI, we get we're in, the We areas those

want into I at my So, Analyst to this so Day, steal we'll don't double-click more own thunder.

the it. Got time. Appreciate

Zach. Thank you very much,

ahead the from with And Basham Seth question next go Please is Wedbush.

a What of of a lot supplies industry in XXXX? pet have growth good you adoptions new outlook. XXXX? the expecting net for side follow-up on terms are in discretionary you And Thanks of the in the business and are I what in question expecting terms morning.

Yeah.

cat. which cat of saw us pets focus a our expanding If continued seen elevated. the on you we'll actually, you see to was is XXXX is at saw second about heightened we Actually, And Vital going part reason we've look analyst talk Care homes, cat, paying half into in of at adoptions, things of one meeting the dividends. to we which increasing already the

of In terms in We on. at were terms of dynamics in of supplies as cited, to if XXXX will, see level. overlap from a heightened supplies, back QX that Brian QX stimulated, going you normalization

plan we category with So grow the is XXXX share. the taking in that heavy overlap supplies QX as will level. It's on QX category. a an And stimulus at again, just dynamic dynamic in

launch And opportunity Vital Very Care is X.X. here. exciting you. Thank follow-up and my around

to you Care of peg Vital customer, LTV terms it the your in relative customer? a of would how Just average

Yes, it's Xx, Seth. about

this is think the as play. share wallet we a a about mentioned, when customer, retention an So Care LTV is play. This of Vital Ron play. is This

customers, this. we around lot a those So do analytics of

of seen early LTV the at as we've what into kind they already Vital when Care expand. we is in were look from Vital a which get is them those we then good adoption So X.X, extended customers, X.X, that And into Care, Xx. which

Thanks. Awesome.

Thank you.

last with Baird. question from go come Peter will our ahead. Please today Benedict And

guys. me for Thanks sneaking Hi, in.

category? further add as CapEx maybe square dovetailing frozen you you push about looking first continue you First kind to of my talk question, the question. to there more that Can footage maybe question, this into guys -- that's are push. off and of just kind And fresh

Absolutely.

you at fresh the conversation will fresh We're $X now. product. fresh through of category by to and because had billion frozen look love XXXX. as retail retail get dynamics frozen, before. We of this a physical gets is the fulfilled It $X of We're over you plus and billion leader. -- category. And $X the XX% have billion frozen I If the I at a plus

spot is it the us. down for right So sweet

we wonderful that JFFD also a and strengthened, with have Freshpet as only and We relationship Instinct we have well.

that by of allows about as and have fresh in has brand, other WholeHearted, another our the JustFoodForDogs fired part better frozen really banner. best marketing expand. We're naturally, then And have but excited to now growth going vector, agreed it's expand them terms fantastic It gives will we for In really, yes, us it WholeHearted -- under JustFoodForDogs a frozen fresh and it expand us a product that to with space, It in up. would we'll definitely kind is more really the that. of to supply own JustFoodForDogs agreement well. against the strategy

we plan on -- fresh overall, frozen. So we We leading plan leading. are

easier tell decisions attractive, These are to And to just it The is yes. of CapEx. have Peter, as really relates make. the some CapEx I ROI I would you,

trip is wonderful The frequency a box the for actually.

Definitely.

my good. over is services And last on more Sounds question the side of things.

the your share business to personalization, improvements standpoint leveraging a you are of kind sharing about And the that ahead? guys year the are positioned of service of the unique on for the You data system of data, offerings? tap from any in-house. Thanks. talked obviously, How on optimize across capabilities for bringing front having there Thrive

Mike let take I'll that.

lot a meeting. the focus at will analyst We actually

get I'll how around Analytics, the a that. Mike believe is we competitive data But and You're moving let of our we're to advantage. firmly address enterprise, going meet Head to which

lot come We've a there's and a we've way, Peter. Yes, more -- long actually opportunity.

platforms over is our stat our grooming the for of training vet, increasingly on think services appointments that app. app, done on our online primarily XX% includes our and and I on are

that we years. time, business, big, just been about over who the this of us services our of game our the capabilities talk of bear. has when do or marriage not you past all So, bring competition the about proprietors most of one technology big the have for digital And couple is changers it, marketing I we'll think think, smaller the the to

point. that's our so, starting And

integration involved additional now so lot for capacity more are a platforms. loyalty with And Vital elements our building we around digital Care, with

to we got think value customer. just more and more presentation. on our And talk And to Analyst will so, enhancements side services I the and related bring more that we've about the additions at of runway digital will yes, that Day a

about in most do have data. to that important the super, acquisition talk data is to to that. organization now powerful, able the so. and vet groomer, The do around ability furthers to we'll single only the aisle a to the move fact how we our data The ecosystem we're But pet that, going the and super Thrive we're is that

of to forward in weeks. Thanks. seeing couple Look Terrific. you guys

Thank you, Peter.

Ladies would any over session. and the to Ron I remarks. to gentlemen, question-and-answer for conference back closing Coughlin concludes this like our turn

I'll just have category. operator. by strong a growth saying we conclude you, Thank

performance are is in is dynamic and our Our share world-class a environment. team deepening, executing. and record-breaking competitive moats This very delivering gains

In and us long-term support us having in with the much share better to growth last you fact, We mistake value. seven retail and quarters. industry over positioned every exited very the we've the top business growth and we've company, today are our better time it, stronger consecutively pandemic that positioned enhanced a appreciate Make drive end spending the about era delivered the no for day. of shareholder investors single

That fourth have available concludes after Investor follow-up any Petco's you will call. earnings call, quarter questions. the and conference XXXX if fiscal Relations be

conference today's today's call. Thank presentation. gentlemen, ladies all concludes this you And attending and for

now You may disconnect.