Petco Health and Wellness (WOOF) 22 May 242025 Q1 Earnings call transcript

Good morning, and welcome to the Petco First Quarter 2024 Earnings Conference Call. [Operator Instructions] Please note this event is being recorded.

I would now like to turn the conference over to Benjamin Thiele-Long, Chief ESG and Chief Communications Officer. Please go ahead.

Good morning, and thank you for joining Petco's First Quarter 2024 Earnings Conference Call.

earnings our is our website the to presentation results. to on download at addition release, a there available In ir.petco.com summarizing

Interim On Mike Brian me with Petco's Chief Petco's LaRose, Officer. the and Executive Financial today Chief Officer; call Mohan, are

risks to like results such statements, call, uncertainties forward-looking our everyone that are that uncertainties risks to and subject from to and could I'd we begin, on These SEC set make actual will differ those they materially out statements. materials remind earnings Before of filings. cause certain which this include a number in and

In these addition, call, measures refer SEC earnings will of found non-GAAP be and to our in certain on today's can release, Reconciliations Instructions] financial [Operator measures. presentation we filings.

turn it me Mike. to let over that, With

joining of Murphy Executive as delighted experience, stage this closely next I'd you everyone, like also morning, be the will years take our to with Glenn of entire him thank our and working him transformation. XX opportunity retail Good welcome on over Petco's Board. us today. The to join leadership we're team have With for Chairman. to

growth. QX, In meaningful our profitable against to the made business and sustainable progress reposition for strategy we

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improve The to clear: leadership on team's priorities falls executing the takeout. are following fundamentals transformation while distinct Retail return to and components. profitability into retail cost fundamentals

owner's not store work on store The In new builds customer-facing our we've only care of to store This year operating create a first also productivity. drive pet started prioritization centers, the experience begun roll and world-class but to promotes model partners wallet. out and mindset. model. The and reinforces an increases last customer share is and empowers the educates time,

second The merchandising area is excellence.

across and strategy our is conducting aligning on which our better merchandising and mix, an and to supported marketing traffic the third is be online long-term parents growth. This increasing effectiveness. pet the by will rationalization all to driving meet of of review are while need pricing of our assortment improve We merchandise This component profitable basket focused in-store review and quality designed overall end-to-end sales.

of engaging and now to funnel lower to stores drive actively effective with are recalibrating parents efforts for traffic the deliver online balance more marketing As and we plan our the marketing channels. year, pet to we our

to top-of-funnel increase We unique every need. reinforcing and to with marketing, cater vendors parents are partnering pet our pet ability to

supply direct-to-customer stores efficiencies. chain further ample overall opportunities omnichannel to that disciplined We deliver opportunity better service across distribution realign costs. and fulfillment to see delivery inventory the our both see and cost finally, capacity We managing centers, management. to meaningful model balances And our entire

progress more with just anticipate XX fuller in days and update actions work much on I'm the a While we plans taken pleased there is ahead, we've finalize. as

on be remain end to in million We cost to to of track fiscal $XX year by savings of enhancements a turning the with million cost target achieved and XXXX unlock transformation. in one. productivity $XXX Now

through As noncore augment we or look including and more sunsetting disposition deeply into the the assets. business, to diligently we're of savings, these working expedite

areas being relationship are are but projects highest spend and ROI, in we lower that hypercritical of no Specifically, on reducing pausing customers. impact or sequencing have all that have intensive on or the drivers priority confidence G&A our minimal with

completed thus recently QX, and noncritical decided example, our we For sale business, systems, to we updates investments customer-focused to enhancements. in redirect to technology allowing of in pause PupBox us the towards internal

to and this also instead only also year's savings. in event focus activities. support our with Summit additional deferred keeps delivers We tangible this Leaders' to Store vendors but interact Deferring not partners customer stores with revenue-generating on this customers, cost our working to are and event

fuller magnitude cost on a of as finalize opportunities our the we expect and We plans. update timing

As close, immense organization, despite long-term the throughout driving committed to we our I we are I reinforce strategy. that want the change to remain

one the omnichannel and the in comprehensive differentiator of assortments Our competitive nutrition and and online-only model fully a players. ecosystem, offering, services mass our market a most merchandising remains of from comprised powerful delivery integrated

customer choice plans place category. to and value return underlying proposition The sight our the a profitable unique of Petco within have clear to lines sustainable in our of reinforces and I'm the as ecosystem we strong, growth. pet This acquisition powers confident remains position flywheel right retailer and of

over call Thank the turn And I'll to now Brian. you.

on Mike, comments days Building potential of and and significant everyone. the business, us opportunities already we've clarity on to begun greater last our given clear Mike's on have about quarter, the the against good and deliver morning, full even activating XX Thanks, it.

we needs value being to and ensure future we're cost with to to and profitability And Ultimately, disciplined committed forensic return meaningfully revenue balancing all growth translates the expect bottom of line. we're assortment Specifically, to the shareholders. our actions to reflect parents. pet these restoring to

the the billion, In actions the sales For with Comparable quarter. flat X%. consumables pricing coupled prior the quarter, took down revenue lapping year inflation, a in decrease impact was X% year-over-year, $X.X of was were net merchandise, we year-over-year. reflecting of third

year-over-year. driven by experienced X% ongoing which services, clinics down businesses with other, businesses and our grooming includes companion XX%, up delivered and growth Services mobile softness, revenue disposed services. continued strength wholesale recently and in X% services vet supplies hospitals, noncore and discretionary Our animal

Moving revenue XX.X% $XX depreciation, expense profit disposition million down XX.X%, a Gross a for of basis from $XXX year. to primarily as severance driven was increased margin related of and the by down Gross expenses decline increased prior related first labor quarter, of changes year-over-year during mix. points, in from the onetime the to XXX XX.X% the store a P&L. driven PupBox. management quarter million, percentage the was by investments to SG&A

year-over-year. was as EPS $XX.X was of with XXX rate onetime adjusted revenue EBITDA the down EBITDA per was severance-related Adjusted margin SG&A in of XX.X%. Excluding to $X.XX QX compared a charges percentage basis and the share year. expense, million, XX% negative down $X.XX adjusted disposition prior X.X%, points an

the balance to sheet. Turning

of year. strong upsized cash cash in the remains additional liquidity years. million in inclusive million and which for XXXX $XXX X and March was prior revolving equivalents $XXX of extended flow Free $XX our at of negative $XX million Our down million, availability from $XX on in was an facility million, and credit negative cash

year. reductions year-over-year, CapEx the QX QX included the XX% of the guidance $XX down for reflecting million in year-over-year of our CapEx is component

positive management, benefits CapEx guidance free savings against we cash our to flow fiscal cost QX our for be ramping and working execution expect initiatives the Given XXXX. our capital of and

maintain of roughly mitigate collars debt, impact interest we rates. reminder, on a As X/X which also our of the helped elevated have

outlook. I'll now turn to QX our

the For following to revenue, are guiding and adjusted second quarter, EPS. we the adjusted EBITDA

our approximately EBITDA of expect we profitability from $X.XXX revenue quarter, negative of for expectations in approximately of trends EPS adjusted guidance improvement quarter. approximately the reflects revenue $XX the QX billion, first sequential and adjusted For million and $X.XX.

expense expenditures savings the can. net which $XXX the with full for savings of inclusive shares, estimated are we year, forward and our hedges we we in rate capital curve; diluted those XXX augmenting weighted benefits where Additionally, $XXX million, and average the impacts is approximately of $XXX which remain full cost year, unchanged; accelerating rate in XXXX the million $XX and on million for interest year-end run to of fully expect million of by and track achieve to year view one a million in unchanged; against

support and this at energy of and have stores, includes focus underlying management him, and business, in I our immediate confidence company of centers excellence share I transformation. financials our Like term. our enthusiasm the Mike's team the long up partners the To way the and retail centers of distribution close, in remarks our the echo the our leading as for important is juncture both on shoring

you for questions. happy with your Thank that, to be take we'll your time. And

first The Wedbush question Seth Securities. with Basham Instructions] from [Operator comes

under supplies pressure. to on the get some color improving which would I first business, love remains results. on the Congrats

that think revenue As into you changes you demand quarter, to see changes see second business Do going Do how you project you perform? and to the to the is look competitive environment? levels? any do forward

and We some we our we more our deliver serving we're see confident decisive question. slight offerings we the year-over-year in pet this. action how animals for work did know breadth thanks our improvement and in remain do. taken supplies some to but plans, to decline team assortment our have of business, companion has The on Seth, Overall, parents. the strategy in and

the really, value the have every And not acting want highest My we or proposition focus our for near to I on in while think our that really drivers -- our term. improve be with clear sequence profitability to to I we're customers. compromising day you, priority relationship is

how were margins could on second look there? And forward, some to Understood. the gross as think margins, relative about should As SG&A more than gross relates you expected, the in stronger we the drivers provide it quarter? to color you which

bottom Thanks drive bottom progresses, say looking driving line for on we're year. as We're we progress just dollar both the throughout Seth. gross year initiatives profitability and question, the on expect improvement, improvement the profit and at efficiency. SG&A steady to improvement sequential focused I'll line

there. some efficiencies. did the in we're out specific also chain prepared transformation remarks, a laid track opportunity both I the I modest there's in driving team to as and improvement across augment and job progress categories you discretionary cost tell you, And supply our good to believe with see and did accelerate QX, will on the

comes next Kaumil Gajrawala with The question from Jefferies.

with makes the balance A lot us each these of it all you good For doing versus maybe and of difficult. when you how come just is productivity? can of items? all around work the what assortment does logical help kind like or effectiveness the because, of on, could at versus prioritization through line just going looks kind just But example, you out marketing, us maybe sense. time If up once that obviously,

a helpful. just can of sense maybe that we get prioritization, better if would So be

both overall biggest on organization, on standpoint, to That's our action customer improve we decisive renewed the SG&A we're Thank our profitability and question. #X that's start The has fewer improve our up And services around we that reviewing great. taking why focus while everyone reset in in in and experience. the clearer the enhance rallied plan. From and are focused our I line focus that spending. profitability area our is priorities. to followed would I profitability profitability. improvement you an at have our area, No, our by is with focus priorities and merchandising, we store level would leadership our in our how improving and a is for our

Brian, anything? you would add

gave where the I'd a Seth examples couple to the same priorities the systems internal the as towards fewer the of most excuse just me, we value of as is to examples we add PupBox, well are that Those team I the enterprise. making disposition of of just have prioritize a to things doing the sure is which some things Yes. working we're the mean, couple say, upgrades of deferment and -- of united of clearer pausing priorities, those Summit. Kaumil, objectives, and the

part the Great. closing something context plan? maybe it like And or Is optimizing the you're sound the misreading just also then you're that is is all the things Or of Okay. in that? doesn't network doing, just that my of evaluating? stores

I at the estate dynamic our that we you, in way look real Kaumil, portfolio. tell are that we would

of demographics as a our very sure in make enter as we the well exit. the we have own process we We market may dynamics that and that any position the markets competitive that to comprehensive understand

any not So a at are this time. changes rolling would there planned it's portfolio. I that say large-scale

next from The comes Citi. Zaccone question with Steven

a here How outlook think is lines, of second macro what from think more The growth. should sustainable But company-specific to predict. going returning needs the I thing you wanted the quarter? really aspect, mentioned along to performance that to do category sustainable to we And the challenging drive growth a forward? happen then those categories? versus discretionary consumables understand to some about you same for

here have of start work our We merchandising excellence. to I'll on is do our why Steve. of we're assortment, and And guide $X.XXX the the list. work category we Thanks, our there revenue. that's in outlook at in top embedded know doing billion the the

the pet the have support and mix parents' quality sales our both then within is We focus needs. better our an part opportunity to our that profitability, mix. every And improve of sell the on we of to Brian? improving

just significant to guide recovery with relative to in partly first I category consistent year. XX%. inflation. our any would due Steve, add, is which quarter, overlapping came roughly haven't discretionary the flat, the we up the baked in we Services remained dynamics strong to the way into Consumables was the in

into the guide those we $X.XXX that the billion quarter. think second everything So about from going for is forward categories baked

Needham with next The & from Company. question Andreeva Anna comes

of questions from to keep With you would be Board, the can That's just that considered then we And looking share? my Glenn's Chairman any follow-up. at guys for see of position of CEO as a to us. Good have making And first appointment the couple A permanent initiatives one. the the with progress. he you company?

of great value improving and executing have you. the experience and a be and we'll We focus remain team, is our few we lot soon And top information is me as to with as any and ongoing, over on last updates The for additional strategy search our provide he'll permanent weeks, the our for it. to profitability. CEO committed Great. I've Glenn time the turnarounds. Thanks, Anna. of given retail spent in the

talk you enough. from that just you mid-single-digit the EBITDA now think as center store base you most are a that to of on Fair follow-up of that, on that, some economics lift that the to there? update can Should still Okay. And the we us the used of profitable? seeing is about? And

coming the terms changed X our year, vets since Anna. in of are for into in to XX which our no the guide. our There's into CapEx model. change vet we been for Thanks, long-term And plans economics guided not have year year, the the baked

you the expertise some tell additional what just vet business. will I on we're that brought into is we in focused

a new And improved that improve experience within for looking the We're with profitability in experience ways we're significant space. both that focused utilization. also as of as We customer the vet leader to through our the business have proposition. well improving hospitals on value greater

Evercore question comes The ISI. next from Oliver with Wintermantel

I ticket or first of versus question transactions had all, regarding, a AUR. the

you quarter some through If give how could for about on think year. updates the us it rest trended that the and how of you the

Oliver. what say not was to though, you, that basket that Thanks, and than specifically. break been that's going consistent for we've traffic, out you seeing. tell would been with stronger I'd we're I

flow other I positive And you're one, the free be year. this to think, it. you cash Brian, Got said expecting

you how If moving about there, get the could talk maybe what are. you parts

Thanks, Oliver. I'll with QX. start

free knobs us the cash company, given frankly, some continue it Oliver, million, negative a balance on profitability the is negative that of It historically was profitability in company, sheet quarter focus rolling was down flow quite to seasonality we $XX million us, on expect of items. trajectory QX $XX the QX. Although last typically for year and negative steady progresses. of improving year as are the the to of the progress for The

with year in execution and I in $XXX guided is for continued guide. the on year. were variable, would We that's down we one second spend XX% The year, last against the our say, CapEx million from track

we And the third opportunities in thing is have inventory.

opportunity have rationalize focus has and to we velocity team on SKUs. inventory good our higher do of job continue a done managing an additional the to Although inventory, management

from Guggenheim. Steven comes question next Forbes The Instructions] with [Operator

Steve is Marin for Forbes. This on Rene

margin gross terms are understand can we Given relatively sales? within product in better bottoming? the quarter-over-quarter, profile us profitability where help you improve drivers product of to overall what through of And business stability working within the is

Thanks the some quarter. mentioned some with line earlier, as tell saw just driving I question. saw in bottom focused was in would for we discretionary chain coupled What supply first you, efficiencies the execution the on the quarter, in the I of that profitability. improvement team's category, we're first the against modest you

we of opportunities across merchandising though, forward, look sales. continue opportunity Looking strategy to for cost within to have our

X% can vet and then break and prepared we remarks grooming? follow-up, it. between understanding down as revenue a Got you trends. between services XX% know you training the And the services, a growth that further us the other in in and vet so underlying mentioned help I can get of the just better

Services hospitals of driven maturation of for and to grooming, strong that Vetco our vet level going not our mobile I'm you. at Yes, and that XX%, underneath. detail continued was business get that into driven by was was by

So results. all three reported strong of those

The with Baird. Justin next Kleber question comes from

is across then of on Do the one how the are about on pricing you the color disinflation trend. pricing are based units like-for-like first here? efforts? simply year? And seeing any improvement deflation? Are understand the any just is on flattening thinking just I consumables assortment you consumables Or any the how on out you My of business. see risk trending? But balance

Thanks, Yes. Justin. start I'll here.

think with solution their breadth pet over different and parent offerings for needs. of make introduced a course makes Petco assortment we've have I sure of we destination preferred every go would for can and the parents. the time pet that to just comprehensive products And our I of millions

assortments. they to in we and with super need, their overindex the our price solve and premium and whole to meeting wherever products points, fresh them on customer I in back of us standpoint offering committed whatever continues right a all think they gives our and again, pricing it thinking choiceful. frozen needs. at premium great gives and to We're the continue ability that the But to are solutions customer disinflation, about be the to

Okay.

volume? that see take stimulate risk don't lower prices any will vendors to you So

We're our profitable of looking our drive a generation the always they're whatever to customers our campaigns. for with working is vendors for. assortment, With outcomes assortments, to ability meet promotions question good comprehensive we and demand have one. us on with The marketing solutions product both

The Wolfe next question with Greg comes Research. from Badishkanian

I questions. value Can how And topic for merchandise, in The to break would Stringer was that of This on by could that ask XQ? macro is just provide Scott share you market trended update last out wanted premium on share. some more an you helpful. versus Greg. if discussion quarter be market

you're just and give profitability, have our Scott. I'm looking Thanks, detail entire but #X to to organization going of we to level priority our start these you improve is rallied for, I'm not the the objectives. with, around going

our our Focusing need on the they cost focus. positioning. customers, strengthen structure offering And while competitive giving an exceptional pet shopping also #X is addressing and parents, products will them our actions these our our experience

Got it. today? trending? on that margins How Maybe is impacting gross one follow-up inflation. That's just How enough. fair is that

I out to consumables. thing think growth biggest there would the to relative call in be the

primary saw driver lapping the flat managing good You That for was the for team of that said, think I margin consumables of The quarter. inflation. quarter. gross job roughly the year-over-year the a dynamics overall did

question comes next from with UBS. Michael The Lasser

your the last market Petco over now, prioritizing is right that suggested share. In to profitability response question,

retailers the So, a, stabilizes, is that especially Petco's online-only market efforts from merchants for stepped-up when that and realistic outsiders predominantly right? share to And aggressively it mass target expect category? b, is with to

Thanks, Michael.

and marketplace. improving priority fragmented competitive basis very that gives the us a for us to our in be profitability, more top Our than is

can that brand going do who offering pet online-only remain our parents and a things focused that millions other we're we end-to-end mass get love to players that. or cannot of unique to chance on Our our experience do, and

call. concludes for your questions. time you. for and earnings you That Thank Thank today's your

today's The conference for Thank concluded. you attending has now presentation.

disconnect. now may You