Providing an update on Petco Health and Wellness Co.’s repositioning efforts, Joel Anderson, the pet chain’s recently appointed CEO, said that “merchandise remains the greatest near-term opportunity for us to strengthen profitability.”
Among the merchandise changes being made, Anderson, who formerly led Five Below, told analysts on the company’s third-quarter conference call that following a detailed review of assortments, SKUs of faster-turning products are being added, while shelf space for slower sellers is being reduced “to simplify the customers’ decision-making process.”
He said, “We’re optimizing our assortment to be aligned more closely with customer demand and make it easier for them to shop with us.”
Anderson also said he’s met one-on-one with several key vendors to provide customers “the value they’re looking for” as they remain budget-conscious. Prior to Anderson taking over as CEO in late July, Petco was already emphasizing value in the inflationary climate, such as by reintroducing a number of value-oriented pet brands — including Friskies, Pedigree, Purina Beneful, Temptations, and Milkbone — that he lower price points.
“We’ve implemented new processes to deliver timely product resets that allow us to offer more exciting products,” said Anderson. “We’re also sharpening our approach to pricing to remain competitive in the market and drive financial outcomes for Petco. To date, we put in place stronger pricing guardrails, implemented more robust reviews of our pricing gaps, and established processes for promo assessments.”
Other initiatives in play to drive improvement include reducing back-office duties in stores to allow employees to spend more time with customers, leveraging automation to standardize in-store fulfillment of online orders, and driving down costs across in-store labor, vendor buys, and logistics.
Anderson also said Petco’s vet offering “remains a key growth driver and differentiator,” with sales expanding 9% due to ongoing strength in vet hospitals, mobile clinics, and grooming. Anderson added, “We’re leveraging our vet customer data to better understand their purchasing patterns, inform how we engage with them, and ultimately drive greater wallet share.”
Overall comp sales grew 1.8% in the third quarter, and a 5% gain in services and other business and a 2.7% increase in consumables offset a 2.8% decline in supplies (accessories, toys) and live pets. The pet category has been slowed by a decline in pet adoptions after seeing a surge during the pandemic.
Petco’s Q3 results slightly topped analyst estimates, although guidance came in lower than expected.
Petco’s in-store service offerings he long been touted as a key differentiator, but the chain is seen losing share due to the continued online shift in pet-related purchases, led by Chewy, Amazon, and Walmart. According to Statista, nearly a third of the pet category’s sales made worldwide are projected to be e-commerce sales in 2025, up from 20% in 2020.
A recent survey of 1,540 pet owners in the U.S. from RBC Capital Market found that 88.9% bought supplies online this year, up from 82.3% in 2023 and 78.4% in 2022, with Amazon found to be particularly gaining share. Of those buying pet products, 79.6% shopped from Amazon, 53.1% from Chewy, 32.9% from Walmart, 31.4% from Petco, 29.4% from PetSmart, and 27.9% from Target.