Pet supplies retailer Petco on Thursday reported $1.4 billion in revenue for the second quarter, representing 19% year-over-year growth driven by a 20% rise in comparable sales. Compared with 2019, revenue grew 31%. Its net income grew more than tenfold compared with last year to $75 million.
Petco also promoted Brian LaRose, its senior vice president of finance since September 2020, to CFO. LaRose succeeds Mike Nuzzo, who had been Petco’s CFO-COO since 2020. Nuzzo will continue as COO and president of Petco Services, the company said.
The San Diego, Calif.-based company filed an IPO in January that valued it at nearly $4 billion. It operates about 1,470 U.S. stores and more than 150 in-store veterinary hospitals.
The pet sector emerged as an unlikely winner in 2020, as rates of pet adoption surged amid stay-at-home orders. Petco has maintained its momentum well into 2021, adding 1 million net new customers during Q2 and reporting its 11th consecutive quarter of comp sales growth.
The quarter ending July 31 "truly highlighted the strength of our unique model with world-class digital capabilities, robust services offerings and a nationwide physical pet care center footprint that provides both the great in-store experience and logistics competitive advantages," chairman and CEO Ron Coughlin told analysts Thursday. "Those capabilities are enabling a growing customer base that is becoming more and more valuable, with significant growth in recurring revenue customers, loyalty customers, multichannel customers and premium product and services customers."
In the second quarter, Petco's digital revenue grew 14%, while its services and vet revenue grew 49%. The retailer has leaned into its new identity as a "health and wellness company for pets," opening 18 vet hospitals in Q2, bringing its total to 155.
The increased focus on health services lends the potential to increase foot traffic in its stores and drive more loyalty; other retailers have followed suit. Walmart in 2019 announced plans to open 100 in-store vet clinics, while online retailer Chewy in 2020 launched "Connect with a Vet" telehealth services.
The continued strength prompted Petco to raise its full-year guidance from $5.5-6 billion to $5.6-7 billion. Its new adjusted EBITDA is now between $565 million and $575 million, an increase from $550 million to $560 million.
But the retailer may face a potential slowdown during the second half of the year as pet adoptions stall or decline. "Pet adoptions have been a key driver of hard-goods sales growth over the past year, while pet food sales have underwhelmed, possibly due to the secular shift to online pet food purchasing at larger competitors," analysts at investment firm Wedbush Securities said in an Aug. 13 note.
Before joining Petco, LaRose spent nearly two decades at Hewlett-Packard, first as a VP of finance across several departments, and most recently as global head of finance for the 3D Printing and Digital Manufacturing business. He began his career with nearly a decade in M&A and audit practices at Deloitte.
"Brian is a seasoned leader and I'm thrilled he's taking on this role," Coughlin said in a statement. "He has already made a significant impact at Petco, including a key role during the IPO process and refinancing, resulting in a dramatically strengthened balance sheet."
Representatives for Petco declined to make LaRose available for comment.