Petco's stock soars 12% premarket after narrower-than-expected loss, as CEO says company on track for return to profit

MW Petco's stock soars 12% premarket after narrower-than-expected loss, as CEO says company on track for return to profit

By Ciara Linnane

Petco is struggling with a slowdown in pet adoptions, while customers are cutting back their spending and switching to less expensive pet foods

Petco Health and Wellness Co. Inc.'s stock soared 12% early Wednesday, after the operator of pet-care centers and mobile veterinary clinics posted a narrower-than-expected first-quarter loss and sales that topped estimates.

San Diego-based Petco had a net loss of $46.5 million, or 17 cents a share, for the quarter, wider than the loss of $1.9 million, or 1 cent a share, posted in the year-earlier period.

Excluding one-time items, its loss was 4 cents a share, narrower than the FactSet consensus for a loss of 6 cents.

Sales fell 2% to $1.529 billion from $1.556 billion a year ago, also ahead of the $1.513 billion FactSet consensus.

"In Q1 we made meaningful progress against our strategy to reposition the business for sustainable and profitable growth," said Mike Mohan, Petco's $(WOOF)$ interim chief executive.

Mohan, who was previously a lead independent director, was appointed after former CEO Ron Coughlin stepped down when the company reported fourth-quarter earnings in March.

Mohan told analysts on the fourth-quarter earnings call that he was confident the troubled company would benefit in the long term from the dual trends of humanization and premiumization in a pet business expected to approach $200 billion in sales by the end of the current decade.

Like other companies operating in the pet-wellness and pet-health business, Petco is struggling with a cutback in spending amid inflationary pressure, a slowdown in pet adoptions and a switch to less expensive pet foods. Mohan also acknowledged missteps, including the company's failure to adapt to changes in consumer preferences.

"The underlying value proposition of this iconic and trusted brand remains strong, and I'm confident that a renewed focus on retail fundamentals and effective delivery of cost transformation will restore profitability and amplify the competitive advantages of our differentiated approach within the pet category," Mohan said Wednesday in prepared remarks.

Petco is now expecting second-quarter adjusted loss per share of 2 cents and revenue of $1.525 billion. The FactSet consensus is for a loss of 2 cents and revenue of $1.517 billion.

The stock has fallen 22% in the year to date, while the S&P 500 SPX has gained 12%.

-Ciara Linnane

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May 22, 2024 07:46 ET (11:46 GMT)

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