SAN DIEGO — Following its flat performance in the second quarter, Petco is beginning to turn the tide with a successful third quarter performance, led by growth in its consumables business. The company shared this and more in its third quarter, 2024 financial results on Dec. 5.
Net revenue was reported at $1.51 billion, a 1.2% increase year-over-year. According to the retailer, comparable sales increase 1.8% year-over-year. Gross profit was $575.8 million, a 4.7% increase from $550 million in the prior year. Adjusted EBITDA was $81.2 million, an increase from $72.2 million in the prior year.
Petco reported GAAP net loss of $16.7 million, compared to $1.2 billion in the prior year.
“Our third quarter results demonstrate the meaningful progress we're making to strengthen our retail fundamentals to drive sustainable, profitable growth,” said Joel Anderson, who was named chief executive officer of Petco in July. “While there is more work to do, our improving results increase our conviction that we are on the right path to position Petco to win long-term. Our entire organization is focused on driving profitability and free cash flow, and I’m confident we’re set up for a solid finish to 2024.”
The company attributed its strong third quarter performance to growth in its consumable business. Net sales for consumables, which includes pet nutrition products, were $753,230, a 3% increase year-over-year, representing nearly 50% of the retailer’s third quarter net sales. Petco attributed growth in consumables to increasing strength in fresh frozen products, which witnessed revenue growth of 20% year-over-year. A new inventory management system, improved shelf utilization and competitive pricing also contributed to Petco’s growth in consumables.
Looking forward, the retailer shared its plans to continue optimizing its business by enhancing its product assortment, offering more shelf space and staying competitive on pricing.
“First, improving merchandise remains the greatest near-term opportunity for us to strengthen profitability,” Anderson detailed in the company’s third quarter earnings calls on Dec. 5. “… We’re optimizing our assortment to be aligned more closely with customer demand and make it easier for them to shop with us. In support of this, we completed a detailed review of our assortment across both consumables and supplies and have identified several opportunities to enhance our offering.
“Key focus areas for us include creating more space on shelves, for faster turning SKUs as well as reducing SKUs in certain categories to simplify the customer’s decision-making process,” he added. “… As consumers continue to be judicious in their spend, we have to meet them where and when they want with the value they're looking for.”
The retailer is also exploring automation to standardize its order fulfillment processes, something Anderson described as “significant potential” for the company.
To help support its business and growth initiatives, Petco has expanded its executive leadership team. In November, the company created its new chief revenue officer role, naming Joe Venezia to the position. Dan Calista was appointed chief strategy and transformation officer.
“These hires underscore our top priority for improving profitability through structural cost out while positioning Petco for growth,” Anderson said. “It’s still early days, but our actions are beginning to take hold. We’re setting ourselves up to play offense as we build momentum into fiscal 2025.”
Additionally, Petco provided guidance for the fourth quarter of 2024. The retailer is expecting net revenue of around $1.55 billion. Adjusted EBITDA is expected to be between $90 million and $95 million.
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