I’d like to begin by expressing my upmost thanks and appreciation to each of our 29,000 Petco partners for their hard work and dedication to doing the best for pets throughout 2023.
Without doubt, Petco is an iconic brand in the pet care category, with a combination of differentiated products, a commitment to veterinary and other pet services and a powerful omnichannel delivery model.
We remain positioned to benefit from the long-term megatrends of humanization and premiumization, supporting consistent and resilient category growth in a market that is expected to reach $200 billion in sales by the end of this decade.
But while 2023 saw progress, I recognize we have not been executing the way we need to in a number of areas to deliver on our full potential.
That’s why, as we look ahead, we’ll work diligently to align our in-store and online offering to consumer needs, and work against fewer and more clearly stated priorities and outcomes.
During my time as Interim CEO my focus will be on execution, keeping our teams energized and supported to achieve our goals, and making progress against the promises we commit to for ourselves, our customers, and our shareholders.
This is an exceptional business that serves millions of pets every year. I believe that by concentrating on our mission of improving pet lives, while addressing the realities of the businesses’ performance with clear, consistent, and focused prioritization, we can unlock Petco’s full potential.
In 2023, while we saw growth in parts of our business, pressures on discretionary spending coupled with a more value-seeking consumer environment impacted that growth and our profitability.
That said, our unique omnichannel offering, including both merchandise and services, keeps us well positioned to execute against our long-term strategy – capturing the long-term megatrends of the pet category.
2023 saw us evolve our business to address the consumer dynamics we’ve been seeing, broadening our appeal with customers and tightly managing costs and capital.
For customers, this included taking steps to ensure our assortment met the needs of all pet parents, with a focus on driving traffic, customers, units, and revenue growth.
And through a comprehensive cost and efficiency program, we identified and are actively working multiple areas to unlock meaningful run-rate cost savings. These include both direct and indirect expenses – including shipping and distribution enhancements such as automation, meaningful general & administrative efficiencies, and improvements to merchandise operations.
As we navigate 2024, we’ll continue to build on the work we’ve already done this past year leading with focus and prioritization to stabilize market share and improve profitability.
Specifically, this means focusing on enhancing our online and in-store shopping experience, supporting our partners so they can effectively sell our complete offering, and leaning into supply chain excellence that delivers inventory profitability with high in-stocks and seamless omnichannel delivery.
In consumables, this past year saw us broaden and curate our assortment to ensure we have what pet parents want, how they want it, when they want it.
As we think about our assortment strategy, our nutrition offering now provides greater choice for pet parents, bringing as many pets as possible into our full health and wellness ecosystem. When combined with our partners’ ability to provide assistance in the aisles, we have the opportunity to help every pet parent, regardless of their budget, or their pet’s age or dietary needs.
And with an industry leading array of premium and fresh-frozen foods, taken as a whole our consumables mix uniquely positions us to capture the category’s megatrends as well as the ability to capture trade-ups, attachment opportunities, or move to Rx foods when recommended by their veterinarian.
In supplies, we continue to build on our assortment of leading national brands, in addition to our line of creative and colorful owned brands, to keep pets physically and mentally happy and healthy.
We’ve adapted our supplies assortment to fit every wallet size. Whether through bundling offers, or providing a range of “good, better, best” toys and accessories, we’re making sure pet parents have everything they need.
Additionally, through targeted marketing, we continue to capture customers during the moments that matter. Whether during the holidays, or heightened flea and tick seasons brought by changing weather, we’re able to get ahead of demand while remaining a reliable, constant source of everyday needs such as beds, crates, leashes, and grooming supplies.
Services continue to be a bright spot for Petco, both as a differentiator and growth driver of our business and capturing additional market share of high value and loyal customers.
Grooming provides a retentive hands-on pet experience that appeals to pet parents and was accelerated this year by our “Clean Grooming” launch, with services and products free from parabens, phthalates, and chemical dyes.
Across our ecosystem we now have over 280 full-service hospitals and operate 1,400 mobile clinics per week. Our mobile vet clinics provide a capital efficient way to expand our services footprint with an attractive value-focused offering and are performing even better than anticipated. And our approach to autonomous medicine coupled with the introduction of new technologies for diagnostics and treatment, including AI, provides an appealing offering for veterinarians and technicians.
Combined, our integrated network of fully-owned services across our Pet Care Centers provides a unique and retentive pet care offering that can meet budgetary needs of all pet parents without sacrificing on quality of care.
From our Support Centers to our Distribution Centers and Pet Care Centers, the energy and enthusiasm our Petco partners bring to work every day not only affirms the power of our category but differentiates us as a retailer.
This means taking care of our partners remains paramount to our success; and this year was no exception.
In training and development, we delivered our “Leadership Essentials” program to 400 newly hired or promoted people leaders, and further nurtured leading talent through our Next Gen leadership program and RED (Reflect, Engage, Develop) peer-to-peer coaching program.
Across the country, our Partner Resource Groups continued to provide a valuable network of resources for all partners, and deepened Petco’s relationship with the local communities.
From working with students from the Barrio Logan College Institute and Preuss School, to sponsoring more Komen Foundation charity walks and Pride festivals than ever before, we continue to foster a safe and inclusive culture for our partners and our customers with an approach that aligns with Petco’s values.
2023 also saw meaningful progress in ESG initiatives that support environmental and social causes, but also helped us further connect with consumers who increasingly look to corporations to take the lead in these global challenges.
And of course, no mention of our purpose in action would be complete without celebrating the amazing work of Petco Love.
Through our partnership with Petco Love, we’ve helped save nearly 7 million pet lives to date. The Vaccinated and Loved initiative reached the milestone of 2.2 million vaccines, providing this vital care to pets in under-resourced communities.
In addition to spending a career in retail, I’ve also had the privilege of being a pet parent my whole life.
This means I’ve seen firsthand, as a board member, a customer, and now Interim CEO, how Petco sits at the forefront of pet care, uniquely positioned with a compelling full-service pet health and wellness ecosystem.
In 2024, we’re focusing on maximizing our opportunities to fully leverage the competitive advantages we have through our in-store and online customer experience. And we’ll act purposefully to connect with pet parents to improve their experience with us, with a focus on growing margins through improved baskets and quality of sales in a meaningful and sustainable way.
Importantly, improving our customer experience, retail execution and overall cost structure will help us drive profit stabilization in the near term, and growth in the medium and long term.
To conclude: If our comprehensive ecosystem is the engine that drives Petco’s success, then the trust and advocacy of our customers, vendors and partners is the fuel that powers it. Looking ahead, this principle will sit at the heart of everything we do.
Thank you,
1 Non-GAAP financial measure; please refer to
the section titled “Reconciliation of Non-GAAP Financial
Measures to GAAP Measures” beginning on page 55 of the
company’s Annual Report on Form 10-K for the fiscal year
ended February 3, 2024 for definitions and
reconciliations of Non-GAAP to GAAP financial metrics.
Information about the forward-looking statements in this
letter can be
found here.