Petco Health and Wellness Co. signage outside the Nasdaq MarketSite during the company's initial public offering (IPO) in New York, U.S., on Thursday, January 14, 2021.
Michael Nagle | Bloomberg | fake images
petco announced Wednesday that its CEO, Ron Coughlin, will resign and said that board member and Best Buy executive R. Michael Mohan will take over as interim CEO while the company searches for a permanent replacement.
Coughlin will serve as an advisor to the board to “support the leadership transition.” In a statement, he said he is proud of the work he has done over the past five years.
“Working with our incredible partners during a period of tremendous change and growth has been the opportunity of a lifetime,” Coughlin said. “I am proud of the differentiated business model we have created that offers the best for pets, which positions the company well for the future.”
Mohan has been on the company's board of directors since March 2021. He previously served as lead independent director, a role he will leave when he assumes the role of interim CEO. He is also the former COO and president of Best Buy.
“Mike's track record of great success across multiple segments of the retail industry, his deep knowledge of Petco and his strong operational skills make him the ideal executive to ensure a seamless transition as Petco moves forward,” said Cameron Breitner, member of Petco's board of directors, in a statement.
Petco also reported fiscal fourth-quarter results on Wednesday that were roughly in line with expectations.
Here's how the pet retailer fared, compared to what Wall Street anticipated, according to a survey of analysts by LSEG, formerly known as Refinitiv:
- Earnings per share: 2 cents adjusted vs. 2 cents expected
- Revenue: $1.67 billion vs. $1.62 billion expected
The company reported a net loss of $22.6 million for the three months ended Feb. 3, or a loss of 8 cents per share. A year earlier, it reported net income of $32.7 million, or 12 cents per share. Excluding one-time items, Petco reported earnings per share of 2 cents.
Sales rose to $1.67 billion, up about 6% from $1.58 billion a year earlier.
Coughlin's decision to resign comes as Petco's market capitalization has eroded over the past year, even as the company has reported steady sales growth and comparable sales earnings. As of Tuesday's close, Petco shares are down about 19% year-to-date and its market capitalization is about $784 million, down from $3 billion in February 2023.
The pet industry has faced pressures and a slowdown in demand after a pandemic-fueled boom failed. A record number of families adopted pets during the Covid pandemic and then needed supplies to keep those animals, generating huge profits for retailers like Petco and Chewy.
However, new adoption has since slowed. Over the past year, Chewy and Petco have seen strong sales in stable categories like pet food and medicine, but demand for high-margin items like beds, leashes and toys has been sluggish.
Coughlin has played a key role in transforming Petco into a health and wellness company since taking over as CEO in 2018. Under his direction, the company stopped selling unhealthy pet foods, eliminated products such as shock collars of its offer and began to develop its veterinary services and business.
In 2020, the company changed its name to Petco Health and Wellness Company. The following year, Coughlin led her in his IPO.
Petco Animal Supplies Inc. CEO Ron Coughlin, right, outside the Nasdaq MarketSite during Petco Health & Wellness Co.'s initial public offering (IPO) in New York, U.S., Thursday, Jan. 14, 2021.
Michael Nagle | Bloomberg | fake images
Petco has used its extensive physical footprint to build veterinary clinics. Petco is now one of the largest pet health providers in the country and operated 282 full-service hospitals as of the end of last year.
Pet health care (and the high margins that come with it) is a crucial component to the overall pet market and has been driving spending growth in the United States, according to Bloomberg Intelligence. While Petco's service business revenue increased 17% during the quarter, it makes up a small portion of the company's overall revenue. Returning those investments has taken time, and Wall Street has apparently grown impatient with Petco's trajectory.
“I look forward to working with the leadership team and our partners to continue to strengthen our business, driving profitability through operational discipline and execution that will improve growth, drive margin and generate cash to create value for shareholders,” Mohan said. it's a statement. “My focus will be on our people, our operations and our customer experience, working together to advance our strategy.”
