Petco Gets Paws Deep on Pet Essentials

Whatever humans need, pets need. That’s the mindset Petco seems to understand when it comes to the pet parent that shops with the specialty retailer.

While the retailer initially prioritized providing essential food supplies, Petco goes beyond that by seeking partnerships. These partnerships not only help Petco respond to demand but also elevate their offerings. By tapping into pet health and grooming, Petco aims to create a comprehensive and memorable experience for pet parents.

Petco’s Approach to Vet Services

During Petco’s recent quarterly earnings call Wednesday (May 24), it was disclosed that the company experienced a 20% increase in the number of pets attending veterinary appointments compared to the previous year, underscoring the growing demand for veterinary services within Petco’s customer base.

A contributor is Petco’s establishment of mobile clinics, which extend Petco’s reach with convenient and accessible veterinary care for a wider range of pet owners.

In the quarter, Petco reported conducting an average of more than 1,300 clinics per week, a 22% increase compared to the previous year. These clinics, fast, affordable and convenient, operate extended and weekend hours.

By fostering a good working environment for veterinarians, Petco says it is seen as a flexible and sought-after employer in a competitive labor market.

During the first quarter, Petco added 375 veterinarians, a 60% surge compared to the previous year. Furthermore, Petco launched 10 new hospitals during the quarter, raising the overall count to 257. Petco says its objective is to establish 50 to 55 hospitals in the current fiscal year.

Petco envisions its veterinary hospitals as a crucial catalyst for driving growth in both revenue and profitability in the medium and long term.

Over time, Petco’s pet care centers that integrate hospitals have demonstrated a steady increase in sales, achieving a mid-single-digit growth rate within just one year.

During the quarter, Petco says it set record for sales in its grooming segment. The company is determined to further expand its capacity and improve the efficiency of its grooming services.

Demand in Partnerships and Private Labels

During the quarter, Petco reported double-digit growth in both sales and customer numbers for its fresh and frozen products. The company’s exclusive partnership with Freshpet enabled the retailer to gain market share in a rapidly expanding market. Similarly, Petco observed positive momentum with premium brands like Science Diet, Royal Canin, and ACANA, all of which achieved double-digit growth.

See also: Meal Kits Go to the Dogs With Petco’s Customizable Freshpet Subscriptions

At the same time, Petco has noticed a growing trend of value-conscious behavior among its customers, who are opting for the company’s private-label offerings, like WholeHearted.

Retailers are confronted with the challenge of offering consumers products at more affordable price points. However, rather than labeling a less expensive version of a branded product as a knockoff, fake, or cheaper alternative, a trendy term for it has been forged a “dupe.” Some, however, call it a private label.

“We’re seeing shopping behaviors indicative of this environment,” Jeff Owen, chief executive officer of Dollar General, said with the company’s latest earnings report March 16. “We continue to see customers shift spending to more affordable options, including our private brands, which represent more than 20% of our total sales within consumables. Private brand growth, both in absolute dollars and penetration, was the highest in the fourth quarter.”

See also: Dollar General Takes Aim at Walmart, Beefs Up Private-Label Brands and Perishables

Responding to More Than Demand

Petco’s digital business exhibited double-digit sales growth, primarily attributed to the strong presence of repeat delivery customers. The company’s rapidly expanding ad network, digital pharmacy, and growth in same-day delivery orders further contributed to this growth.

The year-over-year (YoY) increase in same-day delivery orders, more than doubling in volume, highlights the considerable competitive advantage it offers compared to online-only competitors.

See also: Dupe, Private Label, Call It What You Want, Consumers Want More

Petco finished out the quarter experiencing significant growth in comparable sales, with a 5.1% YoY increase and a 10.2% increase over a two-year period. This marked the 18th consecutive quarter of comparable sales growth for the company.

Their net revenue rose to $1.56 billion, reflecting a 5.4% YoY increase. However, there was a net loss of $1.9 million, or 1 cent per diluted share, compared to the previous year’s net income of $24.7 million, or 9 cents per diluted share.