Petco IPO, New Name Highlights Surging Category
With “renewed clarity” and “reignited vision,” shares of Petco began trading on Thursday (Jan. 14) after the owner of 1,500 pet stores completed its third IPO in 27 years, while ending a 15-year stint as a privately held business. Petco’s latest share sale raised $864 million and initially valued the company at about $4.6 billion. It also puts Petco into a growing field of listed competitors, such as Chewy and Freshpet, and gives investors looking to buy into the pet care boom a pick of the litter.
“I am pleased to introduce you to a significantly transformed Petco that’s redefining the pet care industry and generating a compelling growth trajectory,” CEO Ron Coughlin said in a letter to investors in the company’s prospectus. “[With] renewed clarity in our mission, we set out on a journey to reignite the passion for pet wellness that’s been in our DNA for more than 55 years.”
As part of that transformation, the company has also taken on a new name, “Petco Health and Wellness,” versus just Petco Holdings, in an effort to underscore its digital and multi-service offerings rather than being viewed simply as a chain of retail locations.
“We’re a health and wellness company committed to improving the lives of pets and their parents,” the company said while talking up its new comprehensive, whole-health pet care ecosystem. From memberships and insurance to in-store veterinary care to grooming, through its app and subscription delivery service, Petco is clearly trying to abide by research that shows pet owners prefer a one-stop-shop experience.
“Our 1,470 brick-and-mortar pet care centers – which serve as hubs for BOPIS (buy online, pickup in-store), curbside pickup, and sticky services like grooming and training – are growing, too. And our ability to leverage these locations as mini distribution centers staffed by passionate and knowledgeable partners gives us a powerful competitive advantage,” Coughlin said.
Timing Is Everything
After 15 years on the outside, Petco’s decision to go public coincides with a broader COVID-era trend of increased pet ownership and spending. The pandemic has not only changed the way people shop, it has also changed how they work — and increased the amount of time spent at home. Taken together, COVID-19 has given rise to a pet craze that has brought new attention to what is a $100 billion annual industry in the United States alone.
“It has just been staggering how quickly people have pivoted to find ways to keep their dogs engaged and mentally stimulated,” CEO Spencer Williams of pet supply company West Paw told CNN Business, noting a 55 percent year-on-year increase in sales from May through September.
As for Petco specifically, the pandemic has been both a challenge and an opportunity, since it had already been working to ramp up its digital business.
“Petco is the grocery store, the pharmacy and the doctor’s office for our nation’s pets,” Chief Digital and Innovation Officer Darren MacDonald told PYMNTS in September. “Everything we’ve done to adapt to consumer demands in the COVID environment has only made us stronger.”
The Pet Cost-Benefit Analysis
Multiple news reports have chronicled the surge in pet adoptions over the past year, as homebound people with more free time have taken on furry companions to help break the monotony of sheltered coronavirus life. While broader pet ownership has its benefits, research by the maker of the Pedigree and Eukanuba pet food brands found that consumers also worry about the expense.
According to a November study by Mars Petcare entitled “Pets in a Pandemic,” 86 percent of respondents cited pets as their top source of companionship this year, while 58 percent said the main reason they got a new pet was for companionship. At the same time, the report said financial hardships have taken a toll on pet owners, with nearly two-thirds reporting concern about affording basic pet costs and 13 percent having to surrender their pet because they couldn’t afford it.