Ron Coughlin, CEO of Petco Animal Supplies Inc., outside the Nasdaq MarketSite during Petco Health & Wellness Co.'s initial public offering. (IPO) in New York, January 14, 2021.
Michael Nagel | Bloomberg | Getty Images
Petco It announced Wednesday that its CEO, Ron Coughlin, will step down, and said Best Buy board member and CEO R. Michael Mohan will serve 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.” Coughlin said in a statement that he is proud of the work he has done over the past five years
“Working with our amazing 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 built that delivers the best for pets, which positions the company well for the future.”
Mohan has been a member of the company's board of directors since March 2021. He previously served as lead independent director, a role he will relinquish when he assumes the role of interim CEO. He is also the former COO and President of Best Buy.Â
“Mike’s highly successful track record across multiple sectors of the retail industry, deep knowledge of Petco and strong operational skills make him the ideal CEO to ensure a smooth transition as Petco moves forward,” Petco board member Cameron Breitner said in a statement.
Petco also announced fourth-quarter financial results on Wednesday that were roughly in line with expectations.
Here's how the pet retailer fared, compared to what Wall Street was expecting, based on a survey of analysts conducted 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-month period ending February 3, or a loss of 8 cents per share. The previous year, 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 the previous year.
Petco Health and Wellness signs outside the Nasdaq MarketSite during the company's initial public offering (IPO) in New York, US, on Thursday, January 14, 2021.
Michael Nagel | Bloomberg | Getty Images
The company's shares rose as much as 9% in premarket trading Wednesday following a CEO change and earnings announcements but closed down about 2%.
Coughlin's decision to step down comes as Petco's market value has eroded over the past year, even as the company reported flat sales growth and comparable sales gains. As of Tuesday's close, Petco stock was down about 19% year to date, and its market cap is about $784 million, down from about $3 billion in February 2023.
The pet industry has faced pressure and suffered from a slowdown in demand after the pandemic-fueled boom faded. Record numbers of families adopted pets during the COVID pandemic, then needed supplies to support those animals, resulting in huge gains for retailers like Petco and Chewy.
However, adoption of the new has slowed since then. Over the past year, Chewy and Petco have seen strong sales in stable categories like pet food and pharmaceuticals, but demand for high-margin items like beds, leashes and toys has been sluggish.
Coughlin has been instrumental 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, removed products like shock collars from its offerings and began building its own product line. Veterinary services and works.
In 2020, the company changed its name to Petco Health and Wellness Co. The following year, Coughlin led it through an initial public offering.
Ron Coughlin, CEO of Petco Animal Supplies Inc., right, outside the Nasdaq MarketSite during Petco Health & Wellness Co.'s initial public offering. (IPO) in New York, United States, on Thursday, January 14, 2021.
Michael Nagel | Bloomberg | Getty Images
Petco used its sprawling brick-and-mortar footprint to build veterinary clinics. Petco is now one of the largest pet healthcare providers in the country, operating 282 full-service hospitals as of the end of last year.
Pet health care — and the high margins that come with it — is a critical component of the overall pet market, and has been driving spending growth in the U.S., according to Bloomberg Intelligence. While revenue from Petco's services business jumped 17% during the quarter, it represents a small portion of the company's total revenue. The return on these investments has taken some time, and Wall Street appears to be running out of patience with Petco's path
“I look forward to working with the leadership team and our partners to continue strengthening our business, increasing profitability through operational discipline and execution that will improve growth, increase margin and generate cash to create shareholder value,” Mohan said in a statement. “My focus will be on our people, operations and customer experience, working together to advance our strategy.”
