Petco jumps on comparable-sales gain, outlook

Bloomberg: Petco Health and Wellness Co headed for the biggest advance since June after ringing up new sales gains and unveiling a better-than-expected outlook for this year.

Comparable sales jumped 14% in the fiscal fourth quarter, the seventh straight double-digit gain, Petco said in a statement as it reported earnings. That surpassed lofty expectations, Jefferies analyst Stephanie Wissink said in a note to clients.

The results helped ease Wall Street’s worries that spending on pets would come under pressure as the coronavirus pandemic wanes and people spend more time outside their homes. Petco is benefiting from more purchases of premium food and supplies, while also expanding services in grooming and veterinarian care, Chief Executive Officer Ron Coughlin said.

“We’re not seeing price sensitivity from our customers,” Coughlin said in an interview. “We have offerings for every wallet size.”

The shares climbed 9.4% to $19.35 in New York, on track for the biggest gain on a closing basis since June 14. Petco fell 11% this year, while a Russell 1000 index of consumer-discretionary stocks fell 19%.

The San Diego-based company is also catching a break from greater labour availability and improving freight transportation early this year, Coughlin said.

During the fiscal fourth quarter, which ended in late January, Petco’s adjusted earnings rose to 28 cents a share, exceeding the 25-cent average of analyst estimates compiled by Bloomberg. Sales climbed 13% to $1.51 billion.

For the current fiscal year, Petco forecast adjusted earnings of 97 cents to a dollar a share. Analysts had predicted 91 cents, on average. Sales will be at least $6.15 billion, Petco said, while Wall Street was expecting $6.11 billion.