Petco CEO Ron Coughlin is stepping down

Petco announced Wednesday that its CEO Ron Coughlin is stepping down and said Best Buy board member and CEO R. Michael Mohan will take over as interim CEO while the corporate searches for a everlasting successor.

Coughlin shall be an advisor to the board whose role shall be to “support leadership transition.” In an announcement, Coughlin said he is happy with the work he has done over the past five years.

“Working with our incredible partners during a time of tremendous change and growth has been the opportunity of a lifetime,” Coughlin said. “I am proud of the diversified business model we have built that brings the best to animals, which positions the company well for the future.”

Mohan has served on the corporate’s board since March 2021. He previously served as lead independent director, a job he’ll step down from as interim CEO. He is also the previous chief operating officer and president of Best Buy.

“Mike’s highly successful track record across multiple segments of the retail industry, deep knowledge of Petco and strong operational skills make him the ideal executive to ensure a smooth transition as Petco grows,” Petco board member Cameron Breitner said in an announcement.

Petco also reported fiscal fourth-quarter results on Wednesday, which were roughly in keeping with expectations.

Here’s how the pet retailer performed in comparison with Wall Street forecasts, based on a survey of analysts by LSEG, formerly generally known as Refinitiv:

• Earnings per share: adjusted 2 cents vs. 2 cents expected
• Revenue: $1.67 billion vs. $1.62 billion expected

The company reported a net lack of $22.6 million for the three months ended Feb. 3, or a lack of 8 cents per share. A 12 months earlier, the corporate reported net income of $32.7 million, or 12 cents per share. Excluding one-time items, Petco reported earnings per share of two cents.

Sales rose to $1.67 billion, up about 6% from $1.58 billion a 12 months earlier.

The company’s shares rose as much as 9% in Wednesday’s pre-opening trading following the CEO change and earnings announcement, but closed about 2% lower.

Coughlin’s decision to step down comes as Petco’s market capitalization has declined over the past 12 months, regardless that the corporate has seen regular sales growth and comparable sales gains. As of Tuesday’s close, Petco shares are down about 19% year-to-date, and the corporate’s market capitalization is about $784 million, down from about $3 billion in February 2023.

The pet industry has faced pressure and slowing demand after the failure of the pandemic-fueled boom. Record numbers of families adopted pets through the Covid pandemic after which needed supplies to support those animals, leading to very large profits for retailers like Petco and Chewy.

However, recent adoptions have slowed since then. Over the past 12 months, Chewy and Petco have seen strong sales in stable categories comparable to pet food and medicines, but demand for high-margin products comparable to beds, leashes and toys has been sluggish.

Since taking up as CEO in 2018, Coughlin has played a key role in transforming Petco right into a health and wellness company. Under his leadership, the corporate stopped selling unhealthy pet food, removed products comparable to protective collars from its offer and started to develop its service offering and veterinary activities.

In 2020, the corporate modified its name to Petco Health and Wellness Co. The following 12 months, Coughlin led it through an IPO.

Petco used its extensive physical operations to construct veterinary clinics. Petco is now one in all the most important pet health care providers within the country, operating 282 full-service hospitals at the tip of last 12 months.

According to Bloomberg Intelligence, pet health care – and the high margins that include it – is a key component of the general pet market and is driving spending growth within the US. While revenue from Petco’s services business grew 17% within the quarter, it represents a small portion of the corporate’s total revenue. It took a while to recoup those investments, and Wall Street clearly grew impatient with Petco’s trajectory.

“I look forward to working with the management team and our partners to continue to strengthen our business, drive profitability through operational discipline and execution of actions that will improve growth, expand margins and generate cash to create shareholder value,” Mohan said in an announcement. “I will focus on our people, operations and customer experience as we work together to advance our strategy.”