Pet parents are not willing to buy cheap food, and that has helped fuel sales for Petco, according to the retailer's chief executive.
Petco CEO Ron Coughlin said on Yahoo Finance Live that the majority of our business is staples. Just like you don't cut back on milk or eggs, pet parents don't cut back on food for their pets. In fact, we are seeing an upgrade of foods, continued premiumization toward the most premium kibbles, fresh frozen foods. Inflation played a significant role in this issue. In January 2022, a survey from Rover found that 71% of dog parents attribute higher pet-related costs to inflation. These costs included food, treats, toys, and vet visits.
73% were concerned about rising costs, according to the survey.
The rising prices are a result of the pandemic-fueled demand. In 2020, nearly 2 million pets were adopted, according to Spots.com, and the foster pet population increased almost 19%.
There is this theory that there is going to be a pull-forward of pet ownership, Coughlin said. That is not what happened. The majority of the new adopted pets were adopted by Gen Zers and millennials who spend more on their pets, according to h. According to Coughlin, Petco hasn't had to deal with supply chain issues that have plagued other industries as it has been on top of this trend early on and has made sure it has enough inventory to meet demand.
He said that if you look at our inventory from a unit basis, it matches our sales almost exactly. We don't have that situation of excess inventory on hand because of delays in Asia. Our inventory on hand matches up with the demand that we see coming, so we have a lot of stock on hand. Petco revenue rose 4.3% in the first quarter from a year earlier, a decline from double-digit growth for the previous seven quarters, and posted its 14th quarter of sales growth at stores open at least 12 months, with an increase of 5.1%.
Food made up about 46% of Petco's sales last quarter. Coughlin said that the company has expanded its services business by offering veterinary care and grooming. He noted that there was increased demand for those services.
The pet industry has been relatively resilient despite past economic problems or economic shocks, according to Coughlin.
As for the pet adoption boom that boosted sales for Petco and peers like Chewy during the Pandemic, Coughlin said it is continuing albeit slower.
Julie Hyman is the co-anchor of Yahoo Finance Live, weekdays 9 am -- 11 am ET.