Petco Health & Wellness has recently come under scrutiny as its shares experienced a decline on Wednesday following the announcement of a fiscal second-quarter loss. The pet store chain forecasts that it may continue facing financial difficulties in the current three-month reporting period. The company has projected an adjusted loss between $0.03 and $0.04 per share for this upcoming quarter, which aligns closely with analysts' consensus on Capital IQ, anticipating a loss of $0.03 per share.
Revenue expectations hover around $1.5 billion, conforming to current market forecasts. Consequently, the stock witnessed a 3.9% drop in premarket trading as investors reacted to these forecasts. In a strategic move to stabilize and revitalize the company, Petco appointed former Five Below Chief Executive Joel Anderson as its new chief executive officer in July.
This decision followed the appointment of Glenn Murphy, an executive with a rich history at Lululemon Athletica and Gap, as executive chairman two months prior. Their leadership is part of a broader initiative to enhance profitability and foster long-term growth for the organization. "Our top priority is to prove – and improve profitability, focusing specifically on initiatives that will most significantly impact our business," stated Anderson during a conference call on Tuesday, as noted in a transcript from Capital IQ.
"If the first half of this year was centered on establishing the course for our transformation, the latter half is dedicated to implementing that strategy and positioning ourselves for sustainable growth moving forward." For the quarter ending August 3, Petco reported an adjusted loss of $0.02 per share, a significant shift from the earnings of $0.06 per share recorded in the same quarter the previous year.
Market analysts had estimated a per-share loss of $0.03 for this reporting period. The company experienced a 0.5% year-over-year revenue decline, totaling $1.52 billion, narrowly missing the market's expectations. Despite challenging market conditions, comparable sales increased by 0.3% during the quarter, countering analysts’ forecasts of a 0.4% decrease according to five Capital IQ polled analysts.
Revenue from the consumables segment saw modest growth, rising by 1% to $744.8 million. In stark contrast, revenue from supplies and companion animals fell by 5%, nearing $519 million, as highlighted in the firm's presentation. The services and other division was one of the few shining spots, registering a growth rate of 3%. The company’s gross margin took a hit, deteriorating by 60 basis points year-on-year to rest at 38.1%.
This decline was largely attributed to a downturn in discretionary product sales, as explained by Chief Financial Officer Brian LaRose during the earnings call. Selling, general, and administrative expenses also increased, rising to $578.3 million from nearly $569 million. "The entire Petco team is committed to managing our controllable factors to achieve structural enhancements in our financial standing, aiming for clear and attainable goals on our road towards sustainable and profitable growth," LaRose informed analysts.
Looking ahead to fiscal 2024, Petco is anticipating net interest expenses around $145 million and capital expenditures nearing $140 million. Price: $2.95, Change: -$0.12, Percent Change: -3.91.