Petco Health and Wellness pany(US:WOOF)2023-05-24 16:55Financial Data and Key Metrics Changes - In Q1 2023, net revenue was $1.56 billion, an increase of 5% year-over-year, with comparable sales also up 5% [21][40] - Adjusted EBITDA was $111 million, down 6.9% from the prior year, with an adjusted EBITDA margin of 7.1%, down 90 basis points year-over-year [42] - Q1 gross profit was $604.5 million, with a gross margin of 38.9%, down 230 basis points year-over-year [18][42] - Adjusted EPS was $0.06, a decrease of $0.08 from the prior year, primarily due to a $0.05 year-over-year increase in interest expense [42] Business Line Data and Key Metrics Changes - Total services revenue grew double digits, driven by strong performance in veterinary and grooming services [40] - Consumables sales increased by 11% year-over-year, while supplies and companion animals were down 8% in Q1 [18][22] - The grooming business generated record sales, and the veterinary business saw a 20% increase in pet appointments year-over-year [9][13] Market Data and Key Metrics Changes - The digital business experienced double-digit sales growth, with significant growth in same-day delivery orders, which more than doubled year-over-year [27] - The company reported a nearly 800 basis point improvement in partner retention year-over-year for full-time partners in pet care centers [28] Company Strategy and Development Direction - The company is focused on executing strategic priorities, enhancing operational efficiencies, and driving productivity [6][7] - Petco aims to expand its veterinary services, with plans to add 50 to 55 new hospitals in 2023 [44] - The integrated service model, including veterinary offerings, is seen as a key growth catalyst [32] Management's Comments on Operating Environment and Future Outlook - Management noted a cautious consumer sentiment beginning in the second half of Q1, influenced by banking uncertainty and lower tax refunds [45][131] - The company reaffirmed its full-year guidance, expecting revenue between $6.150 billion and $6.275 billion [44] - Management expressed confidence in the long-term growth potential of the pet care market, driven by trends of humanization and premiumization [32] Other Important Information - The company reported a 50% year-over-year increase in recurring customer revenue, with the Vital Care membership program showing strong growth [29][31] - Petco's liquidity position remains strong, ending the quarter with $593 million, including $149 million in cash [43] Q&A Session Summary Question: Clarification on Q2 EBITDA - Management clarified that Q2 EBITDA is expected to be flat to slightly up relative to Q1 [50] Question: Trends in Consumables and Supplies - Management indicated that consumables remain strong, while supplies are weaker, and they are working with vendors to address cost issues [51][62] Question: Recurring Revenue Trends - Management noted that recurring revenue as a percentage of total sales has been growing, driven by repeat delivery and the Vital Care program [68] Question: Traffic vs. Ticket in Q1 - Management reported positive trends in veterinary and grooming services, contributing to overall traffic [58][74] Question: Impact of New Vital Care Customers - Management stated that while there is some margin dilution from new Vital Care customers, it is not significant compared to the overall customer base [118]