Petco has 1,500 retail locations but now calls itself a “pet platform company.”
Petco CEO Ron Coughlin told investors and analysts that the chain added over 325,000 net new customers in the third quarter for a total active customer base above 25 million pet parents.
“Recurring customer revenue driven by repeat delivery, insurance, and Vital Care grew by 56% year over year,” Coughlin told investors. “Growth was driven by high-value customers returning to shop for premium food and supplies who, like our value-oriented customers, are also leaning into our loyalty and membership programs.”
At the same time, the company is continuing its push to partnerships, noting Q3 deals struck with Nationwide Insurance, Marriott, Nestlé, and Colgate-Palmolive. “It’s clear that in addition to selling products and services, Petco is driving innovation and becoming a pet platform company,” Coughlin said.
To that point, he said the retailer’s “Vital Care” pet health and wellness membership program “saw an acceleration in weekly signups of over 50% fueled by the addition of companion animals and enhancements to in-store registration at point-of-sale,” with active membership topping 400,000 and marking a 42% growth quarter over quarter and over 200% increase from a year ago.
See also: Petco Looks to Fish, Birds, Snakes to Boost Subscription Revenue
The importance of Vital Care to the 1,500-store chain was clear in Coughlin’s comment that loyalty members have a lifetime value (LTV) that’s 3.5 times higher than non-members.
Alongside loyalty, perks played a part in Q3 financials, with Petco reporting perks membership now at 1.7 million customers, driven by nutrition and grooming. Perks members increased store visits by roughly 50% and spend by over 40% in the quarter, he said.
Earlier this year, Petco took full ownership of the Thrive Pet Healthcare venture, and Coughlin told analysts that the unit is “delivering tangible operational synergies and new Vital Care members” saying pet hospital openings accelerated with 17 new hospitals for a total of 229 full-service pet hospitals and clinics, bringing on 350 full time and contract veterinarians in Q3.
New Ventures and Digital Strength
Petco sees growth potential in pet insurance through its new pact with Nationwide, saying that in a total addressable market of over 90 million pet families only 2.3% now carry pet insurance.
Consumables sales were up 12% year over year in Q3, driven by assortment, with Coughlin saying, “RX including prescriptions and food grew almost 50% year over year, driven largely by repeat customers.”
Premiumization through brands like Yummers and the addition of Stella & Chewy’s raw and natural food products to Petco pet care centers, Petco.com and the Petco app beginning in January 2023, with Coughlin saying, “Experience shows us that when we bring in highly popular, narrowly distributed brands into our ecosystem, we see an incremental lift in sales.”
See also: Petco’s Recurring Subscription Revenues Cushion Consumer Downshift
Turning to digital, Coughlin said, “We will use promotions surgically not only to remain competitive but to drive specific outcomes such as BOPIS and loyalty program conversions.”
He said digital Q3 total digital sales were up 10% year over year, with growth drivers including “an increase in average basket, growth in repeat delivery including RX, and continued innovation. Specifically, the addition of multiple same-day delivery windows through our partnership with DoorDash has extended the time in which orders can be placed and increased appeal.”
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