Dive Brief:
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Petco is in search of a new CEO, announcing on Wednesday that Ron Coughlin has stepped down as the pet retailer’s chief executive officer and board chairman.
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Mike Mohan, lead director since 2021, has stepped in as interim CEO. He has been serving on various company boards since leaving Best Buy that same year. He spent 17 years at the electronics retailer, most recently as chief operations officer, per his LinkedIn page.
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The same day Petco reported that, including an extra sales week, Q4 net sales rose 6.1% year over year to $1.7 billion, with comps edging down 0.9%. The retailer swung into the red, with a $22.6 million net loss, from $32.7 million in net income a year ago.
Dive Insight:
Petco is shaking up its leadership after struggling for much of last year, and some analysts see that as a welcome change.
“We wish Ron Coughlin all the best, but acknowledge a fresh perspective is beneficial,” Wells Fargo analysts led by Zachary Fadem said in a Wednesday client note.
The retailer had enjoyed a boom during the pandemic as many consumers adopted pets and had additional spending money. But as that dissipated amid inflation and the end of pandemic-era government support, the company “did not anticipate the magnitude of the shift to value in both our consumables and discretionary business,” Mohan told analysts Wednesday morning. He described “two fundamental problems that we need to address with speed: One, an erosion of market share as customers sought out alternatives, and two, a significant decline in profitability.”
When asked what the company is looking for in a new CEO, Mohan said there is a comprehensive search on to find someone who can drive operational performance and profitability “and really operating at a world-class retail level.”
Chief Financial Officer Brian LaRose added that Mohan himself “is somebody who can come in and actually make meaningful change.”
“Mike probably won't say this but he's coming in with 36 years of retail experience with a reputation for operational excellence,” he also said.
In its efforts to boost profitability and margins, the retailer is looking to cut costs and make adjustments to its assortment to meet demand, according to LaRose. The company this year will slow its plans for new vet hospitals, to protect free cash flow, though its overall expansion of veterinarian services remains in place, he said. Wells Fargo analysts expressed disappointment in that move, noting that the hospital effort has been among the company’s best performing segments.
Coughlin is staying on as an adviser for a while, but has given up his board positions, leaving the board with one less member. Mohan has also stepped down from the lead independent director role.
