Great time to get in the pet business!
Steve’s breakdown: Petco confidentially filed IPO papers and we think one of the ways they are going to use the financing is to grab most marketshare during this very Pet Business Friendly climate.
Either way, whether it’s Petco or some small pet business in your neighborhood, the pet business booming so why not?
SAN DEIGO, CA:
- Petco has confidentially filed a draft document for an initial public offering with the Securities and Exchange Commission, according to a press release.
- The pet retailer said it hasn’t yet determined the price or number of shares to be listed on public stock markets. The company expects the IPO to take place after the SEC finishes its review of the S-1 filing and upon other closing conditions.
- Petco previously went public in 1994 and 2002, and filed IPO papers in 2015 but instead was sold to private equity firm CVC Capital Partners and the Canada Pension Plan, its current owners.
After years of struggling under debt from its multiple private equity buyouts, Petco has had a good year.
S&P Global analysts boosted their outlook for the retailer in September after Petco beat second-quarter expectations, with comparable sales up 10.5%.
“We believe that Petco has benefited from a shift in consumer discretionary spending toward home-related purchases, including elevating spending on pets, and away from travel, dining, and other experiences that have been limited due to the coronavirus,” the analysts said in an emailed press release at the time. They added that Petco has gotten a boost as well from increased pet ownership rates, which they think will remain a tailwind for Petco into next year.
Traffic to pet stores including Petco, rose in the spring, as households looked to their pets for comfort in a turbulent, uncertain period as the COVID-19 pandemic took hold in the U.S. Not every pet retailer has seen boom times, though. Pet Valu recently announced plans to wind down and close all of its 358 U.S. stores.
With the retailer’s fortunes rising, Bloomberg reported in September that the company was mulling either a sale or an IPO that would value the company at $6 billion, all told. All in all it’s a positive turn for a company so bogged down by its debt load that it faced potential default recently.
The S&P analysts said in September that Petco was able to boost its margins and expand e-commerce sales “as consumers increasingly focus on safety and convenience, which led the e-commerce proportion of sales to roughly double in the first and second quarters of the year.” That said, they also noted uncertainty hangs over the company going forward given ongoing disruption from COVID-19 and the lack of another federal stimulus bill, which helped support its sales in the earlier part of the year.