June 17, 2024

Petco, the San Diego-based animal supply and health care retailer, announces layoffs

Looking to cut costs and shift strategies to become more competitive in the tight pet care and pet supply market, Petco announced it is laying off 56 workers at its San Diego headquarters.

The animal supply and wellness company filed a Worker Adjustment and Retraining Notification (WARN) notice with the state Monday.

The layoffs will happen in two rounds: the last day for 47 people will be Friday. Nine more Petco employees will have their last day on Oct. 27. Employees were notified Monday.

The company provided an emailed statement about the reductions:

“As we continue to transform the pet category through Petco’s differentiated end-to-end pet ecosystem, our commitment to growth includes investing in strategic priorities, lowering costs, and adapting to meet shifting consumer needs. To continue fueling growth in this environment we’re streamlining our cost structure, including a reduction of 56 partners who work or report to our California corporate office. We realize these decisions have an impact on our people, and we’re providing severance and transition support to all affected employees.”

Pandemic pets — animals adopted by people during the COVID-19 social distancing era to allay loneliness and boredom — have led to increased demand for pet supplies.

But inflation, increased competition and changed consumer spending patterns have also hit Petco’s profits, the company said in an SEC filing.

At its first-quarter earnings call in May, the company touted a “solid business performance amid (a) dynamic environment.” It reported that its veterinary services were in demand, with the number of pets seen by veterinarians up 20 percent year over year. It also reported it is prioritizing its financial strength by paying down debt.

In a statement about its first quarter performance, Petco reported a drop in net income and cash flow year over year: net income decreased $21.4 million to $14.9 million year over year, and its operating cash flow fell 34.5 percent. However, its net revenue increased 5.4 percent year over year, to $1.56 billion. Its sales grew almost on par — 5.1 percent.

In its 10-K regulatory filing (a required in-depth report detailing a public company’s finances), Petco drew a direct link between inflation, decreased consumer spending and its profits.

“Our business could be harmed by any material decline in the amount of consumer spending, which could reduce our sales, or a decrease in the sales of higher-margin products, which could reduce our profitability and adversely affect our business,” the company wrote. “For instance, a decline in the amount of discretionary consumer spending due in part to persistent inflation has negatively impacted sales of discretionary items, which has had, and could continue to have, an adverse effect on our profitability.”

It also pointed to competition and, in particular, competitive strategies that hurt the company’s bottom line.

“Major competitors have sought to gain or retain market share by reducing prices or by introducing additional products or services, which may require us to reduce prices on our key products or services or introduce new offerings in order to remain competitive, and negatively affect our profitability and require a change in our operating strategies.”

The layoffs all point to a broad strategy shift, with several high-level positions eliminated, according to the company’s WARN letter. Among them: the chief marketing officer, a senior vice president, four vice presidents and five directors. Multiple roles were in strategy. About a dozen were engineering jobs; others were in marketing, IT and human resources.

Petco previously trimmed 180 positions in 2017, with about 50 job losses in San Diego. Before those job cuts, it employed around 650 people locally.

“By consolidating certain functions and activities, we are simplifying and prioritizing key areas of our business in order to continue investing in growth opportunities that lie ahead for Petco,” a spokesperson said at the time.

The company was founded in 1965 and settled into its current 300,000-foot headquarters in 2015. That year, it had 27,000 employees in the U.S. Its latest employment figure: 29,000.

The company is hiring at retail locations across San Diego County, with 47 jobs in sales, pet training, grooming and animal health.

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