PETCO conference call

How strong is the pet industry? It's so strong, that when a PETCO store explodes, executives not only mention it in a year end conference call but manage to turn it into an example of the success of the company.

In its 4Q and Full Year 2004 conference call on March 10, PETCO Animal Supplies, Inc. said services represent the fastest growing segment of its business, growing at a rate of 21% in the fourth quarter. This is similar to PETsMARTs recent comments about the growth of the pet services segment.

But the language and points of emphasis by PETCO differed significantly from PETsMART. Words like "community involvement," "social responsibility," and sentences about the health and emotional development of children, families and companion animals represent the value the company places on understanding the mind of the customer.

PETCOs overall business focuses products and services on the trend of pets being one of the family, illustrating a "powerful evolution of the pet industry," according to Brian Devine, Chairman of the Board.

The dual demographic of young professionals and baby boomers was directly addressed in the conference call, as was the continued expansion of the pet pampering trend. Data on the industry, customers, stores and vendors seem to be well collected and parsed by the company.

In 2005, PETCO's services offerings will continue to grow. Grooming is already available in almost 90% of stores, the dog day camp will expand from 3 current test locations to 10 in 2005, and "education" services (training) will continue to grow, with the company hiring a huge number of trainers and groomers each year.

Educating the employees is also a high priority at PETCO. Combining companion animal training with a shifting management development strategy (one that de-emphasizes traditional skills to focus on the big picture: how the animals, the customers, the employees and the business vision interact) illustrates the importance the company places on defining the corporate culture.

This tight focus on synergizing the customer's psychology with the business seemed to pay off in 2004, with the company reporting net sales up 12.5% in 2004 to $1.8 billion, and comparable year store sales up 6.2% from 2003.

In 2003 the company opened 3 new stores. In 2004, 17 stores were opened, and in 2005 the company plans to open 90 stores, evenly spread over the first three quarters. This is a very different pace from PETsMART, which said it will open the majority of its new stores in the fourth quarter of 2005. Next year's conference calls may show some interesting data resulting from this mismatch, as all new stores would follow the new Pisces design model.

Make that 91 stores this year, including a replacement for the store in Eatontown, New Jersey that blew up due to a gas leak last Friday, March 04. According to the company, the concerted effort to rescue the animals spoke highly of the community and employees.

Not mentioned in the call, but perhaps even more emblematic of some of its points, is the PETCO employee trapped in the rubble of the collapsed building, talking to 911 on her cell phone and wondering who will take care of her dog if she dies.

We wish her and everyone else affected a speedy recovery. And we know her dog will help.

Source: www.petco.com