Petco Started Its IPO on a High, Likely Thanks to New Digital Offerings and the Pandemic’s Pet Boom
Petco recently had its IPO, which saw its shares surging by 63% during the first trading day. This success was likely thanks to a combination of the pet boom during the pandemic and the new digital offerings from the company.
The IPO
When Petco Health and Wellness opened on the stock market, its shares were $26, which was already 44% higher than the IPO price. The company’s first day of Nasdaq trading in mid-January saw a 63% increase, closing at $29.40. As a result, Petco’s market value surged to $6.4 billion. By comparison, the IPO raised $816.5 million with shares at $18. This was already better than the expected price target, which was just $14 to $17.
Reasons for Petco’s Success
The CEO of Petco talked to CNBC in preparation for the company going public. He discussed some of the reasons that the company was doing well and why the IPO and stock launch seemed to be a success.
The Pandemic Pet Boom
One of the major factors was the increase in people adopting pets due to the pandemic. More people are spending time at home and want the company of a pet. According to CEO Ron Coughlin, Petco has grown its customer base during the pandemic, thanks to new adoptions. He revealed that 3.3 million pets recently joined new families. Coughlin predicts that this trend would continue in the first half of this year.
Some people had already been thinking of adopting and realized that working from home offered the perfect opportunity to get a furry friend. Others realized that they were lonely or depressed and decided a pet could help. This is helping Petco as the company supplies the products to train, groom, feed, and vaccinate new pets.
Digital Investment
Another strong factor was Petco’s investment in digital options in the last 18 months. These include same-day delivery and online ordering with in-store or curbside pickup. These changes have allowed for digital business growth. According to Coughlin, 30% of the company’s e-commerce orders are for same-day delivery. Overcoming Petco’s Challenges Petco is facing some competition, such as against online retailer Chewy. However, Coughlin told CNBC that Petco still has some advantages over competitors. This includes its expanding veterinary business. Some 18 months ago, there are 15 vet businesses, but now there are 105. Additionally, around 70% of Petco’s pet products are only available in its stores.
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