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Petco CEO says shift to suburbs is fueling company growth

With more companies allowing their employees to work from home during the Covid pandemic, young urbanites have been moving into suburban and rural areas that give their pets more space to roam, said Petco CEO Ron Coughlin in a “Squawk on the Street” interview.

“There are people, millennials, who couldn’t have pets in apartments, who are now buying homes,” he said. “There could be a second wave of pet buying.”

Last year, 3.3 million new pets found homes as the pandemic made people long for a furry friend to keep them company during Covid lockdowns.

As a result of this shift to the suburbs, Coughlin noted that Petco’s 1,500 store locations across the U.S. and Mexico gave them a competitive advantage over online-only retailers like Chewy.

“Online competitors are shipping it from a distribution center going across multiple zones where we’re taking it in the back of a DoorDasher’s car for the same cost as if it was a tennis ball, delivering it the same day, and delivering it at lower cost,” said Coughlin, adding that 80% of its e-commerce orders are shipped or delivered via their stores.

Chewy declined to comment, citing pre-earnings quiet period.

Petco announced on Thursday that fourth quarter revenue and comparable store sales increased 16% and 17%, respectively, while digital sales grew over 90%. The company said fiscal 2020 revenue and comparable store sales both grew 11%.

Last December, Petco announced a partnership with DoorDash to offer same-day delivery to its customers. The company also tripled the number of ship-from-store locations as soon as Covid hit.

In addition, Coughlin told CNBC that 39% of its customers say they prefer to shop in store for its various pet services.

“They want to come in to our pet-care centers, they want to come in for a groom, they want to come in for veterinary care. We are the only player in the industry that has this end-to-end ecosystem,” said Coughlin.

Petco’s stock rose about 0.5% in afternoon trading.

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