Petco: Outlook Negative

On Wednesday, we concluded the “DO. NOT. MESS. WITH. DAISY. CHAPTER 2 (Short Pet Retailers 2.0) 🔫🔫” about Petsmart Inc., with the following statement:

“With 1600 stores, the company isn’t light with its footprint and same store sales and pricing power are on the decline. Still, the company’s liquidity profile remains relatively intact and its services businesses apparently still drive foot traffic. Which is not to say that the situation doesn’t continue to bear watching — particularly if Chewy.com’s customer-acquisition-costs continue to skyrocket, overall brick-and-mortar trends continue to move downward, and the likes of Target ($T), Walmart ($WMT) and Amazon ($AMZN) continue to siphon off market share. A failure to stem the decline could add more stress to the situation.”

Well, guess what: industry trends are continuing to decline. Last week Petco Holdings announced dogsh*t earnings (oh man, we’ve been waiting all week for that…SO GOOD) and, suffice it to say, its (and Petsmart’s) bonds made fresh lows on the news.

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