Retail chain Petco has spent much of the last two years remodeling its stores to emphasize its new focus on pet health and wellness, which included adding an online pharmacy service courtesy of its 2014 acquisition of online retailer Drs. Foster & Smith. Now Petco, which was taken private in 2006 in a $1.8 billion private equity deal, is taking the story of its reinvention back to Wall Street, filing on August 17 for an initial public offering.
Petco didn't disclose in the filing exactly how much it hopes to raise, only listing a preliminary target of $100 million for the purpose of calculating its filing fees. The IPO is meant to provide a way for the company's owners, including private equity firms TPG Capital and Leonard Green & Partners, to sell their holdings.
Petco--which has more than 1,400 outlets in the U.S., Puerto Rico and Mexico--lists a number of animal health initiatives in its prospectus. In addition to the Drs. Foster & Smith acquisition, the company has been offering vaccinations through its Vetco mobile in-store clinics. Petco has also been installing new technology in its stores that allows its associates to cross-sell health and wellness merchandise, according to the filing.
A warm welcome back to Wall Street is far from guaranteed, however. The company's increased focus on high-margin pet services like Vetco has yet to show on the bottom line. In fiscal 2014, Petco's sales rose 5% year over year to nearly $4 billion but its net income dropped 11% to $75.3 million.
Interestingly, Petco's bid to go public comes just 8 months after its chief rival, PetSmart, was acquired in a staggering $8.2 billion private equity deal. The company was bought by a consortium that was led by BC Partners and included its limited partners La Caisse and StepStone. PetSmart has also bet big on services, operating Banfield pet hospitals in more than 850 of its stores.