Stock Story -
What Happened: Shares of pet-focused retailer Petco (NASDAQ:WOOF) jumped 22.4% in the afternoon session after the company announced the appointment of Glenn Murphy as Executive Chairman of the Board of Directors. He is also expected to lead the Board of Directors' ongoing search for a permanent Chief Executive Officer. Following the appointment, Murphy purchased 1,470,589 shares of Petco's Class A common stock for approximately $2.5 million.
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What is the market telling us: Petco's shares are somewhat volatile and over the last year have had 46 moves greater than 5%. But moves this big are very rare even for Petco and that is indicating to us that this news had a significant impact on the market's perception of the business.
The biggest move we wrote about over the last year was 6 months ago, when the stock dropped 11.6% on the news that the company reported third quarter results, which missed analysts' expectations on nearly every key metric we track: revenue growth, same-store sales growth, gross margin, adjusted EBITDA, EPS, and free cash flow. Management acknowledged the challenges posed by the current consumer environment and expressed a commitment to swiftly address these issues by enhancing customer appeal, implementing cost controls, and managing capital more tightly.
It's worth noting a significant decline in GAAP operating income and EPS, thanks to a one-time $1.22 billion goodwill impairment charge. Even when adjusting for the non-recurring expense, this was still a bad quarter for Petco.
Petco is down 21% since the beginning of the year, and at $2.51 per share it is trading 76.6% below its 52-week high of $10.69 from May 2023. Investors who bought $1,000 worth of Petco's shares at the IPO in January 2021 would now be looking at an investment worth $84.86.
