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Petco Health and Wellness Company (WOOF) Q3 2021 Earnings Call Transcript

By Motley Fool Transcribing – Nov 19, 2021 at 5:30AM

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WOOF earnings call for the period ending September 30, 2021.

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Petco Health and Wellness Company (WOOF 1.19%)
Q3 2021 Earnings Call
Nov 18, 2021, 8:30 a.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:


Operator

Good morning, and welcome to Petco's third quarter fiscal 2021 earnings conference call. [Operator instructions] Please note, this event is being recorded. I would now like to turn the conference over to Kristy Moser, vice president of investor relations. Please go ahead.

Kristy Moser -- Vice President, Investor Relations

Thank you very much, and welcome, everybody, to Petco's third quarter 2021 fiscal earnings conference call. In addition to the earnings release, there is a presentation and infographic available for download on our website at ir.petco.com, summarizing our third quarter 2021 results. On the call with me today are Mr. Ron Coughlin, Petco's chairman and chief executive officer; and Mr.

Brian LaRose, Petco's chief financial officer. In a moment, Ron and Brian will walk us through Petco's recent financial and operating performance for the quarter. Before we begin our remarks, I would like to remind you that on this call, we will make forward-looking statements in regards to our current plans, beliefs and expectations, which are not guarantees of future performance and are subject to a number of risks and uncertainties and other factors that could cause actual results and events to differ materially from our results and events contemplated by such forward-looking statements. These risks and uncertainties include those set forth in our earnings release and our filings with the Securities and Exchange Commission.

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These forward-looking statements are made only as of the date hereof. Except as required by law, we undertake no obligation to update or revise any of them, whether as a result of new information, future events or otherwise. In addition, today's presentation contains references to non-GAAP financial measures. Reconciliations of these non-GAAP financial measures to the most directly comparable GAAP financial measures are included in the earnings release and our presentations, as well as with our filings with the Securities and Exchange Commission.

[Operator instructions] With that, let me turn it over to Ron.

Ron Coughlin -- Chairman and Chief Executive Officer

Thanks, Kristy. Good morning. We appreciate you joining us today. Petco delivered record third quarter results, with our sixth consecutive quarter of double-digit comp growth, generating 32% comp growth on a two-year stack with strong profit flow-through.

We continue to execute on our differentiated strategy with robust performance across all areas of our business. Growth in adjusted EBITDA of 17% outpaced our 15% year-over-year revenue growth, reflecting the strength of our model and operating leverage. I am so proud of our team's performance navigating these unprecedented supply chain inflationary pressures that are impacting every industry. Our focus remains on acquiring and delivering for our customers in an environment where demand is outpacing supply with millions of new pets and greater spend per pet.

I know from my nearly 30-year experience as a vendor to retailers that, in times like these, the strong and growing gets stronger. Correspondingly, we are pleased with our supply relative to the industry, particularly in consumables, enabling a more than doubling of our rate of share gain. Additionally, because most of our holiday stock is owned brands, we are well-positioned, having over 95% of that stock already in stores and DCs. This is on the heels of a 24% increase in Halloween merchandise sales compared to last year.

On inflation, like the broader marketplace, we have seen some price increases on vendor-supplied product that we have been able to pass through. The high end of the pet category where we focus is highly inelastic. In an aggregate, we haven't seen an impact on unit volumes. In a tight labor market, the companies with a compelling employee value proposition and strength of mission will do better in the competition for labor.

If you love pets, and you want to work for a company that cares about you, Petco is the place. And we're seeing that in our Pet Care Center applications, which increased roughly 40% in the third quarter versus the beginning of the year. Now back to business results. Petco's exceptional team has continued to deliver strong purpose-driven performance, combining stellar business results with tangible improvements in the lives of pets, pet parents and those working at Petco.

We had great business momentum in the first half of the year. And in Q3, we lapped a double-digit comp with a strong 15% growth. And that momentum has continued into the fourth quarter to date, giving us confidence to again raise our 2021 guidance, which Brian will provide details on later. Our focus on long-term sustainable growth is powered by continued execution against our transformation, including one of the fastest veterinary expansion in history; further enhancements of our digital competitive advantages, expansion of our merchandise differentiation through powerful owned and exclusive brands; and maximum leverage of our physical footprint.

I firmly believe that we're in a prime position to be a leader in the next evolution of the retail category. Looking back at the industry's history and chapters. Retail 1.0 was the consolidation of business to the brick-and-mortar stores of mega retailers like Sears and mass players. Retail 2.0 is the expectation that nearly all of retail would eventually move to digital.

And now we're in a stage I call Retail 3.0. The omnichannel promise that we've all been talking about for years was accelerated by the pandemic and is now blossoming with consumers. Petco has a combination of best-in-class digital assets and a strategic physical footprint that simultaneously delivers value-added customer experiences, along with powerful distribution capabilities. Pure-play online players lack this combination, and it is absolutely a source of competitive advantage.

Category growth continues to be very strong. Adoptions of new pets remains elevated relative to historic levels, though slightly moderated from 2020's hyper growth, with adoptions continuing to outpace supply. We're seeing particular strength in cat, where adoptions were up roughly 20% versus last year through mid-2021. The LTV of cats is just shy of the dogs, though, on average, is realized over a longer lifespan.

And spend per pet continues its upward march on the back of strengthening humanization trends driven by Gen Z-ers and millennials, where Petco significantly over indexes. Our customer acquisition engine continues to be a competitive advantage across both new and existing pet households. In the third quarter, we added more than 830,000 net new active customers, bringing our total active customer count to 23.3 million at the end of Q3, and we're driving increased value per customer from that larger base through personalization, enhanced analytics and CRM. Additionally, for the millions of new pets and households over the past 18 months, we're seeing a life cycle of pet play out across the category.

The new puppies and kittens adopted last year are growing adding 5, 10, 20, all the way up to 100 pounds in the last year. The larger they become, the more food they consume. Correspondingly, the category does see a reduction in supply sales between year one and year two of a pet's life, after the initial stock up when they're first welcomed into their loving homes. The end of year two status quo continues until the pet approaches end of life, where there is significantly higher spend on vet and prescription, similar to the higher demand we are seeing on the healthcare system with the boomer generation.

Importantly, as consumables have surged, we have taken more than our fair share of the category growth, which we estimate to have grown in the low teens year-over-year versus Petco's 21%. These share gains benefited from our winning hand in higher-growth segments like fresh, differentiated super-premium kibble brands and our own powerhouse, WholeHearted. We've also benefited from how we develop these brands. From a margin standpoint, while margins are higher in the supplies category, the LTV of an acquired consumables customer is strong double digits, more favorable than that of a supplies customer.

In Q3, our digital business again posted what we believe is one of the highest two-year revenue growth rates of any retailer, with an increase of 159% on the back of the 150% we posted last quarter, enabled by 32% year-over-year revenue growth, excluding our sale of Live Aquaria. We've developed a digital destination for pet parents that has incredible traction, and we continue to gain digital share. Repeat delivery grew nearly 40% in Q3 versus the prior year. This is such a valuable source of recurring revenue, and our headlights show significant repeat delivery of headroom ahead.

We generated strong growth in same-day delivery penetration, with 90% of customers choosing either same day or BOPUS, when it's available. We've expanded our assortment and enabled better personalization, which attracts new customers and is driving larger basket sizes. Our highly rated app has been downloaded 5 million times since launch, with app-generated revenue and active users more than doubling from third quarter last year. And the app care reminders we discussed last quarter are now delivering two times the conversion rate of nonpromotional emails.

And in the $50 billion pet health category, which includes grooming, training, veterinary care, prescription and insurance, we've been growing rapidly. This is largely driven by great hands-on experiences we offer, as well as our unique capabilities in marketing and technology, a capability stacked at local smaller brick-and-mortar and online-only competitors cannot match. In the almost $11 billion prescription market, we delivered 50% growth, with significant headroom for more. In Q1, we said it was a focal point for us.

In Q2, we transitioned to a new partner, Vetsource, and the momentum began. And in Q3, I'm proud to say that prescription food was up almost 100%. And prescription drug growth has accelerated every month since the transition. This is a business where ecosystem drives significant strategic advantages.

For example, in 173 hospitals, we now have Petco doctors writing scripts, which are getting filled either in our Pet Care Centers or via petco.com. The upside here is substantial. In the $45 billion TAM services and vet market, we continue to perform strongly with revenue up 24% versus a year ago or 38% growth on a two-year stack. We have the most groomers and veterinarians in our history.

And we're continuing to grow to meet rising demand as many of our groomers and doctors are booked at weeks in advance. While the vet market is one of the tightest labor markets today, our value proposition continues to resonate, and our recruiting time to fill open roles continues to outperform the industry. On this day, in 2018, we had 24 hospitals. On this day, in 2019, we had 73 hospitals.

On November 18, 2020, we had 107 hospitals. And today, we have 173 hospitals, on our way to 197 expected by the end of the year. Tangible milestones and the fastest build-out in history. In the quarter, we delivered 17 vet hospitals and had an acquisition of a vet practice in Texas that closed just after the end of the quarter.

Our organically built owned hospitals continue to deliver incredible results and will be our primary expansion focus going forward. Importantly, we continue to see mid-single-digit center store lift where we put up that hospital, in addition to the attractive four-wall model economics within that hospital, with 20% adjusted EBITDA margin. Our hospitals are complemented by Vetco clinics that are now in about 1,100 Pet Care Centers, up from 800 at the beginning of the year. Strategically, the clinic business continues to be a great feeder system of doctors for our hospitals.

The unique omnichannel platform I spoke of earlier is built on the foundation of a strong brick-and-mortar footprint and capability, which has been optimized over the last three years. Petco's brick-and-mortar merchandise revenue was up 11% year-over-year and 21% on a two-year stack, with growth in all of our major categories, with particular outperformance in the sticky consumables business. Owned and exclusive brands were up double digits. In the quarter, we introduced a ready flagship location in New York's Trendy SoHo neighborhood, complemented by stylist shop-in-shops across many of our Pet Care Centers.

These are great accelerators for a fashion-forward, high-end ready supplies brand. Second, we're driving a mixed shift toward premium and super premium consumable brands, which were up almost 20% versus last year. This also creates competitive insulation as those brands are not generally distributed in mass or grocery and tend to limit online access. Third, fresh and frozen was up close to 50% year-over-year with wonderful trip frequency dynamics that benefit the broader enterprise.

Today, we remain the No. 1 pet specialty retailer in the fresh and frozen category, with a full spectrum of exceptional brands like JustFoodForDogs, Freshpet and Instinct. JustFoodForDogs is now in 517 Pet Care Centers, and we're on track to bring our total to roughly 700 locations by year-end, complementing our nationwide fresh and refrigerated footprint. We've been pleased with JustFoodForDogs' ability to ramp supply in support of our expansion and increased demand from pet parents.

Many of you probably saw that one of our fresh and frozen vendors released results last week. Well, our revenue growth in that brand handily outperformed their total business, exemplifying our leadership and capability in this space. I believe we're reaching an exciting inflection point in our ability to drive value from our customer base as our data analytics infrastructure is maturing and our loyalty and engagement programs scale. This is best exemplified by our progress in driving customers into our recurring revenue and loyalty programs.

Recurring customer revenue was up over 60%, and recurring revenue customers grew by almost 45% year-over-year. Our Nutrition & Grooming Perks loyalty programs, which are driving higher average spend, have reached roughly 1 million members, up about 35% from Q2. Vital Care reached nearly 130,000 subscriptions since launching at the end of last year, and these customers are spending over three times an average customer, with almost 20% being new to Petco. Once again, we grew our multichannel, multicategory customer base by double digits.

As I said earlier, we are committed to purpose-driven performance. Therefore, in addition to delivering business results, we remain committed to improving lives of pets, pet parents and our own Petco Partners. We continue to progress on our mission to save pet lives, returning 1,600 pets to their loving parents through Petco Love Lost, their first facial recognition software for pets. And through our relationship with Merck, Petco Love is distributed over 0.25 million vaccinations to help end life-threatening preventable diseases to pets in under-resources communities across the nation.

We are also investing to improve the lives of those who work at Petco, increasing average hourly wages and investing over $12 million in benefit premiums over the last three years while absorbing certain healthcare costs. Additionally, Q3 bonus payouts for Pet Care Center staff were roughly 40% higher than target, highlighting that as the company does better, our partners will do better. As a result of these and other investments in our people, application hiring remain well above 2019 levels. And as we continue to progress our ESG agenda and disclosures, we were recognized by the Pet Sustainability Coalition with the 2021 Earth Hero Award for setting the standard in the pet industry on sustainability.

We are very proud. This is an incredibly exciting time for Petco. Our entire organization is relentlessly executing against our strategic priorities, and we have built the industry's only comprehensive health and wellness ecosystem for pet parents in a market exhibiting strong sustained growth. We're operating from a position of strength and see a long runway of growth, powered by our digital advantages, our differentiated products and services and our passionate people.

With that, let me turn it over to Brian.

Brian LaRose -- Chief Financial Officer

Thanks, Ron, and good morning, everyone. As Ron highlighted, the third quarter demonstrated the strength and resilience of our business and terrific execution against our strategy, one that is truly differentiated in the market. I'm pleased to share with you how this execution is manifesting into strong financial and operational results. Q3 was yet another quarter of record net revenue of $1.44 billion, up 15% year-over-year, with comparable sales of 15% or 32% on a two-year stack, reflecting the strategic competitive advantages and traction on our transformation that Ron outlined.

On both a one- and two-year basis, transactions and average basket trends were strongly positive for the quarter. In regards to inflation, we have taken select pricing actions to offset cost input increases. Our pricing strategy has been executed methodically. And in aggregate, we've not seen an impact on units.

We have an inelastic category and flexibility to adjust our pricing as dynamics in the market unfold. Momentum in consumables has been increasing, up 27% on a two-year stack and 21% year-over-year. In Supplies and Companion Animal, two-year growth was 34%, lapping heavy prior year comparables nicely at 6%. Services & Other grew 48% on a two-year basis and 28% year-over-year in the third quarter, benefiting from the expansion of our membership and subscription programs.

We continue to deliver these results through a dynamic cost-and-supply environment, during which we have remained steadfast in our inventory management and cost-mitigation efforts. While the environment is certainly challenging across retail, and pet is no exception, our team is executing extremely well, and we have advantages versus our competitive set. With our owned and exclusive brands representing roughly half of our assortment, we naturally receive priority status on those products. We exited products with artificial ingredients and have shifted toward healthier, more narrowly distributed brands, which means we don't compete with some of the 800-pound supply chain gorillas in the mass space the way others in pet specialty and online competitors do.

And importantly, in the healthier premium and super premium space outside of Petco, much of that product is only available with smaller regional pet specialty players. And lastly, our PCC partners are highly adept at redirecting customers to alternative products when their typical products are not available. While many naturally see that as advantage versus online players, it is also an advantage versus mass and grocery, who generally don't have the same depth of product knowledge as our Petco partners. This positioning is complemented by the expansion of our distribution center network that we discussed last quarter.

I'm pleased to report that our new Dallas and Columbus DCs are up and running. And earlier this week, we launched AutoStore in our Dallas DC to drive down cost per pet with an advanced robotic system. We are planning additional automation investments in 2022 and beyond. And through continued investments in enhanced DC compensation, logistics, as well as import and optimization initiatives for key bulk product vendors, we have positioned ourselves well to deliver growth in the fourth quarter and beyond.

Like everyone else in retail, the current environment has pressured freight, logistics and labor costs. These efficiency investments, coupled with select price increases, allowed us to manage gross profit dollars in our business, although it has impacted gross margin rate. Moving down the P&L. Gross profit increased $53 million or 10% to $595 million.

Gross margin was 41.2%, down 177 basis points from Q3 of 2020. Over a third of the decline was due to the mixed impact of exceptionally strong consumable sales and share growth, driven by continued acceleration of our loyalty and marketing programs, continued expansion of our assortment and the pet life cycle moving from year one to year two, as Ron referenced earlier. While this impacts gross margin in the near term, as we indicated, the LTV of an acquired consumables customer is significantly higher than a supplies' customer. We did see the increased supply chain costs that most are seeing in this unique time, and the remaining impact is mix shift toward digital and services.

Given that services labor sits in cost of goods sold rather than SG&A, mix shift toward services pressures gross margin. But given our historical services adjusted EBITDA margin has been roughly in line with total company, the mix shift toward services is really a P&L geography issue. On a sequential basis, the shift in gross margin was primarily driven by the outsized strength of consumables. Long term, we feel confident in our ability to manage levers to offset mix-driven margin pressures.

SG&A as a percentage of revenue improved from 39.3% in Q3 of 2020 to 36.9% in Q3 2021, continuing to demonstrate leverage across our model. On an absolute basis, SG&A expense was $533 million, up $37 million or 8% from prior year, as we support growth and continue to invest in sustained future growth through marketing, our infrastructure and our people. Our Q3 adjusted EBITDA was $139 million, an increase of 17% from prior year, outpacing revenue growth. This excludes a $20 million gain from mark-to-market on our investment in Rover and additional equity allocations following their IPO.

Q3 adjusted EPS improved by $0.13 or 185% to $0.20 based on 265 million weighted average fully diluted shares, as well as a normalized effective tax rate of 26%. Turning to our Pet Care Center base. We ended Q3 with 1,449 Pet Care Centers in the United States and Puerto Rico, down two from the second quarter. Our Mexico joint venture ended the quarter with 108 Pet Care Centers, up seven from the second quarter.

Mexico continues to be the market leader in-store and online, and performance for the third quarter continued to exceed expectations. We continue to have strong liquidity, ending the quarter with $663 million, inclusive of $221 million cash and cash equivalents and $441 million of availability on our revolving credit facility. Looking at cash flow. Year-to-date, we generated strong cash from operations of $288 million and had $164 million in capital expenses.

In the same period, we generated robust free cash flow of $124 million, up 18% versus prior year. Our net leverage ratio reduced by 19% or 0.6 to 2.6 times year-to-date in 2021. Looking forward, given our strong performance in the first three quarters and our confidence in our strategy and execution, we are now expecting the following for full year 2021: net revenue of $5.725 billion to $5.775 billion or a 16% to 17% increase from 2020; adjusted EBITDA between $577 million and $582 million or a 19% to 20% increase from 2020; adjusted EPS between $0.86 and $0.88, based on $80 million of net interest expense, excluding loss on debt extinguishment; 266 million shares outstanding and an effective tax rate of 26%; and capital expenditures at the $220 million to $235 million range, inclusive of incremental investments in digital, the build-out of our vet hospitals, innovation and enhanced supply chain capacity in response to sales growth. While we don't typically guide on a line-item level, given the continued strength of the consumables business, we expect fourth quarter gross margin to be roughly in line with Q3 2021.

Our revised guidance reflects the strength of our unique health and wellness ecosystem that continues to set Petco apart and our confidence in our ability to deliver against our strategic areas like vet, digital and owned and exclusive brands. Relentless execution against our proven strategy and initial revenue trends in Q4 gave us the confidence to guide to a high-20s-percent two-year comp for the fourth quarter despite broader macro dynamics, completing what looks to be a phenomenal 2021 for Petco. With that, Ron and I will now take your questions.

Questions & Answers:


Operator

We will now begin the question-and-answer session. [Operator instructions] Our first question today comes from Oliver Wintermantel with Evercore ISI.

Oliver Wintermantel -- Evercore ISI -- Analyst

Yeah, thanks. Good morning, guys. My question was regarding traffic versus ticket in the quarter. If you could maybe break out what inflation was and how ticket and traffic were trending in the quarter.

And what do you expect that to be in the fourth quarter? Is it more traffic- or ticket-driven? Thank you.

Brian LaRose -- Chief Financial Officer

Yeah. Thanks, Oli, it's Brian. First of all, let me say that transactions and average basket trends were both strongly up versus a year ago. Transactions are up.

We're benefiting from larger baskets. And we also are benefiting from our partnership with our payment platform, Klarna, which went live earlier this week. And we continue to look for opportunities to expand our basket size. Relative to inflation, I'd tell you that we took pricing actions during the quarter, and we haven't seen any aggregate impact on volume, and we'll continue to look at vet pricing going forward.

Ron Coughlin -- Chairman and Chief Executive Officer

Yeah. Right. This is Ron. I would just add on that the traffic and basket increases were present in both our PCCs, as well as digital.

Oliver Wintermantel -- Evercore ISI -- Analyst

Got it. And then just a clarification. The gross margin that you said is the same as the third Q. Is that the rate or the decline in basis points year-over-year?

Brian LaRose -- Chief Financial Officer

Yeah, Oliver, that's great. And what I would tell you is we're in a unique time. And the consumer wants to spend more, and we're focused on driving gross margin dollars. But as you asked and as we said on the call, Q4, we expect to be in line with Q3.

And that said, we're pulling every lever to drive margin as much as we can without sacrificing the customer experience.

Oliver Wintermantel -- Evercore ISI -- Analyst

Got it. Thank you very much, and good luck.

Operator

Our next question comes from Steven Zaccone with Citi.

Steven Zaccone -- Citi -- Analyst

Great. Good morning, guys. Congrats on the continued momentum in the business. Thanks for taking my question.

I wanted to follow up on the gross margin a little bit. So given the dynamic for a continued decline here in 4Q, can you maybe just talk a bit about how much of this you view as transitory in nature with the consumables mix and the supply gain pressure? And then I'm curious to get a sense of what are the defense factors here, right, that could help you on gross margin rate? And there, you're taking pricing up, right, you should be seeing a benefit toward own brands. So how do we think about some of the defense factors you have to protect rate, especially as we get into next year?

Ron Coughlin -- Chairman and Chief Executive Officer

Thanks for the question, Steve. So let me take the first part of it in terms of breaking down the gross margins. But I'll start by just reminding from the release, our EBITDA rate increased by 20 basis points, our gross margin dollars by $53 million. I'll second what Brian said.

We are in a unique, unique time. The consumer wants to spend more money. So we are very focused on gross margin dollars, though we are actively pulling levers on gross margin rate. Three components to the gross margin impact year-over-year, the No.

1 driver is consumable mix. So our business did far better than we expected. And our rate of share gain was twice what we saw a year ago. So this is very good for our business.

Consumables are sticky. Consumable LTV is roughly 20% better than is our supplies of LTV. So we get a better LTV off this customer. So it's strategically a good thing for us.

Does it provide margin pressure here and now? Yes. But again, from an LTV standpoint, it's a good thing. Beyond that, there's a mix element. Brian talked on the call about services component, which is really P&L geography as we mix shift into services.

The COGS are in cost of sales, but the EBITDA is basically neutral to total enterprise. And finally, there's the supply chain piece that every retailer is seeing.

Brian LaRose -- Chief Financial Officer

Yes. And I think on some of the levers, Steve, you hit on a couple of them, but I'll just go a little bit further. So expanding premium and own-brand mix, enhancing our services pricing, realizing the economics of our vet investments, where our bed hospitals are getting more mature. They're starting to see the front funnel of our new hospitals that are coming online, driving higher AOV through targeted customer engagement and PTCs and digital.

And continuing to optimize our digital fulfillment channels toward the lower cost fulfillment options. I would tell you, Steve, that a lot of this is already showing up. If you look at rates in sort of some of the subcategories, gross margin rate for services was up year-over-year. Digital rate was up year-over-year.

Consumables rate was up year-over-year. So within that mix dynamic, we are driving rate increases across the categories.

Steven Zaccone -- Citi -- Analyst

OK. It's very helpful. Then maybe a higher-level question, Ron. Just thinking about the brand's progress.

I guess you've been at the company now for over three years. Company's public. How do you feel about the consumer's perception of Petco? Like what's really working when you talk to customers? Where is there more opportunity for improvement as you go forward?

Ron Coughlin -- Chairman and Chief Executive Officer

I'd say it's a story of we've come so far, but we have so much headroom ahead. If you look at -- it was October 2018, we made the decision to get rid of artificial ingredients. And that was watershed moment for us because it really started repositioning the company into a health and wellness company. And that positioning of a health and wellness company has served us well.

Whether it has helped our consumable business go into the higher-end businesses like super premium kibble or fresh, or whether getting rid of shock color has helped us go upstream on training to positive training. Or clearly giving us credibility in the vet space now get to 173 vets and for consumers to feel like they can come to a Petco for vet services, all the way up to surgeries. So that repositioning of the company has been successful. The brand is successful.

And then underneath that, we've actually really gotten our marketing muscle. And so the campaign that we launched in January of last year really -- or January this year really brought that brand promise to life. And when we couple it with our performance marketing, you've seen the results. I mean let's -- right, there are questions of whether we could lap in the second half.

And we didn't just lap, we lapped with strength. And that's both because of our offering, because of our marketing, but fundamental to all of it is the brand strength.

Steven Zaccone -- Citi -- Analyst

Great. That's very helpful. Have a nice Thanksgiving. Thank you very much.

Ron Coughlin -- Chairman and Chief Executive Officer

Thank you.

Operator

Our next question comes from Michael Lasser with UBS.

Michael Lasser -- UBS -- Analyst

Good morning. Thanks a lot for taking my question. Ron, given the point you made in your script about the step down that typically happens in the second year of ownership of a pet and all the strengths in adoptions that have occurred last year, one would have expected that to be a drag on the industry this year. Yet industry has been really strong.

Why do you think that is? And is this just delaying an inevitable step down next year?

Ron Coughlin -- Chairman and Chief Executive Officer

Yeah. So let me be 100% clear, and this is a conversation we had a lot in the IPO process. There is no step down between year one, year two, year three, year four, all the way out. The only time you get a change in annual spend per pet is in -- toward end of life, where the Rx and prescription bounces up.

But year one to year two, in terms of total dollars, is equivalent. The dynamic that we're talking about is in year one, you have a higher of supplies because you're getting crates, you're getting beds, you're getting all the supplies, leashes, collars. Year two, I don't know about your pet, but my Yellow Lab, Yummy, probably added 50 pounds between year one and year two, and he was eating a lot more food. So year two, you see the consumables pick up versus the supplies.

So if you look at the business progression, 2020 was a hyper growth year for new pets, hyper growth year for supplies. 2021, we're getting into hyper growth on consumables. In both of those dynamics, we're gaining share against those segments. But in the here and now, it does create a bit of margin rate pressure because of that crossover.

On top of that, our rate of share gain on consumables doubled, which is great for our business, but the optics create the conversation.

Brian LaRose -- Chief Financial Officer

Yeah. And Mike, the last thing I would add on that is we've talked about the market expecting to grow at a 7% CAGR over the next five years. And our portfolio is not a direct overlay with that market. We're over-indexed to parts of the market that are growing at a multiple of that services in digital, which will grow at a multiple of seven, and that's two areas where we are over-indexed.

And as part of that is our vet build-out as well. If you look at our vet build-out, we've talked about 170 hospitals, that in this year with one closing right after. The year puts that at 173. And the last thing I would add, to Ron's point, is although the dynamics of the mix of supplies and consumable shifts year one to year two, we are seeing continual increases in spend per pet year-on-year.

Ron Coughlin -- Chairman and Chief Executive Officer

Driven by millennials and Gen Z-ers adopting majority of the new pets. Thanks for the question.

Michael Lasser -- UBS -- Analyst

Understood. [Inaudible] a quick follow-up, if we assume that some of the drags in the gross margin persist in the next year, maybe the balance between consumables, and supplies is a little bit more normal. But supply chain costs, the mix of services probably persist. Do you have the ability to manage SG&A and have it lever like it's been over the last few quarters to offset that, in light of the very tight labor market and wage inflation probably persisting well into next year?

Brian LaRose -- Chief Financial Officer

Yeah, I can take that one, Michael. So first of all, I'd say we've continued to manage our costs aggressively. If you look at what happened this quarter, SG&A improved by almost three points while we continue to invest in the business. So we continue to lean into areas like marketing, where we like the ROI.

And we'll continue to drive operating leverage through growth initiatives and SG&A cost-out opportunities. We have formal programs designed to reduce opex and SG&A and to give us greater leverage. And there's also components of our cost structure that are fixed, such as our operating leases. We have close to 1,500 PCCs.

And we know those associated expenses, so there's natural leverage with volume. On your first point on consumables versus supplies. While consumables, we expect to remain strong, we do expect those growth rates to start to come closer together as we get past Q4.

Michael Lasser -- UBS -- Analyst

Understood. Thank you so much, and have a good holiday.

Operator

Our next question comes from John Heinbockel with Guggenheim Partners.

John Heinbockel -- Guggenheim Securities -- Analyst

Hey, guys. So Ron, let me start with, when you think about Vital Care and its growth rate going forward, how do you think it will track the vet rollout to a certain degree? And how can you accelerate that outside of the vet rollout? I don't know if there's something you can do with Vetco or with partnerships. And then just remind us the -- I know it's early, but the Vital Care customer in terms of their lifetime value and their spend relative to a non-Vital Care customer.

Ron Coughlin -- Chairman and Chief Executive Officer

Yeah. Thanks for the question, John. So Vital Care, we're happy with the growth. We're ahead of our expectations.

We have long-term plans for Vital Care to be scale and to have a tangible impact on our business. These customers are spending three times our average customer. But underneath that are some fantastic ad design dynamics. So for example, Vital Care customers.

19% of Vital Care customers are new to food with us. Over 30% of Vital Care customers are new to grooming with us so -- or services with us. So it is doing the share of wallet job that we wanted to. I mean in terms of the linkage on how we drive Vital Care.

I will tell you, this is in every pocket of Petco thing. So the Pet Care Centers, I think I've been in probably 25 since our last quarterly call. And our Pet Care Center folks are as fired up about Vital Care as our vet folks are. And actually, I'll tell you who the most fired up and influential are, are our groomers.

Because people go in, they trust the groomers, and you get grooming discounts because of Vital Care. So it is across the organization thing for us. And you will see Vital Care accelerate as we go forward from here.

John Heinbockel -- Guggenheim Securities -- Analyst

OK. And then maybe a quick second. In terms of the supply business, right, I think about Reddy. Obviously, the first Reddy Shop is pretty impressive.

Where do you think -- how do you think about driving supplies in Reddy? Can you do it more through more of those locations? Is that going to drive some engagement online? How do you kind of -- is there a way to easily use Reddy to accelerate the supplies business from where it is now?

Ron Coughlin -- Chairman and Chief Executive Officer

Yeah. So we're very focused on Reddy and tight supplies end-to-end. We like the owned brand part of it, and we like the profitability of it. We do have a year one to year two dynamic going on right now.

We love Reddy, which is why we invested in that flagship store. Consider it a flagship store, consider it advertising, which, by the way, if anyone is looking for great Christmas presents for -- or Hanukkah presents for the holidays, we encourage you to go down and pick something up for the New York crew on the call. But we are launching -- or we have launched 70 store-in-stores for Reddy. So you take a normal store, and we do the vet build out.

We also add a Reddy store-in-store in the ones that we've done over the last year, and we're seeing a significant lift. We will continue to drive Reddy as high end, but we're also taking up our entire supplies line, whether that's the everyday supplies. I talked about holiday as a supply -- sorry, Halloween as a supply. Our holiday stuff looks great.

And then in 2000 -- actually going on in Q4 and then into 2022, you will also see us relaunch our Pet OTC. I believe there is no reason why industry can't have a vibrant OTC, similar to what you would see at CVS. And you will see us go after that opportunity in a more significant way at the end of this year and into 2022.

John Heinbockel -- Guggenheim Securities -- Analyst

Thank you.

Ron Coughlin -- Chairman and Chief Executive Officer

Thank you.

Operator

Next question comes from Zach Fadem with Wells Fargo.

Zach Fadem -- Wells Fargo Securities -- Analyst

Hey, good morning. Ron, when you look at your vet and prescription opportunity, could you talk about how much of the industry scripts or vaccinations today are filled by the vet channel or OTC channels? And how you differentiate versus them? And then for vet care as a whole, could you talk about to what extent that tight labor market impacts the vet rollout?

Ron Coughlin -- Chairman and Chief Executive Officer

Yeah, I'll start, and then Brian can add in anything that I leave out. So let's focus first on the Rx part of it, because it is one of the significant pieces of headroom in our business. It's an $11 billion market. And if we look at the progression, last quarter, we talked about the shift over to Vetsource.

We saw our momentum build, and then that's Q2. In Q3 now, what we saw was the business really started to take off, 50% growth and 100% growth on our Rx Food business, which every time we put in a vet, we can sell in the Pet Care Centers as obviously, what we're doing from a digital standpoint. And our script business has gotten better week over week ever since we did the Vetsource. So that was a winning move.

And so we're going after that $11 billion. You think about it, in 173 hospitals in 1,100 Vetco clinics, we now have vet writing scripts that get fulfilled either in the Pet Care Center or in the -- in our digital assets. So we're able to drive that across the ecosystem with an ecosystem effect that other people that don't have live vets may not have. On our ability to hire vets, as we said on the call, our time to fill is below industry averages.

And our value proposition is really working. If you look at what we do, we offer flexible working hours, working days. And if you know what's happening in that business and the profile, that is valuable to them. We offer the ability to practice autonomous medicine.

That is very valuable, and the roll-ups aren't doing that. We offer stock, which most companies -- vet hiring companies do not offer. So we have very attractive components to our value proposition, which is why our time to fill is better than industry averages. The other thing that we haven't talked too much about is our Vetco clinics.

We have 1,100 Vetco clinics. We tap into 1,500 vets, who sign up for shifts on our Vetco clinics. Those vets, number one, are a feeder system for future hospital as maybe their life circumstances change. But importantly, those vets can do filling shifts for us.

I don't think anybody else in the industry has that capability. So we're doing well on our pure vet hospital recruiting, but we have this cadre of vets that sign up for our clinics that can do fill-in shifts. And that's what enables us to drive the growth that we're doing in terms of number of vets. That said, it is a tight market, but I like how we're executing in a tight market, and I like our value proposition.

Zach Fadem -- Wells Fargo Securities -- Analyst

Got it. Thanks, Ron. That's helpful. And for Brian, when I look at your profit flow-through, it's been relatively consistent this year at a low double-digit incremental EBITDA margin.

But I'm curious, to what extent is this being constrained today by the external environment inflation, perhaps some of your growth initiatives? And as I think about long term, what are the opportunities to improve flow through? Or is this low double-digit level the right way to think about the business?

Brian LaRose -- Chief Financial Officer

Well, thanks for the question, Zach. I'm not going to get into specific guidance, but what I will read forth some of the points that you made. We've been consistent over '21 -- 2021, where we've pulled levers and we've driven adjusted EBITDA margin expansion in each quarter while investing in future growth. So I wouldn't use the word constrained as you did.

I'd rather say we are balanced in our execution against expanding adjusted EBITDA. If you look at our guidance, our adjusted EBITDA for full year is growing faster than revenue, while continuing to invest back into the business. We continue to highlight areas like marketing and advertising. We look at the ROI on those investments from a customer acquisition and LTV standpoint.

And as long as we like the ROI, we'll continue to lean into those investments while also expanding EBITDA.

Zach Fadem -- Wells Fargo Securities -- Analyst

Got it. Appreciate the time, guys.

Ron Coughlin -- Chairman and Chief Executive Officer

Thank you for the question, Zach.

Operator

Our next question comes from Chris Bottiglieri with BNP Paribas Exane.

Chris Bottiglieri -- BNP Exane Paribas -- Analyst

Hi. Thanks for taking my question. So Ron, you hit on the pet adoption in the prepared comments. Can you just elaborate more there, what you're seeing? It's kind of hard for us to track that data.

It's probably tough for you, too, if you have the adoption shelters, you have kind of like your CRM and data analytics. So hoping you can maybe give us a sense for like the cadence of pet ownership over the last several quarters and how that's comparing to like pre-COVID trends.

Ron Coughlin -- Chairman and Chief Executive Officer

Yeah. So thanks for the question, Chris. So if you look at pet data, I come from a PepsiCo background and in the HP background, where you had near-perfect data in your categories. So the pet industry is not a perfect data.

So we triangulate from industry sources. We triangulate from Petco Love in terms of rescues. We triangulate with online resources. At the same time, there are -- one of the biggest ways people source pets is person-to-person.

So I will give you those caveats. What we're seeing is the category continuing at an elevated rate in terms of pet adoptions. We are not seeing heightened relinquishments. I know there's been stories of heightened relinquishment.

Thank God, we're not same heightened relinquishments at this point, but we are trying to get ahead of that in case it does when people return more to work. Spend per pet continues to increase. As we said, Gen Z-ers and millennials are leading the humanization trend. They spend more.

So the more pets that go into those folks' hands, the more puffer vest they're wearing, and their box are walking next them are wearing. So that is a positive trend. Overall, again, it's elevated, but it's slightly moderated from what we saw in '20 is what our triangulation is showing.

Chris Bottiglieri -- BNP Exane Paribas -- Analyst

Gotcha. That's helpful. And then -- so it sounds like digital process -- these stores outpaced overall digital growth. Can you just help us like better understand your fulfillment options? I think you said 90% of your online sales are BOPUS and DoorDash.

Can you give us a sense for the split of BOPUS and same-day? And kind of like how that's been kind of, I guess, trending sequentially, especially as, I guess, the economies reopen and consumers return to the store, that would be helpful.

Ron Coughlin -- Chairman and Chief Executive Officer

Yeah. So let me break down the data we shared. What we said is when BOPUS or same day are available, think about at 4:00, you can't do same day, right? So when they're available, 90% are choosing them, which highlights that there is customer momentum where we have capability that our online competitors do not have, because they can't do BOPUS, they can't do curbside, they can't do same day. Our statistic, we provided that 80% of our e-commerce orders are fulfilled through our Pet Care centers, whether that's ship-from-store, BOPUS, curbside or same-day delivery.

Again, competitive advantage because we have inventory close to the customer, particularly in an environment where FedEx and UPS costs are going up. So those are two of the things. Specific to the offers, I think the only numbers we broke out, as we did say, the repeat delivery is up 40%, and we also have shared in the past over 50% of our e-commerce business is in recurring revenue programs.

Brian LaRose -- Chief Financial Officer

Chris, the last thing I would add is just as a few questions on leverage here. In addition to being a fulfillment advantage for our customers, it gives us leverage across our model because we're leveraging the labor in our PCCs for that fulfillment. And our PCC leadership team has done an excellent job at driving task out of the process in store to have more customer-facing time. Further, with the fulfillment -- what our fulfillment options give us a real advantage on is fresh.

We've done the model. We've run the math on delivering fresh from a DC. The amount of packaging involved and delivering fresh, the costs associated with that, it gives us an advantage faster to customer. It shows up with minimum packaging.

It's much more profitable for us.

Ron Coughlin -- Chairman and Chief Executive Officer

Which is why, today, we're five times -- or we estimate we're roughly five times the size of leading online competitor in Fresh Frozen.

Chris Bottiglieri -- BNP Exane Paribas -- Analyst

Gotcha. Thank you for that color. Appreciate it. 

Ron Coughlin -- Chairman and Chief Executive Officer

Thank you.

Operator

Our next question comes from Liz Suzuki with Bank of America.

Liz Suzuki -- Bank of America Merrill Lynch -- Analyst

Great, thank you. It looks like the raised guidance seems to be mostly just flowing through the 3Q beat and implies some deceleration in sales on a two-year growth basis. Are you just baking in a fair amount of conservatism given the heightened uncertainty around consumer behavior in the months ahead?

Brian LaRose -- Chief Financial Officer

Yeah, Liz. So first, I would say that the guidance was not just a direct add of flow-through from Q3. There was incremental on top of that. And I think if you do the math out, we guided to a high-20s percent two-year comp; and for the full year, a two-year stack of 30%.

And as Ron indicated in the call, based on what we're seeing so far in Q4, we feel good about where we guided.

Liz Suzuki -- Bank of America Merrill Lynch -- Analyst

Great. And then it looks like inventory per store is up nicely. Just how much of that is due to inflation as opposed to higher unit volumes? And are there any categories where you found it difficult to procure enough inventory to meet the strong demand?

Brian LaRose -- Chief Financial Officer

Let me start with the inventory levels, and then maybe Ron and I can tag team the second part. So I would say that the inventory levels are more a function of us staying out in front of demand. There's also some seasonality in the back half, Liz, with Q3 reflecting a stock up of holiday, which tends to normalize a bit in Q4. But we will continue to look for opportunities to stay out in front of demand.

On a broader question, I'd tell you that supply chain is tight, but I like our positioning relative to the market. And I would highlight to you that a minority of our revenue is from products sourced outside of the U.S. So we feel like we're well-positioned. We like our model of leveraging our PCCs as micro distribution centers, as we just talked about.

And I'd also tell you that in store, in our PCCs, our partners are a strategic advantage. They do a great job at redirecting customers to alternative brands and products, which optimizes substitutions as a result.

Ron Coughlin -- Chairman and Chief Executive Officer

Yeah, let me -- thanks for your question, Liz. Let me just add color to that, right? You have a customer coming into the Pet Care Center and they say, I need a food that has digestive track properties. And we don't have their normal product. In most settings, whether it be a mass or supermarket or online, that sale is lost.

In ours, they trust our Pet Care Center folks. They're knowledgeable, and they can redirect them to another product that has that same attribute. So we believe we're able to capture that sale, which I think is showing up on our consumable share gains that we talked about earlier. In terms of specific products that we're in or out of stock, it's been a volatile market, and we've had to be nimble.

But I think the fact that we drove 15% growth in that market is big source trends.

Liz Suzuki -- Bank of America Merrill Lynch -- Analyst

Great.

Ron Coughlin -- Chairman and Chief Executive Officer

Thanks for your question, Liz.

Operator

Our next question comes from Stephanie Wissink with Jefferies.

Unknown speaker -- Jefferies -- Analyst

Hi. This is Corey on for Steph. I wanted to ask if you could talk a little bit more about the puts and takes behind Q3 SG&A with COVID costs coming out and some of the investments you made. Then if you can talk about those dynamics into Q4, that would be great.

Thanks.

Brian LaRose -- Chief Financial Officer

Yeah. I mean, Corey, thanks for the question. I mean, I'll reiterate some of the things I said. Our SG&A leverage was down three points year-on-year.

Although we saw dollar growth, there are areas that we continue to invest in. The two biggest ones being our labor model. So we've got a long-term labor model that we're executing against to make sure that we have that model right. Number two is advertising and marketing.

We continue to like the ROI that we're seeing, and we're going to continue to lean in. But there's a big fixed cost component of our SG&A that we have line of sight to. I mentioned we have close to 1,500 PCCs. The rent associated with cost of those are very predictable, and we have those lined up.

So that's about as much color as I can get into for you, Corey. But I would tell you that the investment areas are labor and advertising, but we have leverage overall.

Unknown speaker -- Jefferies -- Analyst

Got it. Thanks. And then in terms of seasonality in Q4, would you typically expect to see a higher mix of supplies and hard goods? And the difference this year is the COVID adoption comp?

Brian LaRose -- Chief Financial Officer

I would say that there's two differences this year, Chris. So yes, typically, you see a bump up in supply quarter-on-quarter. That said, we have a lot of momentum in consumables, and that's why we indicated on the call that we expect that momentum to continue into Q4. Now the growth rate, if you look at this quarter, you had 21% growth in Consumables, 6% growth in supplies in Companion Animal, two-year Supplies and Companion was 34%.

So we had very strong growth last year. So you've still got a lap dynamic in Supplies, pending in year-over-year to Q4, but we would expect the Consumables to stay strong and the growth rates to start to come closer together.

Ron Coughlin -- Chairman and Chief Executive Officer

The thing I'd add, Corey, is the normal sequentials in the normal year-over-year are influenced by this dynamic of the heightened pet adoptions in '20, year one in '20 versus year two in '21, that is biasing some of those numbers from their normal trajectories.

Unknown speaker -- Jefferies -- Analyst

Got it. Thank you.

Ron Coughlin -- Chairman and Chief Executive Officer

Thank you.

Operator

Our next question comes from Seth Basham with Wedbush Securities.

Seth Basham -- Wedbush Securities -- Analyst

Hi. Thanks a lot, and good morning, and congrats on a great quarter. My question is on the customer additions that you mentioned, Ron, 830,000 net in the quarter. Could you provide what you grew customers on a gross basis?

Ron Coughlin -- Chairman and Chief Executive Officer

We did not provide that. If you look at kind of the adds, if you look at last quarter in Q2, we had significantly more adds than our key competitor, almost three times as many adds. And we believe that we led the market with Q3 as well in terms of net adds. And it reflects the strengths of our model, the strengths of our marketing.

We're going to continue to flex this. We like the [Inaudible] annuity of the customer acquisitions. So we're pleased with where we are, and we're pleased with the spend per pet as we talked about Gen Z and millennials spending more. But no, we did not provide the gross number.

If we're going back to some of the stuff we talked about in Q2, there was no difference in the customers that we serve. It was just a categorization based upon a POS shift. So that really had no impact on our business.

Seth Basham -- Wedbush Securities -- Analyst

Got it. And just a follow-up on that. So the attrition rate in your customer base isn't really changing from one quarter to the next kind of a year-over-year basis for the net adds for this quarter, relative to last? How do those look?

Ron Coughlin -- Chairman and Chief Executive Officer

The net adds is what I gave you in terms of the 830,000. And in terms of the retention, retention is basically flat. If we look at the cohorts, it's been roughly in line with historical cohorts. We're seeing similar buying patterns.

So retention is in line, which is great because you pick up all these brand new pets, you think they might have different buying habits, but the retention is in line with prior cohorts.

Seth Basham -- Wedbush Securities -- Analyst

Got it. Thank you very much.

Ron Coughlin -- Chairman and Chief Executive Officer

Thank you.

Operator

Our last question today comes from Peter Benedict with Baird.

Peter Benedict -- Baird -- Analyst

Hi guys, thanks for sneaking me in here. Two questions. I guess first one, the 4.1 million multichannel customers, I think that pencils out to maybe 17%, 18% of your active base. How is that penetration different, if at all, among some of your younger or newer customers? And where do you think you guys can kind of take that penetration over the next few years? That's my first question.

Ron Coughlin -- Chairman and Chief Executive Officer

Yeah. So on multichannel, I mean, it's something we've been focused on. We drove a double-digit increase. This is our third consecutive quarter of double-digit increases, and we're getting better and better at this.

If you recall, Peter, when we talked earlier in the year and even a year ago, we talked about building capability on analytics. Building capability on CRM to drive people across what we call One Petco and across the portfolio and across the portfolio offerings. We are seeing more and more strength with that. At the same time, we've been adding customers at such a rapid rate, right? 1 million customers last quarter; 830,000 customers this prior quarter.

And so what happens is you get a customer in, and then you move them across your enterprise. And Biocare is a perfect example that I cited, over 19% new to food over 30% new to supplies. So in general, that dynamic is a feeder system to our multichannel offering is what we're seeing.

Peter Benedict -- Baird -- Analyst

Yup. That makes sense. And then my next question is just around the consumables. Obviously, the traction is very encouraging here.

Can you maybe expand a bit on the success you're having within the fresh category? I'm curious if you can share anything on maybe the relative basket size or margin profile of transactions that include JustFoodForDogs or Freshpet, and how that maybe compares to your typical ticket?

Ron Coughlin -- Chairman and Chief Executive Officer

Yeah. So what we're seeing from a fresh frozen is you see hiring and you see higher frequency. So actually, when we look at JustFoodForDogs in particular, what we look at is not just the benefits of JustFoodForDogs. We look at the enterprisewide benefit, which is part of the financial analysis underneath why we're building out these pantries and these runs is because that frequency has lug on effect to the entire enterprise.

So we like that a lot. It's significantly higher frequency of that channel. Being a pet parent that includes JustFoodForDogs and when I feed my guy, I know the frequency is higher. Just hitting on your prior question for a second, the multichannel by kind of age cohort, it's generally a bit higher with millennials and Gen Z-ers, which given we've acquired a bunch of them in the last years being swelled to kind of future prospects.

Peter Benedict -- Baird -- Analyst

No, that makes sense. Any chance you give us a run at maybe what's the penetration of fresh and frozen within your food business at this point? Or maybe how it compares to a couple of years ago or a year ago?

Ron Coughlin -- Chairman and Chief Executive Officer

What I would tell you is what we said is we grew 50%, our business. I would -- we'll tee that up for Analyst Day. How about that?

Peter Benedict -- Baird -- Analyst

All right. You're on. Thank you very much.

Ron Coughlin -- Chairman and Chief Executive Officer

Thank you, Peter.

Operator

This concludes our question-and-answer session. I'd like to turn the call back over to Ron Coughlin for some closing remarks.

Ron Coughlin -- Chairman and Chief Executive Officer

Thank you. So point back up, we delivered exceptional results on both the top and bottom line, a strong flow-through. Our team has been incredibly nimble and effective in navigating this challenging supply chain and labor market. We're executing our proven strategy, and our unique model with its compelling advantages is working.

Looking forward, we're focused on driving sustainable growth, optimizing our margin levers while we reinvest in our business and our people. That, combined with the momentum we're seeing early Q4, gave us the confidence to again raise our guidance for the remainder of the year. With that, I want to thank our investors for their confidence in us, as well as everyone who joined us today. Thank you very much.

Kristy Moser -- Vice President, Investor Relations

That concludes Petco's third quarter 2021 earnings conference call. Investor relations will be available after the call if you have any follow-up questions.

Operator

[Operator signoff]

Duration: 66 minutes

Call participants:

Kristy Moser -- Vice President, Investor Relations

Ron Coughlin -- Chairman and Chief Executive Officer

Brian LaRose -- Chief Financial Officer

Oliver Wintermantel -- Evercore ISI -- Analyst

Steven Zaccone -- Citi -- Analyst

Michael Lasser -- UBS -- Analyst

John Heinbockel -- Guggenheim Securities -- Analyst

Zach Fadem -- Wells Fargo Securities -- Analyst

Chris Bottiglieri -- BNP Exane Paribas -- Analyst

Liz Suzuki -- Bank of America Merrill Lynch -- Analyst

Unknown speaker -- Jefferies -- Analyst

Seth Basham -- Wedbush Securities -- Analyst

Peter Benedict -- Baird -- Analyst

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