Petco Could Be the First Billion-Dollar IPO of 2021

Petco has filed an amended S-1 form with the U.S. Securities and Exchange Commission (SEC) for its initial public offering. The company intends to sell 48 million shares, with an overallotment option for an additional 7.2 million shares, in the range of $14 to $17 apiece. At the maximum price, the entire offering is valued up to $938.4 million. However, the price could go up from here. The company intends to list its shares on the Nasdaq under the symbol WOOF.

The underwriters for the offering are Goldman Sachs, Merrill Lynch, Citigroup, Evercore ISI, Credit Suisse, UBS Investment Bank, Wells Fargo, Baird, Guggenheim, AmeriVet Sercurities, C.L. King, R. Seelaus, Ramirez and Siebert Williams Shank.

The U.S. pet care industry is a large, attractive growth market experiencing a significant acceleration in response to multiple secular themes. The industry serves more than 72 million households with pets and represents a total addressable market of $97 billion in 2020. Since 2008, the industry has grown at a 5% compound annual growth rate, driven by steady, predictable growth in the underlying pet population coupled with strong tailwinds associated with pet humanization.

Petco operates as a retailer for pets and goods associated with these animals. The company operates roughly 1,500 locations across the United States and Mexico, including over 85 Unleashed by Petco locations, which is a smaller-format store.

The company augments its product offering with services as well. Petco offers grooming, in-store training and veterinarian services at many of its locations.

In terms of its finances, the company posted net sales of $3.58 billion for the first three quarters of 2020, representing a period-over-period growth rate of 9.0% compared to 2019. At the same time, comparable sales growth was 9.6%. Operating income increased 83.5% to 127.4 million from 69.5 million in the same period as well.

The company intends to use the net proceeds from the offering to pay down its debt, as well as for working capital and general corporate purposes.

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