Petco Health and Wellness Company, Inc.

Good morning, and welcome to the PECCO fourth quarter 2023 earnings conference call. All participants will be in a listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star, then one on a touch-tone phone. To withdraw your question, please press star, then two. Please note, this event is being recorded. I would now like to turn the conference over to Kathy Yao. Please go ahead.

Good morning, and thank you for joining Petco's fourth quarter and full year 2023 earnings conference call. In addition to the earnings release, there is a presentation available to download on our website at ir.petco.com, summarizing our results. On the call with me today are Mike Mohan, Petco's Interim Chief Executive Officer, and Brian LaRose, Petco's Chief Financial Officer. Before they begin, I would like to remind everyone that on this call, we will make certain forward-looking statements which are subject to a number of risks and uncertainties that could cause actual results to differ materially from such statements. These risks and uncertainties include those set out in our earnings materials and SEC filings. In addition, on today's call, we will refer to certain non-GAAP financial measures, reconciliations of the measures can be found in our earnings release, presentation, and SEC filings. And finally, during the Q&A portion of today's call, we ask that you please keep to one question and one follow-up. We will allow for 30 minutes for Q&A. With that, let me turn it over to Mike.

Thank you, Kathy. Good morning, everyone, and thank you for joining us today. I'm going to spend some time discussing the leadership changes that we've announced today, while Brian will take us through our financial results and initial expectations for the year ahead. As you will have seen from today's news, I've been appointed by the board to serve as interim CEO while we conduct a comprehensive search for a new CEO. Ron Coghlan has stepped down as CEO and chairman and will serve as an advisor to the board during the transition. I am honored to be here with you today and serve such an incredible company with a mission that matters, to improve the lives of pets and pet parents. I've served as Petco's lead independent director for the last three years, and I'm proud to be stepping in to lead our 29,000 dedicated Petco partners who bring our mission to life every day. The board has spent some time with the executive team over the past several months to assess our operating and financial results. I'm confident that given our position as a leader in pet health and wellness, we will be able to improve performance in the years ahead. I want to share my initial perspective on the business and what we'll do to drive improvement. Petco is an iconic brand in the pet care category that is benefiting from the long-term megatrends of humanization and premiumization, supporting consistent and resilient category growth in a market that is expected to approach $200 billion in sales by the end of this decade. Petco has a combination of different products, a commitment to veterinary and other services, and an omnichannel model that taken together is unmatched in our industry. With the only full-service pet health and wellness ecosystem, Petco sits at the forefront of the industry and is uniquely positioned to win for the long term. While we have made progress in a number of key areas over the last several years, I recognize we have not been executing the way we need to in a number of areas to deliver on our full potential. Most critically, we have not adapted quickly enough to recent changes in consumer preferences. First, we did not anticipate the magnitude of the shift to value in both our consumables and discretionary business. And second, we did not expect customers to pull back as quickly as they have and for this duration when spending on discretionary items. As a result, our in-store and omnichannel offering was not appropriately aligned with our customers' needs. This has led to two fundamental problems that we need to address with speed. One, an erosion of market share as customers sought out alternatives, and two, a significant decline in profitability. Our work here has already begun with the reintroduction of value brands in our consumable business and adjusting our discretionary offering to provide more balanced price points. But simply reintroducing these products into our assortment is not enough. This more balanced assortment must be supported with stronger retail and online customer experiences and more disciplined execution. This starts with effective marketing to both existing and potential customers. It builds with strong in-store and online merchandising. It is further supported by the education of Petco partners to ensure they can effectively sell our complete offering. And finally, it needs to be supported by effective supply chain management that delivers inventory profitability with high-end stocks across our store base and efficient delivery to omnichannel customers. Going beyond these critical near-term actions, we have to engage pet parents more effectively. We are focused on executing against high-quality, top-of-funnel customer acquisition and long-term retention so more customers benefit from the full Petco offering. In doing so, we'll double down on our efforts to maximize the opportunity to fully leverage the competitive advantages and opportunities we have with our in-store and online customer experience. and will act purposely to connect with pet parents to drive share gains and grow margins through improved baskets and a quality of sales in a meaningful and substantial way. Improving our customer experience, retail execution, and overall cost structure will help us drive profit stabilization in the near term and growth in the medium and long term. I plan to have us work against fewer and more clearly stated priorities and outcomes while keeping our teams energized, supported, and equipped to execute against achievable goals and making progress against promises we commit to for ourselves, our customers, and shareholders. Throughout my over 36-year career in retail, one truth has remained. This journey is never linear, but it must be built on a world-class retail experience. If our comprehensive ecosystem is the engine that drives Petco's success, then the trust and advocacy of our customers, vendors, and partners is the fuel that powers it. This principle will sit at the heart of everything we do, beginning with our employee experience. This is an exceptional business that serves millions of pets every year, and I believe that by focusing on our mission while addressing the realities of the business's performance with clear, consistent, and focused prioritization, we can unlock Petco's full potential. Finally, On behalf of the board and all of us at Petco, I want to thank Ron for his leadership over the last six years. Ron has overseen the evolution of Petco as a full-service omnichannel retailer and champion for pet health and wellness. We are grateful for his leadership, dedication, and passion for pets, people, and our business. Thank you for your time. I'll now pass it over to Brian to cover our financial performance.