To compete against online rivals Chewy and Amazon, the retailer touts its 1,500 locations. But cost-cutting is rendering many stores less attractive to customers — and can make them less safe for animals.
By Lauren Debter, Forbes Staff
Stephanie Jordan noticed the change after Petco went public in January 2021. She and her co-workers were getting pulled from daily tasks at her store outside Pittsburgh to mind the cash register or answer customer questions. Fewer employees were looking after the animals. Fish weren’t fed every day. Cages were grimy. Customers were alerting employees about dead mice and frogs. She felt sick about it.
“You’re supposed to be looking at your animals all the time,” Jordan, 54, who left the company in July, told Forbes. “But everybody’s hours had been cut drastically.”
Some of Petco’s 1,500 U.S. stores have reduced staffing levels in the past several years by as much as one-third, to under 300 hours a week, employees told Forbes. That’s making it more common for just two people to be working at stores that average 14,000 square feet and house a multitude of live animals, such as rabbits, hamsters, fish, lizards, turtles, snakes and crabs. It has led to longer lines at the cash register, dirtier facilities and improper animal care, according to interviews with more than a dozen current and former employees at stores around the country.
Understaffing threatens Petco’s strategy, which relies on drawing shoppers to its brick-and-mortar stores. Rather than try to beat online heavyweights Chewy and Amazon on their home turf, Petco CEO Ron Coughlin has doubled down on in-person services like grooming, training and veterinary services. He’s opened more than 250 full-fledged vet hospitals in stores, which offer shots, prescription medications and basic procedures like microchipping and spay and neuter surgeries, with plans to add another 650 in coming years. In June, Petco debuted a two-story flagship store in New York City, touting an indoor dog park, a dog barber shop and a gourmet kitchen spinning up small-batch meals for pets.
Even so, Petco said last month it would be far less profitable this year than it previously thought as shoppers pull back on discretionary spending on items like toys and treats.
“It’s ironic because Petco, like lots of other retailers, is saying our competitive advantage is we have stores where you can actually talk to somebody and they know your pet’s name,” Chris Tilly, a UCLA professor and co-author of Where Bad Jobs Are Better: Retail Jobs Across Countries and Companies, told Forbes. “But it’s completely at odds with what they’re actually doing with their staff.”
Petco declined to say how much it has reduced staffing nationally or comment on its implications. The company said that over the past several years, it has recognized the contributions of its employees with “multimillion-dollar investments in pay adjustments, bonuses and health and wellness benefits.”
“Petco’s purpose is to improve the lives of pets, pet parents and our Petco partners, and we take issue with any claims to the contrary,” said a Petco spokesperson in a statement emailed to Forbes. “Our high standards for animal care, developed and constantly reviewed by our veterinary staff and backed by an independent panel of experts, have been certified by American Humane, the world’s largest certifier of animal welfare.”
Petco’s store-first strategy works best when a customer comes in for a vet appointment, is told their dog should go on a certain diet to lose some weight and can buy the food before they leave, said Oliver Wintermantel, an analyst at Evercore ISI. The approach has seen some success. Foot traffic is up 24% since Coughlin took the top job in 2018, according to Placer.ai, although it has slipped slightly in the last two years. Sales have risen by more than a third to $6 billion during his tenure, with the services business growing double digits. The company has signed over 600,000 customers to its new paid membership program, Vital Care Premier, which for $25 a month offers discounts and freebies on grooming, vet visits and products. Members spend more than three times as much as other customers.
Variable-Rate Loans
But Petco has been forced to earmark much of the cash it generates to paying down $1.5 billion in debt. Private equity shop CVC Capital Partners and the Canada Pension Plan Investment Board purchased the chain in a leveraged buyout in 2016, loading down its balance sheet with debt before taking it public five years later. Petco was caught off-guard by rising interest rates, and has faced larger payments on the variable-rate loans it took when borrowing money was cheap.
The cash crunch has put shareholder-friendly initiatives like planned stock buybacks on ice. Petco has slowed the pace of capital-intensive investments, like new vet hospitals, to 50 to 55 a year, down from 60 to 70 a year, and announced $150 million in cost cuts by the end of 2025. In July, it said it would lay off more than 50 employees at its San Diego headquarters.
Investors have soured on the stock, with the share price tumbling 85% since its January 2021 IPO, hitting fresh new lows in recent weeks. “There’s just no catalyst for it to get better,” said Wintermantel.
It’s not the only pet retailer to suffer as the pandemic pet boom fades and inflation grinds on shoppers. Chewy’s stock is down 80% from its highs in early 2021. (Another competitor, PetSmart, is privately held.)
Petco may need to cut costs even deeper to appease investors as patience wears increasingly thin, Wells Fargo analyst Zachary Fadem wrote in an August note to clients.
Dead Fish
When Kathryn Romero, an official with Colorado’s Department of Agriculture tasked with ensuring that pet stores are following the state’s regulations for animal care and safety, stopped at a Petco in Aurora for an unannounced inspection last October, she found the store was so short-staffed that just the manager was working, according to inspection reports reviewed by Forbes. At other locations, she and her colleagues found dead fish in various stages of decomposition still in their tanks, sick rats who weren’t receiving their medications as prescribed and empty cat cages that had been left for days with food, dirty water and dirty cat litter.
Since the beginning of 2022, public records requests show that inspectors visited six Petco stores in Colorado. Four flunked the inspection. A fifth received a passing mark during a return visit only after failing the previous inspection. Petco declined to answer a detailed list of emailed questions, which included a request for comment on the inspection results.
Allegations of improper animal care at Petco aren’t new. When the company filed to go public, it told shareholders that animals sometimes died or were injured while in its care and that negative publicity about its treatment of animals, even if the claims weren’t true, could hurt its business. Petco has long been targeted by animal-rights group PETA, which has called on the company, as well as rival PetSmart, to stop selling animals altogether.
In 2021, a former employee sued the pet store for wrongful termination, claiming that he’d been fired after complaining about broken dog kennels and alleged fraudulent sales practices. He filed to dismiss the case after reaching a settlement with Petco. In 2010, Petco paid $1.75 million to settle a lawsuit brought by five California counties that claimed animals in its stores were neglected or mistreated and customers were overcharged. In 2004, it paid over $900,000 to settle similar allegations from California prosecutors. Petco didn’t comment on the litigation.
Petco said it welcomes feedback from employees and customers and takes seriously all concerns that are raised. It said it provides multiple avenues for such feedback, including an anonymous hotline.
‘A Thousand Things’
The recent staffing cuts aren’t helping matters, say employees, who have seen hours at their stores reduced to new lows.
“We were expected to do a thousand things and only had time to do two,” said Michael Guadamuz, who worked at a Petco store in San Francisco for eight years and left in June.
For instance, properly deep-cleaning the aquatics tanks once a week could take one person an entire eight-hour shift since they had to take the fish out and replace the water, said Guadamuz. He said the company expected it to be done in half that time.
Petco also dictates that animals should be checked every hour. Employees say that’s not always possible. Some animals are left with dry water dishes. Some miss medications. Some have dirty cages, with visible urine and feces on the floor, dust covering the ventilation and fingerprints on the glass. In April, a customer posted on social media about how she discovered 13 dead Betta fish at a store in Alpharetta, Georgia.
“Either there was no time to get around to it, or management wasn’t enforcing animal care because they were worried more about the number of sign-ups,” said Grayson Haugland, who worked at a store on Long Island, New York until June, referring to sign-ups for the company’s Vital Care program.
Employees are often pulled in several directions. At Haugland’s store, the aquatics department employee was constantly being asked to work the register or help with other tasks. “I would have to fight to get him back,” said Haugland, who was in charge of animal care at the store. “I need him to clean, do inventory, do orders.”
At a store in Ohio, Nick Thompson, who was hired to unload pallets and stock shelves a few hours a week while he was in college, said there were some days where he would spend most of his shift interrupted by customers who needed help buying fish or were looking for recommendations. He didn’t mind, but says he was reprimanded by management for failing to complete his own work.
In Illinois, an employee who managed inventory said he witnessed cashiers clean cages, the dog trainer unload trucks and had personally been asked to help with the fish tanks.
“I know nothing about fish,” he said.
‘Customers Get Angry’
One of the niceties that’s been scaled back from stores: floor cleaners, who used to show up every week, but were reduced to coming monthly earlier this year. Dog urine sometimes lingers on the floors, say employees, because no one has time to deal with it. Sometimes bathrooms go uncleaned and broken light bulbs go unfixed for the same reason.
When one employee complained about the deteriorating state of a store in North Andover, Massachusetts, the U.S. Department of Labor’s Occupational Safety and Health Administration launched an investigation. In July, it said it found that employees had routinely been exposed to live and dead rodents, as well as rodent droppings and urine in the store and the backroom. Petco was ordered to pay $129,000 in penalties. OSHA found similar conditions during an inspection at a store in Corpus Christi, Texas in 2021. Petco didn’t respond to questions about the findings.
Dirty stores, combined with poor customer service, are a quick way to alienate customers. As staffing levels have fallen, customers may have to hunt down someone to help them. A store employee in Minnesota, who asked to remain anonymous because she still works at the company, said it’s not uncommon for her to be helping a family in aquatics when she’s paged to the small animals department. Then she hears a page to the crickets section, and the phone rings. She finishes up with the first family, and goes to help the next customer. The person waiting for crickets had since left. The phone is still ringing, and four people are in line at the cashier.
“This is our reality and customers get angry about it all the time,” said the employee.
Sometimes stores are so short-staffed, employees said, that they have to turn away customers looking to buy animals because there’s no one to help them. Other times stores are forced to close early, without notice, rather than leave a single employee on the floor, according to Petco workers.
‘Selling, Selling, Selling’
Despite the staffing cuts, employees say that pressure to persuade customers to sign up for Vital Care remains intense. Most stores are expected to sell ten memberships a week, although that figure can be higher for busier stores.
“I saw a noticeable shift to selling, selling, selling” after the IPO, said Guadamuz, the employee from San Francisco. Positions were renamed to reflect the new focus. “Guest service leaders,” for example, became “selling experience leaders.”
Managers who don’t hit their numbers are taken to task. “It’s a nightmare for mid-level supervisors who have to deliver,” said Francoise Carré, a retail labor expert at the University of Massachusetts in Boston.
It’s even harder to sell, say employees, after certain benefits were reduced or discontinued this summer. On Reddit, Petco employees joked that when the stock price dropped under $5 it became worth less than the cash-back rewards Vital Care members get after spending a certain amount.
“How are we supposed to do all this selling they want us to do?” said Jordan, the former employee from Pittsburgh. “There isn’t time to talk to anyone about anything.”
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