Petco announced Wednesday that its CEO, Ron Coughlin, is stepping down, and said board member and Best Buy executive R. Michael Mohan will take over as interim chief executive as the company searches for a permanent replacement. 

Coughlin will serve as an advisor to the board to “support the leadership transition.” In a statement, Coughlin said he’s proud of the work he’s done over the last five years. 

“Working with our amazing partners through a period of tremendous change and growth has been the opportunity of a lifetime,” said Coughlin. “I am proud of the differentiated business model we’ve built that delivers the very best for pets, which positions the Company well for the future.”

Mohan has been on the company’s board since March 2021. He previously served as lead independent director, a role he will shed as he takes over the interim CEO post. He’s also a former chief operating officer and president of Best Buy. 

“Mike’s highly successful track record across multiple segments of the retail industry, deep knowledge of Petco and strong operational skills make him the ideal executive to ensure a seamless transition as Petco moves forward,” Petco board member Cameron Breitner said in a statement. 

Petco also reported fiscal fourth-quarter results on Wednesday that were roughly in line with expectations.

Here’s how the pet retailer did, compared with what Wall Street was anticipating, based on a survey of analysts by LSEG, formerly known as Refinitiv:

• Earnings per share: 2 cents adjusted vs. 2 cents expected
• Revenue: $1.67 billion vs. $1.62 billion expected

The company reported a net loss of $22.6 million for the three-month period that ended Feb. 3, or a loss of 8 cents per share. A year earlier, it reported net income of $32.7 million, or 12 cents per share. Excluding one-time items, Petco reported earnings per share of 2 cents.  

Sales rose to $1.67 billion, up about 6% from $1.58 billion a year earlier. 

The company’s shares rose as much as 9% in premarket trading Wednesday after the CEO change and earnings announcements but closed about 2% lower.

Coughlin’s decision to step down comes as Petco’s market cap has eroded over the last year, even as the company has reported consistent sales growth and comparable sales gains. As of Tuesday’s close, Petco’s stock is down about 19% year to date, and its market cap is about $784 million, down from around $3 billion as recently as February 2023.

The pet industry has faced pressure and contended with a demand slowdown after a pandemic-fueled boom fizzled. Record numbers of families adopted pets during the Covid pandemic and then needed supplies to support those animals, leading to massive gains for retailers like Petco and Chewy.

However, new adoption has since slowed. Over the last year, Chewy and Petco have seen strong sales for stable categories like pet food and medicine, but demand for high-margin items like beds, leashes and toys have been sluggish. 

Coughlin has played an instrumental role in transforming Petco into a health and wellness company since he took over as chief executive in 2018. Under his direction, the company stopped selling unhealthy pet food, removed products like shock collars from its offering and began building out its services and veterinary business.

In 2020, the company changed its name to Petco Health and Wellness Co. The following year, Coughlin led it through its IPO. 

Petco has used its sprawling brick-and-mortar footprint to build out veterinary clinics. Petco is now one of the largest pet health providers in the nation, operating 282 full-service hospitals as of the end of last year. 

Pet health care – and the high margins that come with it – is a crucial component to the overall pet market, and has been driving spending growth in the U.S., according to Bloomberg Intelligence. While Petco’s services business revenue jumped 17% during the quarter, it forms a small portion of the company’s overall revenue. The return on those investments has taken time, and Wall Street has apparently grown impatient with Petco’s trajectory. 

“I look forward to working with the leadership team and our partners to continue strengthening our business, driving profitability through operational discipline and execution that will improve growth, drive margin and generate cash to create shareholder value,” Mohan said in a statement. “My focus will be on our people, our operations and our customer experience, working together to advance our strategy.”