What: Forbes goes in-depth with the example of Petco, which has drastically cut staff while at the same time increasing profit and sales expectations.

Why it is important: There is so much that can be done when cutting on staff, and if objectives are not aligned, it can lead to strategic dead ends like the one Petco seems to be in.

Petco, aiming to differentiate itself from online competitors like Amazon and Chewy, emphasizes its brick-and-mortar presence and in-store services such as grooming, training, and veterinary care. However, since going public in 2021, many of its 1,500 U.S. stores have drastically cut staff, leading to decreased store cleanliness, improper animal care, and longer wait times. These staff cuts undermine Petco's store-centric strategy. Moreover, while the company has invested in in-person services and opened several vet hospitals in stores, it recently lowered its profitability expectations due to reduced discretionary spending by shoppers. Critics argue that while Petco claims its advantage is its physical stores, its actions of reducing staff contradict this. Petco's financial challenges also include managing a $1.5 billion debt, facing increased interest rates, slowing investment, and undergoing stock price declines. Allegations of improper animal care have emerged, with inspections revealing inadequate conditions in various stores. The company has been historically embroiled in controversies over animal care, facing lawsuits and settlements in the past. While Petco is pushing its paid membership program, Vital Care Premier, staff report that there's immense pressure to secure sign-ups, even with declining benefits. Amidst these challenges, the overall sentiment is that Petco's customer service and care for animals have deteriorated due to the staff cuts.

When staff cuts leads to strategic disalignment: the example of Petco