Published: San Antonio Business Journal
By: W. Scott Bailey
Date: December 10, 2010

San Antonio leaders say there is a chance that the Alamo City could leverage the new PETCO Animal Supplies Inc. satellite support center it recently attracted into an even greater opportunity.

While the San Diego-based company says it has no plans at present to relocate its corporate headquarters, local officials say there is a chance that San Antonio could ultimately house more of PETCO’s operations. “They like this city,” says San Antonio City Councilman John Clamp about PETCO officials. “This (support center) could be a precursor to a much larger investment by PETCO in San Antonio.”

Texas has withstood the effects of the recession better than a number of other states — including California. And San Antonio leaders have targeted California as an area where companies may be searching for greener pastures.

If San Antonio were successful in attracting more of PETCO’s operations, maybe even its headquarters, it would be yet another economic coup for a city which, over the last couple of years, in the midst of a recession, has continued to attract more companies and jobs.

PETCO announced late last month that it plans to develop a satellite support center in San Antonio. Company officials say that facility will serve as an “extension” of its national support center headquarters in Southern California.

That planned support center will be located in the 114,000-square-foot Westpointe Corporate Center building on Richland Hills Drive and will house about 400 personnel who will work in a variety of operational capacities, including finance and accounting, human resources, internal audit, loss prevention and risk management.

PETCO expects to invest about $5 million to transform that single-story property into its new satellite center.

Bexar County Judge Nelson Wolff, among those instrumental in helping convince PETCO to select San Antonio for its satellite center, says roughly 40 to 50 people will relocate to the Alamo City to work at the new facility, which is expected to open in mid-2011.

“We know a lot of their executives are coming here,” he says. “That’s a pretty significant deal.”

Business climate

Bexar County Economic Development Executive Director David Marquez says it’s early in the game, but San Antonio could play a bigger role in PETCO’s future plans.

“If San Antonio and Bexar County can prove what we are capable of ... we could get more of their operations,” he says.

Clamp says considering the economic challenges in California and the momentum San Antonio has enjoyed the Alamo City should “absolutely” make a play for more of PETCO’s operations — including its headquarters.

“If there is any opportunity we should do this,” he says. “These are the kinds of jobs we want.”

PETCO CEO Jim Meyers says the reason his company wanted to develop a satellite support center is because it needs more room.

“With our company’s continued growth comes a need for additional space, and we’ve run out of capacity at our San Diego headquarters,” he says in a press statement.

PETCO, a privately held company, operates more than 1,000 retail stores nationally and employs a total of roughly 22,000 full- and part-time personnel. The specialty retailer markets pet-related products and services.

In 2006, PETCO announced that it had agreed to be acquired by a pair of private equity firms — Texas Pacific Group and Leonard Green & Partners LP — for approximately $1.8 billion.

PETCO officials would not divulge 2009 financial figures. But Forbes reports that the company had total revenues of $2.7 billion last year.

After an extensive search of more than 40 potential locations, including Dallas, PETCO selected San Antonio for what Meyers says will be the company’s “first office location outside of San Diego.”

California was hit hard by the recession. According to a recent report from the U.S. Bureau of Labor Statistics, that state had the third-highest unemployment rate in the nation in October, at 12.4 percent.

“The sense I got was that they are frustrated with the business climate in California,” says Wolff about PETCO. “It seems like that state is not making much of an effort to retain companies.”

Steve Nivin, director and chief economist for the SABER Research Institute, a locally-based economic development think tank, says, San Antonio has some advantages over San Diego including a “lower cost of living and a more favorable business climate in the sense of a lower tax structure and a less burdensome regulatory environment.”

Could the economic situation in California move PETCO to consider relocating more of its operations, perhaps even its headquarters, outside the state?

“It could somewhere down the line,” says PETCO spokeswoman Lisa Epstein. “That’s not part of our plan right now.”

Gravitational pull

Last year, Wolff was part of a separate delegation of San Antonio leaders who met with various groups in California including Toyota.

Those leaders pitched the automaker on the merits of moving Tacoma truck production from a plant in Fremont, Calif. to an existing Toyota production facility in San Antonio. Toyota has since moved that Tacoma work to the Alamo City.

Some local leaders believe that more companies, like Toyota, will find that there are economic and geographic advantages in San Antonio.

“I think they are coming here for a number of reasons,” says Wolff about PETCO. “One of them is that, instead of being tucked way off in a corner in California, they are more centralized here between the coasts.”

Marquez says several major retailers have located the base of their operations in the middle of the country rather than on either coast. He points to Target, Sears and JCPenney, for example, companies which are based in Minnesota, Illinois and Texas, respectively. Walmart has its headquarters in Arkansas.

“There has been a natural gravitational pull to the Central time zone for a number of reasons,” Marquez explains.

Nivin agrees that geography “might be an advantage” for San Antonio.

PETCO has not yet opened its San Antonio support center, and local leaders don’t want to put the cart before the horse.

But when asked if San Antonio should make a play for PETCO’s headquarters, or at least more of its operations jobs, Wolff had this to say:

“I think when they looked at this community and how we are progressing, they saw San Antonio as a growing, prosperous city. So we’ve got to get them down here, get this first phase (of the support center) completed. After that, then yes, we should.”