Wednesday, November 09, 2005

MWI Veterinary Supply Q4 and 2005 Results

With solid numbers for the fourth quarter and 2005 year, wholesale distributor MWI Veterinary Supply, Inc. is rapidly establishing itself in the pet health market. Net income for the quarter rose 112 percent compared to last year, while net income for the full year rose 80.5 percent to $4.6 million.

According to President and CEO Jim Cleary, vet supplies sales have resisted the changes in consumer spending behavior seen by other retailers in the wake of higher energy prices. Like the pet services market, which retained strong growth rates relative to pet supplies over the summer, it seems to me one more indication that pet owners are unwilling to compromise on the health, wellbeing and appearance of their pets.

Along with increased market penetration, the growth of its companion animal business is positively impacting the company. Citing growth rates "above market" for both companion animal and production (eg. cattle) lines, Jim Cleary noted that the fourth quarter saw the companion animal business grow at a "significantly higher" rate than the production business. These higher margin products boosted the bottom line.

The company shows signs of moving up the value chain. With strategic plans for distribution logistics, customer service and value-added services, 2006 will also bring an expansion into private label products. With three current private label products at "relatively low" sales levels, the company mentioned several additional products are in the pipeline for 2006.

I believe the company is also riding two strong trends within the pet industry, namely pet insurance and medications. Only last year, pet insurance underwent a fundamental shift, from being marketed traditionally through veterinarians to being mass-marketed by retailers like Petco. Similarly, pet medications are produced by some of the largest pharmaceutical companies in the world that spend significant amounts of money on this segment.

Related Links:
Consumer Spending on Vet Services - purchase charts of pet owner spending trends by age, income, family size, and more.

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