PetSmart Q1 2011

PetSmart Inc (PETM) reported strong first quarter 2011 results, booking net income of $71 million on $1.5 billion in revenues, with earnings up 33%. The company reported comparable store sales growth of 5%, services sales growth of 9%, and total sales up 6.8%.

Super premium pet food and services seem to be primary drivers of the customer to the store. The company believes it has captured 15% of the $3.6 billion annual market for grooming and boarding services. Further, the company notes strong sales in grooming supplies, and points to exclusive Martha Stewart and GNC branded product launches.

PetSmart has recently matured efforts to drive the customer into cross-selling and defined channel strategies, as well as adding higher margin private label brands into the mix. A good combination in the highly competitive pet industry.

Source: PetSmart Investor Relations

Pet Industry 2011 Strategic Outlook

A new market research report for pet industry business development is available for purchase online.

U.S. consumer spending continued to grow across all four segments of the pet industry, cementing its reputation as "recession resistant." But shifting demographics reveal changing patterns by core demographic groups. U.S. pet owner spending by age, income, higher income, household composition, and region are charted, with an Executive Summary by Dillon Media.

The Pet Industry 2011 Strategic Outlook analyzes nationwide spending, trends and business involvement in the industry, including how it fared during the recession and opportunities moving forward. The data aggregate consumer spending on all pets in four main segments: Pet Food, Veterinary Services, Pet Purchase Supplies & OTC Meds, and Pet Services.

The latest available data are from 2009, with forecasts through 2015. This report is valuable to participants in the nationwide pet retail market, for business plan citations, for product development strategy, for marketing and advertising plans, and for an overview of the pet industry landscape.
 

Ralph Lauren Dog Accessories

More than four years after introducing a popular dog polo shirt and cashmere sweater, Ralph Lauren now boasts 16 different dog accessories, including a wider range of trendy shirts, a hoodie, a trench coat, and leather collars and leashes.

Catering to the broad swath of American consumers that own dogs, every retail store allows dogs. And the company's website has vastly improved since I last blogged about it three years ago.

It seems to be a solid strategy to appeal to certain pet parents, with dog products and marketing co-ordinated at the retail level and online. This picture, for instance, is for a human tote bag sold on a Mother's Day page.
 

Pet Vacuum Cleaners

Browsing Williams-Sonoma's website, I noticed a $799 Miele Dog & Cat vacuum cleaner, made specifically to handle pet hair.

It seems the response to pet owner demographics, or at least Consumer Reports testing in 2006, has been swift, with pet-specific lines now available from Bissell, Eureka and Dyson, all retailing for under $200.



Two-thirds of American households own a pet of some sort. Forty percent of U.S. households own a dog. That's a large market, with lots of pet hair, suitable for an expensive dog & cat vac. Eight hundred bucks is a lot for a vacuum cleaner, but they are really nice. Even the lowest-end Miele model (the one I own) is fantastic.
 

Home Depot To Stop Selling Pet Products

Home improvement retailer The Home Depot, Inc. (NYSE: HD) plans to stop selling pet products in 2008. Overall, the company reported it's first ever yearly sales decline in 2007 yesterday, so perhaps it's wise to re-focus on core competencies. Especially with the state of the housing market.

Home Depot's pet product selection was highly limited in scope and brand selection anyway, with no dog houses, beds, indoor barriers, ramps or other common products a pet owner often adds to a home. Even so, this move signals a broader theme that may play out again soon: large retailers cutting back on pet products discretionary to their business models, but not necessarily to the consumer.
 

Pet Owner Spending Trends in the U.S.

A new report has just been published on nationwide pet owner spending trends.

The aging population, childless consumers and the ascendancy of high-income baby boomers are analyzed by their pet spending habits. Charts and tables are included using data from the Department of Labor, Bureau of Labor Statistics that highlight core trends in U.S. consumer spending by income, age, general region, and family composition.

The Pet Industry 2008 Strategic Outlook is our annual report, written for businesses marketing to pet owners.
 

Pet Trade Shows

It's trade show season for the pet industry. This list will be updated throughout the year as schedules are finalized and websites go online, so bookmark it and check back.

Global Pet Expo 2008
Feb 14-16, San Diego, California
Presented by the top industry manufacturers and distributors' trade organizations, over 800 companies will launch pet products at this show.

H.H. Backer Spring 2008 Trade Show
May 16-18, Baltimore, Maryland
Traditionally in Atlantic City, show organizers moved this event to Baltimore, citing improved logistics and metropolitan city services for the participants.

Interzoo 2008
May 22-25, Nurnberg, Germany
Floor space is already 85% sold as of this post date. This biennial international pet trade show drew almost 1,300 companies from 56 nations in 2006, and 2008 should be even better.

Attending a Tradeshow?
Dillon Media can help with booth design and marketing material. Learn more...
 

Dog Friendly Cars

These days, consumers are taking pets into consideration when making large purchasing decisions, and the market has responded.

Last year, home and garden stores and catalogues, as well as custom home builders, ramped up marketing to pet owners, and now, a new company helps dog owners buy a new car.

DogCars.com reviews new automobiles from a dog owners perspective. Dog friendly cars tend to be roomy: SUVs, trucks, wagons, hatchbacks and crossovers, and there are some pleasant surprises on the site like the Suzuki Forenza and Honda Fit reviews.

Surveys indicate up to 50% of dog owners consider a pet's needs when buying a new car.

[Update Jan 2008] DogCars.com is seeking advertisers for its new website. Check them out to reach a niche market of high income pet owners in the market for a new car.

Read all posts about dog cars.

  

Handmade Leather Dog Collars

A small company poised for growth is Paco Collars. Run by leather artisans and dog owners, they create and sell custom and handmade leather dog collars. These collars are beautiful but also highly functional, with tapered neck widths for smaller dogs and multiple sturdy leash attachments. Each order is handmade to each dog's specifications and takes 6-8 weeks for delivery. The company also sells leashes that match the collar in color, leather and brass or silver hardware.

The depth of commitment to the human-animal bond (and to the customer) is on display, from the initial order process to a lifetime guarantee on parts. When the dog passes the company can make the collar into a bracelet for the owner.

When asked who's buying these expensive collars, founder Ana Poe responded, "The one really interesting trend that we've found in our sales is that there is no one demographic that's buying. When we think we've got the consumer pegged, there's a whole new crop of people that surprise us.  Rich, poor, young, old, you name it and they're buying."

Maybe this widespread appeal is why a Paco Collar was recently spotted in a television ad for Proctor & Gamble's Febreze air fresheners.

It seems Paco Collars is well-positioned in the pet industry as it moves forward. By offering premium, well-designed, custom products to pet parents across demographic groups, the company is aligned with core trends in spending and consumer behavior.

Kansas City Animal Health Corridor

Last year's unique initiative by Kansas City to attract animal health companies keeps paying off. MWI Veterinary Supply, Inc. (NASDAQ:MWIV) based in Idaho is the most recent company to sign up, announcing plans to open a 105,000 square foot distribution facility in the area.

In fact, the KC Animal Health Corridor contributes 32 percent of total sales in the $15.2 billion global animal health market by hosting company divisions including Bayer HealthCare, Hill's Pet Nutrition, Del Monte and Cargill.

Pet health has become one of the driving trends in the industry. Even though pharmaceutical companies have been in the animal health segment for years, there's been a recent acceleration in interest, as previously reported in this blog and on our company website.

A good article on the subject: "Big Pharma Chases Dogs and Cats," by Rachel Petkewich, Chemical & Engineering News, June 25 2007.

Sony Hopes The Puppies Will Help

On the paws of successful titles like Nintendogs and Sims2 Pets, it's become clear: pets in video games attract women. Nintendo credited its game for attracting female market share, and Sims2 Pets sold over 3 million units in three months (which is a good number for a video game, by the way).

The New York Times reported this week that Sony Online Entertainment, in trying to diversify the demographic profile of its 85% male customer base, has added puppies to its new release, Free Realms.

Marketed toward girls, the game is free but relies on paid registration and microtransactions like buying virtual pets. Puppies, that is. Apparently the male design team wanted pets with fighting capabilities until someone came to their senses ("Sony's Other Games Division Makes Push in New Direction," by Seth Schiesel, New York Times, June 11, 2007).
 

Barking at Google

Sometimes being independent sucks. Having no investments in any of the pet industry companies I write about gives my company legitimacy and allows me to maintain a truly independent market research firm.

But watching companies like VCA Antech Inc. (NASDAQ:WOOF) grow over the last four years sometimes makes me jealous. VCA Antech outperformed Google Inc. (NASDAQ:GOOG) over the last 12 months.

Note the interesting inverse relationship between these two very different companies as they rise. Click on the chart to enlarge.

Interested in the Pet Industry?
Check out the Pet Industry 2008 Strategic Outlook for an independent overview of emerging pet owner demographic and spending trends.
 

Pet Industry News

PetSmart, Inc., the nations largest retailer of pet supplies, announced 2006 fiscal year results. Net sales in 2006 grew 11% from the previous year, to $4.23 billion. Pet services sales and revenue continue quarterly growth above 20%, generating $376 million in revenue in 2006.

The company will close all 180 State Line Tack departments, exiting the equine business to make room for higher margin pet supplies or PetsHotels.

Earlier this month, PetSmart increased its number of stores in Canada by 58% to 42 with the acquisition of 19 Super Pet stores.

One current advertising campaign directs users to the Nutrition Selector on the website, featuring highly differentiated premium dog and cat foods. Pet food is the largest segment of the industry - American's spend about $14 billion each year on pet food - and a primary driver of the consumer into the store.

Petco, the nation's second largest pet specialty retailer, went private last year but refuses to sit, expanding on services and pampering themes. The company announced a nationwide fashion show marketing campaign, and was reported to be exploring the mobile grooming business in Las Vegas.

Central Garden & Pet, the largest supplier of pet items to PetSmart, Petco, Wal-Mart, Target and many others, has been impacted recently by rising grain prices and Wal-Mart's decision to stop selling live fish. But it continues to innovate and grow across many segments of the industry, winning nine New Product awards at the 2007 Global Pet Expo.

Nestle, the world's largest food company, will open its first pet food factory in China this year as it tries to take a bite out of Mars Inc's Chinese market share. Mars has been in China for 10 years, and sells a lot of Pedigree and Whiskas to the local market through an alliance with a Chinese company, in this case Effem Foods (Beijing) Co. Ltd. Nestle may benefit from newer foreign ownership regulations.

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VCA Antech Gets an Optimistic Diagnosis

What better way to celebrate a twentieth anniversary than by watching the share price hit an all-time high? VCA Antech, Inc. (Nasdaq:WOOF) did just that, beating 2006 estimates and providing upbeat 2007 guidance, citing increases in just about everything from margins to revenues to average order size.

The company bought it's first animal hospital in 1986, and now owns 379 veterinary hospitals in 37 states, operates 33 laboratories that serve all 50 states, has about 10,000 employees and over a billion dollars in annual revenue.

Actively consolidating the veterinary channel, VCA Antech noted in its 4Q and Full Year 2006 conference call very strong growth in digital radiography (high-resolution digital x-ray images) equipment. Recent market penetration has established the company as a leader in this growing area.

Management attributes the company's 2006 growth to "the great market that we're in" and to the core execution of business processes and strategic plans

Source: VCA Antech
Video: WOOF Report

Marketing Veterinary Services?
Check out the Pet Industry Strategic Outlook by Dillon Media.
 

Eli Lilly Enters Pet Health Market

Leveraging existing strengths in human and production animal medications, Eli Lilly and Company will launch a new business group focused on companion animal health. The first products will address obesity and separation anxiety and launch by the end of the year, according to the company's website. Lilly will expand ties to practitioners and schools of veterinary medicine, and hire staff to expand strategy, development and sales at Elanco Animal Health, its production animal division.

PetSmart 3Q results highlight services growth

PetSmart Inc., the nations largest pet specialty retailer, posted higher earnings in its third quarter 2006 results. Net income grew1.9% to $31.7 million on net sales of $1.0 billion, up 14% from the same period in 2005.

Comparable store sales grew 6.8% in the quarter, compared to 2.4% during last year's third quarter. Pet services sales were up 25.4% to $89.7 million.

Source: petsmart.com

In earlier conference calls, CEO Phil Francis has said services customers on average spend more money and return to the store more often than others, and that dog grooming is the primary driver of the services-oriented pet parent into the store.

Pet services spending has grown consistently over the last decade. These days, both the busy professional and the empty nester happily spend record amounts of money on dog grooming, boarding and training.

And the aging demographic of American househoulds should continue to drive this trend in the future. Click on the chart to enlarge.

Animal Planet adopts Petfinder

Animal Planet, owned by Discovery Communications, adopted Petfinder.com and PetsIncredible as it expands its reach into consumer channels. Earlier in 2006 the company announced plans to bring its Animal Planet Expo to twelve locations in the U.S. PetsIncredible sells DVDs for pet owners and trainers, and the popular adoption site petfinder.com generates 120 million page views each month, according to Mediaweek.

Starbucks targets dog owners

Starbucks, in a localization trend, has started to appeal to dog owners. According to the Wall Street Journal, a Starbucks in Portland responded to strong dog owner demographics by adding an outside window counter so customers can purchase coffee without bringing their pets inside ("At Starbucks, Coffee Comes With New Decor," by Janet Adamy, The Wall Street Journal, Nov. 10, 2006).

Luxury Pet Products

Retailers continue to appeal to pet owners. Whether looking for broader customer reach or attracted by high profit margins, this trend is evident across the range of retailers, from dollar stores to luxury boutiques. Even Target and Wal-Mart are moving upmarket, but what's at the top?

Neiman Marcus just released the new Christmas Book, featuring a much larger selection of luxury pet accessories than last year, including a $185 dog leash that matches personal accessories and an Italian-designed dog house for $8,000. Notably, there's also a Neiman Marcus-branded pet throw costing from $485 to $800.

Macy's launched it's second pet department in Philadelphia last month. The first 'Pet on the Woof' boutique opened in NYC last year.

Harrod's in the UK holds an annual pet fashion show called Pet-a-Porter.

And one of my favorite online luxury retailers, Pampered Puppy, recently wrote about brand extensions from the likes of Kate Spade, Von Dutch and Burberry.

Read More:
Neiman Marcus
Marco Morosini
Pampered Puppy

Not in the Pet Industry? Maybe You Are

The independent product evaluators at Consumer Reports magazine seem to be paying more attention to pets these days. Besides reporting on dog and cat products and services recently, including airline policies for pet travel, they are beginning to address the impact of a dog or cat on household products they test.

The October 2006 rating of vacuum cleaners includes a sidebar explaining how they are adjusting methodology to allow for pets, most notably they collected six months worth of cat hair and mashed it into a rug. The surprise is how poorly some top-rated vacuum cleaners performed.

Just another reminder that a large percent of almost everyone's target market owns pets.

Source: www.consumerreports.org