Webcast #36: We Always Wanted to Invest in the Pet Industry — Now We Have Our Stock (9 minutes)

If you have ever owned a pet, you can attest that they’re part of the family.

Few industries can boast about growing during the financial crisis. The pet industry, however, was one that did. As the chart below suggests, expenditures on pets, pet food, veterinary, and other pet services grew by a +6% compounded annual growth rate between 1994 and 2016. Between 2016 and 2021, that rate spiked to over +9%.

Pet ownership is now at an all-time high. During the pandemic, pet ownership grew from 67% to 70%. We believe that adults are more likely to adopt a pet if they grew up owning one in their adolescent years. With pet ownership higher now than ever before, we believe it will grow beyond 70% as many of today’s youth become accustomed to owning a pet.

Our latest purchase for clients is Pet Valu, a company that sells premium branded pet products and commenced trading shares in the public market in June 2021.

While we have always wanted to invest in the pet industry because of its resilient customer demand, Pet Valu has grown faster than its sector. We quoted above that the industry grew by over +9% from 2016 to 2021. Over that same time period, Pet Valu’s average same-store sales growth has been +11%.

It is the largest company in Canada’s pet market, commanding an 18% market share. Behind Pet Valu stands Petsmart (14%), Walmart (11%), Costco (8%), and Amazon (4%).

Last week, Pet Valu reported excellent earnings results and raised its guidance across the board. During the quarter, same-store sales increased +21.2% (excluding results from its acquisition in Quebec of Chico). For the fiscal year, the company expects same-store sales to grow by +13-15% this year compared to last, an increase from their previous +9-12% guidance. It also increased its earnings per share expectations to $1.47-1.51 this year, up from the previous $1.37-1.44 guidance.

Over time, Pet Valu envisions its store count climbing to 1200 location. That’s an increase of almost 70% from today’s roughly 700 locations. While 72% of Canadians live within 5 kilometres of a Pet Valu location, there’s much more opportunity for growth in the years ahead.