Diving into the fiscal year-end finances of pet firms

The headwinds of 2023 are clearly impacting the finances of some major pet players. Some companies don’t have an alternative other than to lower the optimism reflected in their earnings and revenue forecasts for the rest of the year. But others have managed to forecast the same or even increase the guidance they set at the beginning of the fiscal year.

Cutting down 

• Petco

The American pet retailer adjusted its full-year guidance and now expects adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) of $400 million (€364.9M) for the year, down from previous guidance of $460 million (€419.6M) to $480 million (€437.9M).

Petco expects to hit net revenue of between $6.15 billion (€5.5B) and $6.27 billion (€5.7B) in 2023.

Chief Financial Officer (CFO) Brian LaRose says that the shift in consumer spending and pressures on the discretionary business pushed them to make this decision.

The Californian company is also targeting cost savings of $150 million (€136.8M) by the end of fiscal year 2025, with $40 million (€36.5M) expected in savings in 2024.

Petco achieved a net revenue of $1.49 billion (€1.35B) in the 3 months to 28 October, a slight decrease from last year when it hit $1.5 billion (€1.17B). CEO Ron Coughlin confirmed to investors that results were below the company’s expectations.

• Chewy

Online retail giant Chewy also reassessed its financial situation in the last earnings release in December. 

The US-based retailer initially forecast hitting between $11.15 billion (€10.1B) and $11.35 billion (€10.3B) in revenue by the end of the year. This has now changed to fall between $11.08 billion (€10.02B) and $11.1 billion (€10.03B). 

The American retailer told stakeholders that the alteration reflects “the continued macro pressures observed industrywide.”

Market research firm Zachs agrees that the negative impact of Chewy’s performance in Q3 2023—achieving a net loss of $35.8 million (€32.7M) from a profit of $2.3 million (€2.1M) in the previous year—led to the slight reduction in guidance. 

• General Mills 

General Mills also revised its guidance for FY 2024, ending May 2024. “Organic net sales are now expected to range between down 1 percent and flat, compared to the previous range of 3 to 4 percent growth,” informs the company. 

The pet food manufacturer recognized that these numbers reflect a “slower volume recovery” during the year, mainly impacted by the 5% cost inflation of the total cost of goods sold. Labor inflation is also one of the reasons behind the decision.

General Mills’ pet segment brought in a net revenue of $569.3 million (€518.7M) in the 3 months to 26 November 2023, 4% less than during the same period last year.

Yahoo! Finance discussed the company’s outlook, saying that problems have arisen amid “food disinflation, which means the company loses pricing power.” It added that the “high prices coming from General Mills” allowed some competitors to take up a larger market share. 

• IDEXX

American pet healthcare multinational IDEXX estimates its 2023 annual revenue to fall between $3.63 billion and $3.65 billion (€3.26B–€3.27B), slightly lower compared to its previous forecast of $3.66 billion to $3.72 billion (€3.28B–€3.34B). 

The decision to lower the guidance came after the business increased its outlook in the second quarter of the year. The company indicated this was partially due to a slower-than-expected rise in the number of visits to its animal clinics. 

A recent OnePoll survey commissioned by Forbes found that 55% of US owners reported cutting back on veterinary care.

Maintaining guidance

• Pets at Home

UK pet retailer Pets at Home maintained its guidance despite a challenging year. The company reiterated its profit before tax (PBT) guidance at £136 million ($173.1M/€156.6M) for the FY ending in March 2024.

“We have experienced higher logistics costs and disruption than originally planned, but these have been managed, and the impact on profit expectations contained without compromising our commercial proposition or overstretching our operations,” the company says. 

Financial services company Hargreaves Lansdown highlights the “legwork being put into marketing and online infrastructure” as well as the “structural growth opportunity” of increased pet ownership.

• Musti

Nordic pet retailer Musti reaffirmed its net sales goal to reach a minimum of €500 million ($556.4M) by the end of FY 2024 in September.

The business said they are choosing to keep their outlook as they are experiencing a “continuation of strong customer acquisition.”

According to the company, the number of loyal customers from October 2022 to September 2023 increased by 6.1% in Finland, Sweden and Norway.

• Symrise

Symrise was another company that has kept its growth targets and forecasts an organic growth of between 5 and 7% and an adjusted profit before tax (EBITDA) margin of around 20%.

However, a recent report by financial media Market Screener has cast doubt over the German company’s ability to reach its FY 2023 goal, which will conclude in March 2024. 

According to the analysis, the corporation “is feeling the effects of a delayed reduction in inventories and negative currency effects.”

Increasing expectations

• Freshpet 

US manufacturer Freshpet has raised its yearly outlook and expects to hit $160 million (€146M) in sales, an increase from last year.

CEO Billy Cyr told investors that due to the company’s “strong” third quarter performance, they raised the guidance for 2023 by 27%, $5 million (€4.68M).

Investing advice tool Motley Fool noted the surge in the company’s stock shares amid the promising results. “Overall, the quarter shows the company’s expansion strategy is paying off, and investors are clearly responding to the results,” it says. 

Financial analysts stressed that “the company appears to have a long growth opportunity ahead of it as it gains market share in the pet food industry.”

• Trupanion 

US pet insurance company Trupanion increased its guidance for FY 2023, concluding at the end of December 2023, from $1.1 billion to $1.108 billion (€994.8M–€1B). According to the company, this represents 22% growth at the midpoint.

Trupanion’s total revenue in the third quarter of the year was $285.9 million (€258.6M), an increase of 22% compared to 2022.