Financial snapshot: Retailers and health companies lead in Q3 revenue growth

While a few pet players have yet to publish their results, the third-quarter earnings season—measured on a calendar-year basis, since fiscal years differ from company to company—is almost over.

Despite a challenging economic environment, the period produced more positive than negative results for the sector. Of the 20 earnings reports covered by GlobalPETS, 12 showed year-on-year (YoY) revenue growth.

For companies operating solely in the pet sector, the analysis covered total turnover. For those with other activities, only figures from the pet segment – or, in some cases, the broader animal segment – were considered.

Biggest winners

At least 6 companies had a double-digit surge in YoY revenue. The 2 with the highest net sales growth have some aspects in common: they are retailers and their results were supported by store expansion and business acquisition – either partial or total.

Petstock, Australia’s largest retailer, Woolworths Group’s pet brand, led with a 15.8% rise, totalling AU$238 million ($155.8M/€134M). And the Nordic pet retailer Musti Group reported a 14.2% YoY increase in turnover, reaching €127.3 million ($140M). 

Third comes the American fresh food producer Freshpet, with a 14% increase in net sales to $288.8 million (€272M), driven by price and volume gains, especially through partnerships with large retailers. 

Despite the positive performance, the company’s CEO, Billy Cyr, tells investors there was an “unprecedented” deceleration in sales growth during the year, especially due to consumer sentiment.

According to Thomas Elliot, Managing Director of Consumer Goods Investments at Capstone Partners, the popularity of fresh, raw pet food has driven the adoption of refrigerators and freezers in big stores across the United States, demonstrating a growing adaptation of the logistics needed to preserve this type of food.

Pet insurance 

Pet health firms also figure among the winners, coinciding with the rise in veterinary costs in different parts of the world, increasing vet bills and an ageing pet population. “There are more products, services and remedies in the preventive, health and vet areas now,” Elliot tells GlobalPETS. 

He highlights that the pet insurance segment is particularly attractive to the American investment market due to its growth potential. And it is precisely a North American insurance company that leads the health ranking for the quarter: Trupanion saw a 12% increase in total revenue at $366.9 million (€315M).

In September, Trupanion had more than 1 million pets enrolled in its subscription model, an increase of 5% over the previous year. The insurer delivered “record quarterly profitability,” according to CEO and President Margi Tooth: its net income increased more than 3 times to $5.9 million (€5M). 

In its earnings call, the CEO attributes the result, among other things, to improved retention efforts and one of the other performance enemies in the sector: economic instability. “Our efforts to make adjustments more predictable and to reinforce the importance of coverage, especially in uncertain economic times, are paying off,” Tooth says. 

Swedencare and Elanco 

The other 2 are pet health product manufacturers: The Malmö-headquartered Swedencare, which reported a net turnover growth of 11% to SEK 712.9 million ($65M/€61M); and the Indianapolis-based Elanco, whose $1.1 billion (€940M) revenue represented a 10% YoY rise. 

Elanco’s results were driven by strong performance from certain dog health products, both in international markets and in US vet clinics. After the earnings release, the commodities market analysis firm Argus kept a positive outlook for the company, suggesting confidence in its business prospects. 

Other positive results in the quarter were from H&H Group’s Pet Nutrition and Care (7.3%), Pet Valu (4.9%), ADM’s Animal Nutrition (3%), Hill’s Pet Nutrition (1.4%), Zoetis (1%) and Pets at Home (0.7%).

The (fewer) losers

Only 2 companies analyzed by GlobalPETS registered double-digit declines during the quarter, both dragged down by fewer volumes. The largest drop was recorded by the American omnichannel brand Bark, whose revenue fell 15.2% to $107 million (€98.4M) due to fewer subscriptions. 

It was followed by Post Holdings’ pet food business, which registered an 11% YoY drop to $1.6 billion (€1.5B) due to distribution losses and product reductions.

The results reflect another general trend. “Because of less consumer spending, product companies’ sales have generally gone down from last year,” Elliot says, noting also the effect of tariffs, mainly on retailers and manufacturers’ inventories.

Firms with negative turnover included Petco (-3.1%), Nestlé’s pet care (-3%), Pet Circle (-2.9%), dsm-firmenich’s Taste, Texture & Health (-1.7%), Central Garden & Pet’s pet segment (1.6%), and Spectrum Brands’ pet care segment (-1.5%).

Other metrics

American ingredient player ADM operates its pet nutrition business under the animal nutrition segment. While the 3% revenue increase in the category was modest compared to other top performers during the quarter, ADM posted a 79% jump in operating profit, which it attributes to high-margin product lines.

And although the positive 3% increase in revenue was not among the most expressive winners of the quarter, ADM delivered a 79% surge in operating profit, which it attributes to high-margin product lines. 

In September, the firm partnered with Alltech, a company focused on agricultural solutions, to launch a joint venture focused on animal feed “to transition into higher-margin specialty ingredients,” it states in its earnings presentation. 

In the case of dsm-firmenich, the pet food business is part of the Taste, Texture & Health segment, which encompasses ingredients and nutritional solutions. 

As the company does not provide specific figures for the pet portfolio, it is only possible to assess the segment as a whole. Although revenue dropped 1.7% during the quarter, the Swiss-Dutch manufacturer highlighted in its presentation that pet food “continued to perform well.”

Despite mixed results across the sector, the third quarter highlights a clear trend: companies leveraging retail growth and pet health services are emerging as winners.