Pets at Home: Maximizing Share of Wallet for Profit Growth

Source: Pets at Home

Pets at Home sees increasing its share of wallet as its biggest opportunity as it moves forward from a significant year for the brand.

The company's 2024 financial year, ending on 28 March 2024, focused on laying the groundwork for growth through investments in consolidating its brand and introducing a new digital platform.

This year, the company announced to investors that their focus will be on increasing profit.

In the 2024 fiscal year, consumer revenue increased by 6.9% to £1.9bn. However, the underlying profit before tax decreased by 3.2% to £132m.

The company mentioned that the decrease in its gross margin by 123 basis points was influenced in part by a £2.2m investment in a TV campaign to promote the launch of the master brand that integrates all of Pets at Home’s services.

Looking ahead to this year, the company aims to resume profit growth and has pinpointed expanding its share of wallet as its top priority. The company highlighted that by increasing the average value of its customers by just £10, it could generate £78m in additional consumer revenue.

The business reported that the average Pets at Home consumer spends £178 per year with them. On the other hand, the most engaged customers spend over £900, showing promising potential for growth.

During the pandemic, there was a surge in pet ownership leading to the acquisition of many new pets by the business. A significant 36% of the pets in its loyalty scheme are less than three years old. This positions the business well for future growth, as younger pets tend to require more spending on veterinary services as they age.

The Pets Club loyalty scheme program has 7.8 million active members, showing a 2% year-over-year growth. The program has been running for over 10 years and has gathered data on more than 10 million pets.

Pets at Home CEO Lyssa McGowan mentioned that the business has a great understanding of pet owners' spending habits. She described the customer base as loyal and easy to predict.

By utilizing this knowledge, the business is able to increase the lifetime value of its customer base through encouraging repeat purchases, promoting related products, and offering upgrades. Additionally, the business has introduced subscription services, such as health plans, which now account for 10% of its revenue, showing a 330 basis point increase compared to the previous year.

Identifying the expansion of share of wallet as its primary opportunity, the business affirms that it is positioned in a continuously growing market. Trends such as premiumization (where pet owners opt for higher quality products) and increased penetration (as pet ownership becomes more widespread) are contributing to the overall growth of the market.

The work done in the past year to bring the brand together shows that Pets at Home is seen as the top choice for all pet care needs, with a 23% share of the market.

Pets at Home has a strong hold on the premium food segment, with a 47% share of the market. However, in areas like grooming, where it only holds an 11% share, there is room for growth.

Editor's P/S:

Pets at Home's focus on increasing share of wallet is a strategic move in a growing pet care market. By capitalizing on the loyalty and predictability of its customer base, the company aims to drive repeat purchases, promote related products, and offer upgrades. The success of subscription services and the potential growth in grooming services indicate promising opportunities for revenue expansion.

The company's understanding of pet owners' spending habits and the growing trend of premiumization and increased pet ownership position Pets at Home for continued success. The consolidation of its brand and the introduction of a new digital platform in the previous year have laid the groundwork for this growth strategy. By leveraging its strong market share in premium food and expanding into other areas, Pets at Home aims to become the preferred destination for all pet care needs.