With all the talk about a) retailers and b) recessions recently I thought it could be useful to look at how two popular pet care companies plan to grow. National Veterinary Care Ltd (ASX: NVL) and Greencross Limited (ASX: GXL) are similar businesses, with different strategies for growing profits over time:
National Vet Care ("NVC"):
- 'Best For Pet' wellbeing program increases consumer spending over time via upsell of additional services like dental (consumers spend more at NVC clinics over time)
- Run best-practice workshops and lift participation of non-NVC vets to 50% (improves staff knowledge + effectively markets NVC to external vets, who may sell their practice + join NVC)
- Selling customers managed services + paid access to NVC's procurement agreements, systems/benchmarks, and Centre of Excellence
- Acquisition of new vets
- Has $15 million in available finance for acquisitions and is earning positive cash flow
- Plans to add ~6 new clinics per year (currently 50 clinics)
Greencross Limited:
- Is co-locating vets and groomers into retail stores (lower establishment costs, also boosts sales + cross-selling)
- Sells own-label brands (higher margins)
- Online + app orders, 'click and collect' functionality (lower cost of sales, easier to reach customers)
- Acquisition/establishment of new vets and retailers
- $120 million headroom remaining on debt facilities, earning free cash flow
- Target of 350 retail stores (currently 221)
- Target of 120 in-store clinics (currently 25, 154 vet practices in total)
Both companies have solid strategies for growing their sales and network footprint, and so far both strategies have been delivering measurable results. My current preference would be to own Greencross Limited, as I believe this company has similar growth prospects to National Vet Care, albeit at a much lower price.
Greencross' joint vet and pet retail business also gives it a few extra levers to pull for generating growth that National Vet Care lacks. I think Greencross is an opportunity at today's prices.
