‘Once in a lifetime’: the leap of faith driving growth for pet care retailer PetO

After spending the past year integrating a transformational acquisition of assets disposed by rival pet retailer Petstock, the privately owned PetO aims to grow revenue by almost 70 per cent to $250 million by FY28.

In May last year, the Sydney-based PetO, which was founded by brothers Nick Greenhalgh and David Rowe in 2006, acquired 41 retail sites from Petstock to add to its existing 17 outlets.

The acquired businesses included the Best Friends, Our Vet, My Pet Warehouse and Pet City brands, all of which were part of Petstock which was forced to offload them by the Australian Competition and Consumer Commission in the wake of Woolworths’ (ASX: WOW) plans to buy a majority stake in Petstock for $586 million.

Since the acquisition, the businesses have transitioned to the PetO brand which has grown to become Australia’s third-largest pet-care retailer behind market leaders Petbarn and Petstock.

“It’s been quite a journey over the last 12 months,” Greenhalgh tells Business News Australia.

“There’s a lot of work, expense and time doing that rebranding. When you have 800 people you are engaged in a lot of change. Most people will say they are up for a change but, when it happens, not everyone likes change.”

One of the key decisions for PetO following the acquisition was to exit the sale of live animals, a part of the pet sector that doesn’t fit the group’s more streamlined business model which focuses solely on servicing the needs of cats and dogs.

“When we bought the Petstock business there was a large orientation towards live animals,” says Greenhalgh.

“The 41 stores we acquired on average had 30 tanks, cages and enclosures in each store full of fish, birds or guinea pigs.

“Part of the investment that we have made in these stores included removing those cages and tanks. As a business, we’ve never sold live animals. It was a purpose-over-profit decision.”

While Greenhalgh expects there is another year to go to fully integrate the new stores, PetO remains on target to grow revenue to $250 million by FY28 – up from about $150 million currently. The company also anticipates this will lead its workforce to grow from 800 to 1,000.

“The engine room will be organic growth from the stores we’ve got, but we also have ambitions to open more stores,” he says.

“We really have a good network that we believe can realise its full potential. We haven’t done that yet, but we believe there is a lot of upside.”

Greehhalgh notes that among the many changes made since the acquisition last year, PetO hasn’t closed any of the stores from the Petstock buyout.

“In our 20 years of existence we have never closed a store; we only know how to open them,” he says.

“Currently, we are at 58 stores and number three in Australia. If we open another 100 to make it 158, we would still be number three.

“So, we have an incredible runway. I doubt whether we will open 100 stores in three years, but we will be opening more stores in the states we are already in and we will be looking at states like South Australia for state expansion as well.”

The Petstock acquisition has given PetO a retail footprint in NSW, ACT, Victoria, Western Australia, Queensland and Tasmania.

“The brand has been well received (in the new territories),” says Greenhalgh. “Now we are beginning to relaunch the brand and delivering our message to our data base of one million.”

PetO is leveraging solid growth in the pet care sector to expand its market share. While the post-COVID boom in the sector has faded, Greenhalgh says business growth has “levelled out to normal”.

“The industry is still growing at low single digits but nevertheless it is still growing,” he says.

“Our strategy is to be experts in dogs and cats, and that goes for our recruitment. Our big warehouse stores are completely jam-packed with foods, accessories and pharmacy for dogs and cats.

“Our research tells us people are interested in price and advice, and they also want great choice.

“If we focus on dogs and cats, which is unlike our competitors, then we have that expert advice.

“The people that work for us are authentically passionate about those two areas and most of the time they are either ex-groomers or vet nurses or have their own army of dogs and cats at home.”

Greenhalgh also points out that PetO's growth ambitions benefit from being a family-owned private business.

“We are not marred, coloured or disrupted by private equity or the ASX. There is no shareholder that is not in the business.”

While scaling the business through new store openings has become easier in recent years due its expanded footprint, Greenhalgh says PetO still retains the startup culture that drove the business from its foundation.

Greenhalgh and Rowe established their first store in the Sydney suburb of Brookvale in 2006.

“We spent five years working through what the model looked like and we didn’t open our second store until five years later at Mona Vale,” says Greenhalgh.

The network grew to 17 outlets by early last year, before the acquisition of the Petstock outlets, financial details of which have not been disclosed.

“We did a lot of personal reflection (ahead of the acquisition),” says Greenhalgh.

“It was a once in a lifetime opportunity. You either jump on the ship now or sit in your armchair 10 years from now and say 'what if'. It’s about having a go.

“It’s been tough, it’s been challenging but it’s also been exhilarating.”

Staying grounded with the business is part of the growth strategy by the PetO founders, which they plan to maintain as the business grows both organically and through new store openings.

“We’re both in our stores every day - I work out of a store and my brother works out of a store,” says Greenhalgh.

“The focus is less about sitting in the office but rather going out to stores and seeing first-hand what’s working and what isn’t.

“In a retail business, in particular, you really have to know what’s going on.”

To manage current growth, PetO has fortified its management team while also started exploring new opportunities as they arise.

“We have the road map to grow organically and open new sites, but inevitably there will be opportunities with other independently owned pet stores that may call time,” says Greenhalgh.

“There are several that have passed our desk already. We are definitely interested but it’s just a question of the right timing and the right proposition.”