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BFD Expert Voices - Retail Deals

BFD Expert Voices

Since joining PetMeds Express as CEO in 2021, Matt Hulett has orchestrated three strategic investments or partnerships.

Why it matters: Large consumer product goods companies, health care companies and private equity firms are all vying for a piece of the pet care market, Kimberly writes.

The largest online pet retailer Chewy is also entering the fray, recently launching CarePlus, a suite of pet wellness and insurance plans.

What they're saying: “What I want to start doing is provide premium food, prescription food, virtual vet services and insurance to create this kind of health and wellness brand,” Hulett tells Kimberly.

Catch up fast: Perhaps the biggest bet was PetMeds' acquisition of PetCareRx for $36 million in cash, which closed this month.

The deal helped push the company into areas beyond prescriptions, including premium pet food, supplements, treats and supplies.

In February, it partnered with pet insurance provider Pumpkin Pet Insurance.

Last April, PetMeds invested $5 million in pet telehealth startup Vetster’s $30 million Series B round and became its exclusive partner, launching Vetlive through PetMeds' website.

Zoom in: With more DTC players moving back to physical stores, Hulett says PetMeds had to be thoughtful about which digital commerce channels it chooses.

“That's why we've invested in all these things like telemedicine and solutions like that,” he says.

New entrants in the space aren’t a threat, he says, adding that it’s a broad market with room for everyone.

He likens it to the human world. “There's a bunch of human pharmacies. There's not a 90% market share leader in health for humans, nor do I see that happening in pet.”

The big picture: Total spending in the pet care industry is projected to increase to more than double from 2019 levels to $277 billion by 2030, according to a Morgan Stanley report.

By the numbers: PetMeds had just over $100 million in cash and cash equivalents for the nine months ended Dec. 31, 2022.

The company, which trades on the Nasdaq, has a market cap of $320 million as of today.

PetMeds posted $58.9 million in sales in the third quarter, a 3% decline from the previous year.

About 90% of its sales come from prescriptions, Hulett says, and it has now added more services and products to sell through its acquisition of PetCareRx.

What’s next: The company will slow down on the number of deals it will do to digest the three deals it just signed, Hulett says.

The intrigue: The next burgeoning area is in diagnostics, such as ancestry tests, and biometrics, to better personalize food and health for pets, he says.

“A lot of those things are going to be more driven by the consumerization of the health care of the pet, just like we saw in human health.”

1 big thing: PetMeds vies to be top dog

photograph of matt hulett surrounded by circles and a close up of a dogs nose

Photo illustration: Tiffany Herring/Axios; Photo: Courtesy of PetMed

Footwear company RG Barry will likely exit to another set of financial sponsors once the M&A market stabilizes, CEO Robert Mullaney tells Richard exclusively.

Why it's the BFD: Industry executives continue waiting for an opening in the market to put the dry powder on the sidelines to work.

Details: "There's always room for capital investors," given Blackstone and Mill Road Capital-backed RG Barry's ambitions, Mullaney says.

While Mullaney declined to elaborate on timing, he said there are theories out there now that indicate M&A will improve in the second half of this year, with "clear skies" in 2024.

While a public offering is in RG Barry's future, it is not a near-term option and is likely something for the next set of owners to contemplate, he says.

Between the lines: Mullaney says he took the top job in 2018 because of the potential of the foundation and what he described as underappreciated brands.

One of the first challenges he tackled was manufacturing waste to cut costs.

The other aim was to transform RG Barry into an e-commerce-centric business.

By the numbers: The company, parent of accessories brand Baggallini and slippers brand Dearfoams, generates between $250 million and $500 million today, Mullaney said.

Over the past five years the company has had a 15% compound annual growth rate (CAGR) and doubled its revenue, he says.

Mullaney projects the company will be four times the size it is today in 2030.

Most of that will come from organic growth, but a portion will come from M&A, he says.

What's next: RG Barry is eyeing buys of strongly recognized brands that need modernizing and could benefit from its digital platform.

Mullaney will be bargain hunting over the next 12 months in areas such as casual comfort footwear as well as bags, sleepwear and loungewear.

The Dearfoams brand is also launching a line of comfort footwear.

The company is planning to launch an initiative in partnership with other retailers on end-of-life products.

Flashback: Blackstone and Mill Road took publicly traded RG Barry private in 2014 for about $215 million, according to reports.

Per the announcement at that time, it was approximately 50%-owned by Mill Road Capital, 48%-owned by Blackstone, and 2%-owned by a consortium of institutional investors.

Of note: While the company has not yet formally rebranded, the acronym RGB has a dual meaning, also standing for Responsible Growth Brands, Mullaney says.

2. The BFD: RG Barry eyes (eventual) exit

Illustration of a pair of sneakers with a dollar sign insignia 

🔔 Fanatics is moving closer to an IPO with the hiring of Deborah Crawford to head up investor relations at the digital sports platform, CNBC reports.

Crawford is a seasoned professional, recently serving as Facebook parent Meta's head of IR. Before that, she served in the same role at Netflix.

An IPO for Fanatics, which has a valuation of $31 billion, is not on the immediate horizon, the article says, however.

3. Retail therapy

Illustration of a check out screen on a phone with an icon of a shopping cart and a button that says "feel better."

• L Catterton invested in Urban Egg, a Colorado-based restaurant concept. www.urbaneggeatery.com

• Doms Industries, an Indian stationery company, plans to file as soon as June for an IPO in Mumbai that could raise $200m to $300m. https://axios.link/3NcJX18

• Kirin Holdings, a Japan-based brewer, agreed to buy Australian vitamins maker Blackmores for $1.2b in cash. https://axios.link/3n77hma

• Essity, the Stockholm-listed maker of Plenty paper towels, is seeking a buyer for its 52% stake in Chinese tissue paper maker Vinda International (HK: 3331), per Bloomberg. https://axios.link/3ngJK2a

• Godrej Consumer Products, based in India, is buying the consumer goods business of Raymond Consumer Care for $345m, Reuters reports. https://axios.link/446ytCk

4. Retail transactions

• Fresh Vine Wine, a Minneapolis-based producer of lower-carb wines, has named Roger Cockroft as its new CEO, replacing interim Rick Nechio. Cockroft is currently an executive partner at PE firm Salt Creek Capital. https://axios.link/3LChgtn

5. It's Personnel

Situational awareness: Consumer confidence fell this month to the lowest point since July 2022, according to the Conference Board.

📺 What we're doing: Richard finished watching the latest season of "The Mandalorian," featuring Baby Yoda in a life-size robot he can operate out of.

✏️ Thank you to newsletter editor Claire Rychlewski and copy editor Mickey Meece for today's edits.

April 27, 2023

1 big thing: PetMeds vies to be top dog