Greencross rebounds as Amazon steers clear of kennel for now
Source: http://www.copyright link/business/...teers-clear-of-kennel-for-now-20171228-h0b62b
A 20 per cent rebound in the share price of pet store retailer and veterinarian services operator Greencross in the past six weeks is proof that the "fear of Amazon" effect among investors went too far.
The sky-high cost of vet's bills for the household hound remains a constant for pet owners in the $9.5 billion petcare sector in Australia whatever Amazon does in Australia. But the climb in the Greencross share price is a symbol that some of the short-term fears about the arrival of Amazon's local operations immediately decimating profits and margins among a raft of ASX-listed companies with a large retail component have been allayed.
Greencross, which runs around 250 retail stores in Australasia including 140 Petbarn outlets, along with 110 stand-alone vet clinics and 40 in-store clinics, was the biggest gainer among the ASX200 stocks on Thursday with a 4.8 per cent rise to $6.29 to reach its highest close in more than five months. It lost a little bit of ground in early trading on Friday but then moved higher again to be sitting around $6.31 by mid-afternoon in a weaker overall sharemarket. That has delivered a 20 per cent-plus increase from $5.20 on November 17 for anyone bold enough to bet against the looming Amazon wave.
Amazon's Australian operations are offering a range of pet products such as dog leads, bowls and grooming products through third party sellers on its online site. But pet care doesn't appear to be a main area of focus for Amazon which instead is concentrating on categories such as consumer electronics , toys and sporting and outdoor products in the first few weeks.
Greencross, which has a market capitalisation of $740 million, is revving up its own online offerings. Chief executive Martin Nicholas outlined to shareholders the the group's annual meeting that it had expanded its online range to 4,500 products. But online is still only a small component of total retail sales, at 3.4 per cent. This compares with the broader retail sector penetration in Australia of around 8 per cent of total retail sales being transacted online among all players.
The big plus for Greencross is that people buying online spend up with much more gusto than if they are in a Petbarn store. Mr Nicholas said the online basket size is about 50 per cent higher than that of in-store. Online revenues increased by 55 per cent in 2016-17 off a low base, and Greencross has had good early success with its "Click and Collect" model, where customers transact online and then drive in to their local outlets and pick up their goods.
Greencross, which is the largest employer of vets in Australia with 650 across its businesses, is also a big believer in the integrated one-stop shop model. Internal figures show that customers who use the group's vet services, grooming services and frequent the retail stores, on average make 18 visits each year across all facets. This compares with an average of five visits a year for consumers who only go to the retail outlets.
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