Toys “R” Us Inc, Maplin Electronics Ltd, Mothercare PLC, Carpetright PLC, House of Fraser, Poundworld.
The list of casualties on the British high street seems to grow by the week, forcing survivors to seek new strategies to weather the onslaught from online rivals such as Amazon.com Inc.
For Pets At Home PLC, struggling in its traditional business of selling dog and cat food, the game plan is an increasing drive into the higher-margin area of veterinary practices.
The company late last month reported falling profits, sinking its shares to an all-time low, but its in-store vet business was a rare bright spot, with revenues rising 16 percent.
It is now placing its bets on vets.
It told reporters it plans to double the number of practices it operates — mainly 50-50 joint venture partnerships with vets — to 1,000 over the next decade.
The company is to invest £20 million (US$26.31 million) next year alone in its vets business, which has a core profit margin of about 34 percent, compared with its retail division’s 14 percent.
Pets At Home is not one of the bigger British retail players, with a market value of about £830 million. Yet its toils and tactics tell a wider story about how companies across the sector are being forced to rethink business models to plot courses out of the gloom.
Its push also reflects a global boom in high-margin pet services, such as vets and grooming, and premium accessories like toys and bedding.
US consumer spending on such services is growing at double-digit percentage rates, driving a surge in dealmaking in the area.
Consumer giant Mars Inc’s pet care division is now larger than its traditional confectionary business, for example, after a string of acquisitions, including two announced in the past week, for British firm Linnaeus Group and European chain AniCura AB.
Britain’s high-street retailers have had a torrid year.
As well as online competition, they have been hit by weak consumer sentiment and currency swings due to the Brexit vote.
Maplin and Toys “R” Us collapsed in February, while Poundworld went into administration last week, and Mothercare, Carpetright and House of Fraser are shutting stores in restructuring plans.
Pets At Home is looking to elude such a fate, yet its vet expansion plans carry significant risks.
The company’s revenue from the vets practices — which make up about one-third of group operating profit — comes entirely from the franchise fee it charges its joint-venture partners, calculated as 17 to 18 percent of sales.
However, many of the practices are struggling to turn a profit — suggesting the model could be unsustainable unless business picks up.
A review of the accounts of more than 200 of the joint ventures found three-quarters of them are loss-making.
Pets At Home declined to comment on the size of the losses of the underlying joint ventures, but said the group expected each practice to break even after four to five years of trading.
“It takes time for a veterinary practice to develop and reach maturity. We have a lot of young practices, more than half are under four years old,” a spokeswoman said, adding that 87 of its 461 practices were profitable and debt-free.
The company also faces increasing competition from chains, including private equity-backed Independent Vetcare Ltd and CVS Health Corp, as well as a shortage of vets and veterinary nurses in Britain that could hamper the expansion plans.
“There are a lot of questions out there in terms of the sheer number of practices,” said Mark Hedberg, a vet and joint venture partner in the southern England town of St Neots. “In the last three to four years it has increased massively. It is hard to find veterinary staff to staff all these expansions.”
Two other joint venture partners told reporters they were also finding it difficult to staff their businesses.
“It is very competitive, especially because the other corporates are in the market,” said Laszlo Novak, a joint venture partner in Linlithgow, near Edinburgh, Scotland. “There is a huge pressure.”
Among the rows of vibrators, rubber torsos and leather harnesses at a Chinese sex toys exhibition in Shanghai this weekend, the beginnings of an artificial intelligence (AI)-driven shift in the industry quietly pulsed. China manufactures about 70 percent of the world’s sex toys, most of it the “hardware” on display at the fair — whether that be technicolor tentacled dildos or hyper-realistic personalized silicone dolls. Yet smart toys have been rising in popularity for some time. Many major European and US brands already offer tech-enhanced products that can enable long-distance love, monitor well-being and even bring people one step closer to
TRANSFORMATION: Taiwan is now home to the largest Google hardware research and development center outside of the US, thanks to the nation’s economic policies President Tsai Ing-wen (蔡英文) yesterday attended an event marking the opening of Google’s second hardware research and development (R&D) office in Taiwan, which was held at New Taipei City’s Banciao District (板橋). This signals Taiwan’s transformation into the world’s largest Google hardware research and development center outside of the US, validating the nation’s economic policy in the past eight years, she said. The “five plus two” innovative industries policy, “six core strategic industries” initiative and infrastructure projects have grown the national industry and established resilient supply chains that withstood the COVID-19 pandemic, Tsai said. Taiwan has improved investment conditions of the domestic economy
Malaysia’s leader yesterday announced plans to build a massive semiconductor design park, aiming to boost the Southeast Asian nation’s role in the global chip industry. A prominent player in the semiconductor industry for decades, Malaysia accounts for an estimated 13 percent of global back-end manufacturing, according to German tech giant Bosch. Now it wants to go beyond production and emerge as a chip design powerhouse too, Malaysian Prime Minister Anwar Ibrahim said. “I am pleased to announce the largest IC (integrated circuit) Design Park in Southeast Asia, that will house world-class anchor tenants and collaborate with global companies such as Arm [Holdings PLC],”
MAJOR BENEFICIARY: The company benefits from TSMC’s advanced packaging scarcity, given robust demand for Nvidia AI chips, analysts said ASE Technology Holding Co (ASE, 日月光投控), the world’s biggest chip packaging and testing service provider, yesterday said it is raising its equipment capital expenditure budget by 10 percent this year to expand leading-edge and advanced packing and testing capacity amid strong artificial intelligence (AI) and high-performance computing chip demand. This is on top of the 40 to 50 percent annual increase in its capital spending budget to more than the US$1.7 billion to announced in February. About half of the equipment capital expenditure would be spent on leading-edge and advanced packaging and testing technology, the company said. ASE is considered by analysts