PetSmart purchase promising

Tom Dougherty, CEO – Stealing Share

15 December 2014

 

What the equity firm should do

 

It always amazes me when companies decide the way to increase profits is to cut costs. Like that’s a long-term strategy.

Instead, it’s really a way for company executives to make the next quarter’s reports look better and to appease shareholders. “Look,” the investors say. “The CEO is thinking about us and our dividends.”

That’s what PetSmart has been doing, cutting $200 million out of its budget in an attempt to fight off stale sales.

PetSmart

The focus should be on creating preference, not cutting costs.

But there is a bit of sunshine rising over the horizon. PetSmart is about to be bought by private equity firm BC Partners, which will make the company private – therefore, not so beholden to shareholders.

This way, the company and BC Partners can think long term, although we’ll have to see if they follow the right path. You see, the reason why it amazes me that companies think cutting costs is the only way to be relevant again is that it eventually leads to its demise. (Think Circuit City.) You just keep cutting and cutting until there’s nothing left.

PetSmart. What is in the future?

What PetSmart should be doing is investing in regaining its preference. In announcing the purchase, BC Partners said, “PetSmart is an iconic brand and the category leader in the growing pet retail industry.”

It’s not so iconic anymore. Sales are flat, there is greater competition (especially from the local shops) and online has eaten into its market share. PetSmart might be the market leader, but its preference among pet owners is shrinking.

BC Partners stated it does foresee a strategic overhaul and it does note that the US pet industry is booming – so it sees the opportunity.

But simply cutting costs will not seize the opportunity. There is a brand problem at PetSmart, which has been overlooked due to its market leadership. In fact, it’s when you are doing well when you should be vigilant in ensuring your brand does what it is supposed to do: Create preference.

 

See more posts in the following related categories: Creating Preference PetSmart PetSmart BC Partners Retail

0 Comments

Submit a Comment

Your email address will not be published. Required fields are marked *

Walmart grocery delivery to overtake Amazon?

  Walmart grocery delivery   Tom Dougherty, CEO - Stealing Share 19 February 2019 Walmart grocery delivery to overtake Amazon? I hate grocery shopping. Let me say that up front. Every Saturday or Sunday, we trek to the nearest Harris Teeter and pile our cart...

Measuring TV advertising effectiveness

  TV Advertising Effectiveness   Tom Dougherty, CEO - Stealing Share 18 February 2019 Measuring TV advertising effectiveness I found a new study utterly hilarious as it says as much about the state of TV advertising effectiveness as it does about attention...

How feasible is the Toys R Us return?

  Toys R Us return   Tom Dougherty, CEO - Stealing Share 13 February 2019 How feasible is the Toys R Us return? It appears the rumors of Toys R Us demise are greatly exaggerated. Tru Kids Brands announces that it has begun the Toys R Us return by reopening...

Share This