Blue Buffalo CEO forecast internet pet food sales growth

Blue Buffalo CEO sees opportunities in e-commerce, veterinary formulas and international markets, he said during the pet food company’s fourth quarter earnings call.

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photo by Javier Brosch | BigStockPhoto
photo by Javier Brosch | BigStockPhoto

Looking to 2017 and beyond, Blue Buffalo CEO Billy Bishop sees opportunities for growth in e-commerce, veterinary formulas and international markets, he said during Blue Buffalo’s fourth quarter earnings call on February 28.

“Today, in the sea of legacy brands, losing their relevance with consumers, Blue has become the new mainstream brand...” said Bishop. “With that said we still have only a six percent share in the US and feed less than three percent of pets.”

Bishop provided details on how the pet food company increased both net sales and income by double-digits in 2016. In 2016, Blue Buffalo’s net sales increased by US$1.15 billion, an increase of 11.9 percent over 2015. Adjusted net income hit US$157 million, up 28 percent from last year.

The company’s annual goal is to grow revenues by at least 10 percent with earnings-per-share increasing at least 20 percent. For the full year 2017, Blue expects to deliver net sales between US$1.24 billion and US$1.27 billion.

Fourth quarter Blue Buffalo financial highlights

  • Net sales of US$295 million, up 11.3%
  • Net income of US$35 million, up 261.1%; Adjusted Net Income of US$36 million, up 13.9%
  • Adjusted EBITDA of US$65 million, up 17.1%
  • Diluted EPS of US$0.17, up 258.3%; Adjusted Diluted EPS of US$0.18, up 13.1%

Net sales in Q4 of Blue Buffalo’s dry foods increased US$23.2 million, or 10.8 percent, to US$238.2 million while net sales of wet foods, treats and other products increased US$6.7 million, or 13.2%, to US$56.9 million.

“This growth was primarily driven by volume, which was well above market growth and as a result, we gained share,” said Bishop.

Full year Blue Buffalo financial highlights

  • Net sales of US$1,150 million, up 11.9%
  • Net income of US$130 million, up 45.7%; Adjusted Net Income of US$157 million, up 28.0%
  • Adjusted EBITDA of US$276 million, up 24.3%
  • Diluted EPS of US$0.65, up 44.8%; Adjusted Diluted EPS of US$0.79, up 27.2%

“In 2016, the total US pet food market continued to grow low single-digits,” said Bishop. “From a channel perspective, untracked channels, particularly e-commerce, continued to grow rapidly, while tracked brick-and-mortar channels slowed.

“On the e-commerce side, we continue to ramp up our sales and gain share in this rapidly growing channel, which represented a mid-teens share of our US sales retail mix in Q4.”

Blue Buffalo in international and veterinary markets

Blue Buffalo’s Mexican and Japanese sales and market share have done well, said Bishop. However, the strength of the US dollar stifled their Canadian business.

“In Canada, the price gap between our products and the locally produced competition has widened over the last couple of years, which has been a significant headwind to our top line momentum,” he said.

Bishop said that Blue Buffalo has increased focus on their True Blue Veterinary program. In Q4, the company rolled out kidney support and kidney mobility therapeutic pet food formulations.

“Although our Rx sales in Q4 represented continued progress, the absolute numbers are still small and the overall adoption curve is steady but slow,” said Bishop. “We continue to be excited about the size of the price in this channel and we are committed to its success.”

2017 Blue Buffalo financial outlook

For the full year 2017, Blue Buffalo expects to deliver net sales between US$1,240 million and US$1,270 million and adjusted diluted earnings per share of US$0.91 to US$0.94. 

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