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Why Greencross Limited shares are feline ill today

Credit: Sergiu Bacioiu

The Greencross Limited (ASX: GXL) share price is down 2.4% today to $6.54 and 4% over the last week after the veterinary business and pet food retailer announced that one of its most popular cat food brands is subject to a product recall due to claims it was making cats violently ill.

The Best Feline Friend brand is a “luxury” cat food distributed exclusively through Petbarn’s network and its American manufacturer Weruva has reportedly arranged for the suspect cat food to be independently tested in Australian laboratories.

According to Petbarn initial results suggest no catamination, however, this is only from a small sample and it’s advised that owners continue to stop feeding their cats the product.

Greencross now owns 169 Petbarn stores across Australia which represent 62% of revenue when including its 32 CityFarmers stores. It also has its Greencross Veterinary business and New Zealand operations that make up the rest of revenues.

The news around the product recall for the Petbarn stores is likely to have some reputational damage among Greencross’s customers with feline friends, although the financial impact is likely to be negligible with Weruva as the supplier probably liable to Greencross for out-of-pocket costs.

Today’s share price of $6.54 then may be a good opportunity to buy shares in an Australian retailer that is growing same-store sales at a healthy rate in a pet care market that is forecast to deliver good growth without the disruption risks associated with online competition from the likes of Amazon and others.

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Motley Fool contributor Tom Richardson owns shares in Amazon Inc. The Motley Fool Australia owns shares of Greencross Limited.

You can find Tom on Twitter @tommyr345

We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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