Pet care brand Heads Up For Tails faced challenges in expanding its operations during FY23. While the company’s scale saw a modest 2% growth, its losses surged by a factor of five during the same period. This was primarily due to a sharp increase in expenses related to marketing and employee benefits throughout the fiscal year ending in March 2023.
According to consolidated financial statements filed by the group company Sara Global Pte. Ltd. in Singapore, Heads Up For Tails’ revenue from operations rose from Rs 138 crore in FY22 to Rs 140 crore in FY23. It’s worth noting that the company achieved an impressive 85% year-on-year growth in FY22.
Heads Up For Tails boasts a catalog of 13,000 pet products from over 250 brands, including its own labels. The company claims a presence in more than 18 cities with over 90 stores and 65 pet spas. Pet product sales constituted 96.7% of the overall revenue, which increased to Rs 135.42 crore in FY22. Other revenue streams for Heads Up For Tails include advertising, warehousing, and logistics.
The majority (93%) of the company’s revenue is derived from domestic sales, with the remainder coming from international sources.
The consolidated financial statements include subsidiaries such as Barkyard Private Limited and Precious Pet Services Private Limited.
On the expense side, the cost of procurement accounted for 55.59% of the overall expenditure, increasing by 15% to Rs 118 crore in FY23. Increased expenses on employee benefits, freight, marketing, professional charges, software, and other overheads pushed the overall expenditure up by 38.8% to Rs 212 crore in FY23 from Rs 153 crore in FY22.
The stagnant growth and significant increase in total costs resulted in heavy losses for Heads Up For Tails, reaching Rs 71 crore in FY23 compared to Rs 14 crore in FY22. Its return on capital employed (ROCE) and EBITDA margin deteriorated to -25% and -43.8%, respectively. The company spent Rs 1.52 to earn a rupee.
Having raised approximately $40 million, including a $37 million Series A round led by Peak XV and Verlinvest in 2021, Heads Up For Tails faces competition from Supertails, Zigly, PetSutra, Wiggles, and potentially Drools.
The significant increase in marketing costs highlights the intensifying competition in the pet care segment. However, Heads Up For Tails’ challenges in FY23 have left it in a vulnerable position, needing to regain a growth trajectory without further financial strain. Investors may seek consolidation in the growing segment, with Heads Up For Tails’ losses potentially attracting such scrutiny. Keep an eye on developments in this space.
