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Petsway files bankruptcy, plans closures

Chapter 11 reorganization plan identifies trouble in St. Louis and Poplar Bluff markets

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Last edited 9:09 a.m., Jan. 21, 2020

Springfield-based Petsway Inc. filed for Chapter 11 bankruptcy reorganization ahead of the new year, and company officials say they’re planning to shed three of the pet supply retailer’s out-of-town locations.

Petsway co-owner and Vice President Karl Keller II said the store’s Poplar Bluff and St. Peters stores weren’t profitable, which triggered the bankruptcy filing by the roughly 65-year-old family business. He said the five local stores – four in Springfield and one in Nixa – will not be affected.

Officials for Petsway, which sells small pets and pet supplies and offers grooming and training services, plan to close or sell its two stores in the St. Louis area and one in Poplar Bluff. A buyer had not been secured as of press time.

Keller’s father, Karl Keller Sr., started the venture selling fish out of the family’s Ava home in the early 1950s, and later that decade he moved into commercial space and operated as Karl’s Aquarium. It adopted the Pet Warehouse name in 1989 and branded as Petsway in 2007.

The younger Keller said an expansion plan began in 2014 didn’t go the way company officials had expected. Petsway opened its first St. Louis store and its Glenstone Avenue location that year, then later closed its Joplin and 5009 S. Campbell Ave. locations to focus efforts on other markets, he said. That led to the opening of a Nixa store in 2017 and in St. Peters a year later.

Keller said the St. Peters store, west of St. Louis, experienced contractor issues, cost overruns and an extended delay in opening, which ultimately led to its failure.

“When you have two stores you close – which is a drop in revenue – you expect to replace it, and that was delayed,” Keller said, referring to the closed Joplin and Springfield locations. “We had taken out a line of credit to expand our stores. When you have a store that’s not generating revenue, you end up spending your line of credit to keep operations going.”

Keller said the company’s estimated liabilities are roughly $2 million-$3 million, and the Dec. 30 bankruptcy filing lists estimated assets of $50,001 to $100,000. The company has roughly 75 creditors, he said. The creditor with the largest unsecured claim is OakStar Bank at $1.5 million after collateral is accounted for, according to the filing.

As for the Poplar Bluff location, which opened in 2007, Keller said the entry of two big-box stores – PetSmart Inc. and Petco Animal Supplies Inc. – oversaturated the market. Poplar Bluff has a population of roughly 17,000, according to U.S. Census data.

“It was doing well for us,” Keller said of the southeastern Missouri store. “But then Petco came, and then PetSmart – that’s just too much competition for too small of a market.”

In 2018, PetSmart and Petco had roughly 47% combined market share in the U.S., according to data by market research firm IBISWorld.

During the last three years, Springfield also has welcomed two Petco locations and an additional PetSmart store at Campbell Avenue and Sunset Street. In Springfield, the pet supply market also includes Fetch Pet Supplies & Gifts, Pet Wants, All About Dogs & Cats LLC and All Pet Supplies.

Keller said the Springfield stores did have some initial impact from the openings but declined to disclose drops in revenue.

“When you have big-box stores come in, they’re taking business away from somewhere. Everyone feels it to some extent,” he said.

Reorganization
Part of the company’s reorganization plan includes a heightened focus on Springfield operations.

“We need to reinvest some money into the existing stores because of the bleeding that’s been going on with out-of-town stores,” he said, declining to disclose projected investments.

This includes consolidating the company’s distribution warehouse, located at 222 N. Kentwood Ave. The company already leases a portion of its warehouse space and will be shrinking its footprint at the warehouse in 2020. Keller declined to comment further.

Also on the docket is the rollout of an in-store pickup service for online orders, which should be underway before mid-2020, he said, adding that the Nixa location likely would not take on the additional service. Once that’s introduced, Keller said the company is planning to offer home delivery services.

“It adds an excellent way to compete, when you can offer online shopping that can be scheduled to be delivered to your home,” he said.

Other local pet supply shops that offer home delivery are Fetch Pet Supplies & Gifts, Pet Wants, PetSmart and PetCo., according to Springfield Business Journal research.

Market moves
In 2019, more American households had pets than those that had children, according to market researchers at Statista. Additionally, the American Pet Products Association estimates 70% of all households currently own a pet, which resulted in over $75 billion spent in the pet industry last year. That’s a 65% increase from 10 years ago.

As demand for pet supplies grows, local pet store owners say the biggest competitors are online retailers, such as Chewy Inc. and Amazon.

“It’s hard to fight online retailers like Chewy, because they do so much national advertising that we can’t afford to do,” said Jan Guin, general manager of the two All Pet Supplies stores in Springfield. “We can go online with our products, but unless you’re local, you won’t know about us.”

Guin noted a dip in business when the PetSmart and Petco stores opened, but she said All Pet Supplies has sustained revenue through grooming and other services that keep customers walking through the doors. Now in the market for 30 years, she said All Pet Supplies this year plans to remodel its south-Springfield store and participate in more community events to build brand awareness.

Jennifer Silverberg, who opened Fetch Pet Supplies & Gifts in 2016, said she doesn’t feel the heat from Springfield’s PetSmart and Petco stores.

“I think there’s a place for them here, and there’s a place for the smaller stores, as well,” she said, noting she’s emphasized brands from smaller companies or local, family-owned businesses. “When I opened my store, I made it a point to not compete with them because I knew I wasn’t going to win.”

Web Editor Geoff Pickle contributed.

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