Wal-Mart to trim its ebbing pet fish business

Wal-Mart Stores Inc. is letting a small part of its business swim away, leaving suppliers floundering.

The world’s largest retailer said it would stop selling live pet fish at some U.S. stores in response to slack customer demand.

Central Garden & Pet Co., the largest U.S. producer of aquariums, and Spectrum Brands Inc., which also sells aquatic supplies, said last week that “a large retailer” would stop selling live fish at some stores.

Neither identified the retailer, but Wal-Mart confirmed its plans to Reuters.

Central Garden, based in Walnut Creek, Calif., lowered its fiscal 2007 outlook Wednesday and said the retailer’s plan was partly to blame.

Atlanta-based Spectrum, which sells aquariums and related products under the Tetra and Jungle brands, said the decision affected 700 stores.

Wal-Mart, which is based in Bentonville, Ark., and operates more than 3,000 U.S. discount stores, declined to say how many locations would stop selling live fish but said it was not abandoning the business.

Spectrum Chief Executive David A. Jones said Thursday that other pet categories would be tested to see what should be sold in the space that had been dedicated to fish.

“So we think there’s an opportunity there, because it’s a jump ball for all of us to convince that retailer that our products, our assortment ... are appropriate for the space that’s available,” Jones said in a conference call.

SunTrust analyst Bill Chappell, who rates Central Garden and Spectrum shares “neutral,” said that if Wal-Mart was trying to improve pet product sales, it made sense to dedicate space to faster-growing categories such as items for dogs and cats.

Pet fish got a boost in popularity after the 2003 hit animated film “Finding Nemo,” but the aquatics trend has since faded somewhat.

The leading pet store chains, PetSmart Inc. and privately held Petco Animal Supplies Inc., maintain large aquatic departments. Chappell said Wal-Mart did not match the appeal of such chains or independent aquatics stores.

“You see too many floaters,” Chappell said of its displays. “You walk in there and there are a bunch of dead fish.

“It’s not that consumers don’t want fish.... It’s just consumers don’t want to buy fish there and it’s in large part because they don’t look particularly healthy,” Chappell said.

According to the American Pet Products Manufacturers Assn., 13.9 million U.S. households own freshwater fish as pets, compared with 43.5 million U.S. households with dogs and 37.7 million with cats.

Jones of Spectrum said the change would present a short-term issue but the company had been aware of the plan for some time.

“People will buy fish somewhere, and we do think that other competitors, other retail competitors, will benefit from that decision,” Jones said.

Spectrum, formerly called Rayovac Corp. and well known for its Rayovac batteries, established itself in the aquatics market in 2005 when it bought Tetra Holding of Germany and a smaller company, Jungle Labs. Now, after those acquisitions and others, Spectrum is considering selling some assets, especially its home and garden business.

Analyst Chappell said he saw the pet category as Spectrum’s healthiest business and one that the company would “work the hardest to hold on to.”

Spectrum’s other pet-related products include Dingo treats for dogs and Nature’s Miracle stain and odor removal kits. Central Garden’s products include Nylabone toys for dogs and Kaytee food for birds.