Technology drives revenue growth while losses narrow, Dogness investors are not convinced

Despite the core pet leash business facing difficulties, this pet industry pioneer is boosting performance through products like smart collars and smart feeders.

Key Points:

• Dogness's financial report shows that revenue for the fiscal year ending in June increased by 39.5% to $20.7 million, with losses narrowing by 15.8% to $5.1 million.
• Although smart product growth has been strong in the latest fiscal year, the pet supplies retailer's stock price has fallen by a cumulative 75% since the beginning of the year.

Tan Ying

Decades ago, 16-year-old Chen Silong began his career at a shoelace factory in Dongguan. This industrial city, adjacent to Guangzhou, is known as the "world's factory." After several cross-industry attempts, 22-year-old Chen Silong founded a company in 2003, providing shoelace dyeing services for shoe factories. From there, he gradually expanded into the production of climbing buckles, then extended into the pet leash business, ultimately founding the current Dogness (International) Co., Ltd. (DOGZ.US) in 2008.

As China's pet economy is on the rise, Chen Silong has accurately seized market opportunities. This trend initially emerged among the millennial generation and continues to benefit from the strong demand of Generation Z, who tend to prefer raising pets over having children and view pets as family members. The national pet population remains relatively stable, reaching approximately 124 million by 2024. Currently, a new wave of growth is driven by various smart pet products and services, which infuse technological elements into traditional categories like leashes and feeders.

After listing on NASDAQ in 2017, Dogness reached its peak in 2022, driven by the global "pet adoption boom" spurred by the pandemic. Since then, the company has been mired in losses, with revenue continuously shrinking and stock prices plummeting without respite. The recently released fiscal year report ending in June shows that the pet technology wave is injecting new vitality into Dogness.

Key indicators suggest that Dogness is on the path to recovery, but the core pet leash business remains weak. The company's annual revenue grew by 39.5% to $20.7 million, while revenue from "traditional pet products," primarily leashes, declined by 4.1% year-on-year to $8.6 million, with its revenue share dropping from 60% last year to 41%.

During the same period, sales of the company's smart pet products surged by 43.7% to $6.3 million, accounting for 30% of total revenue. These products cover various areas, including cameras that allow owners to remotely monitor their pets while away, as well as smart pet feeders.

While the performance of smart products is impressive, Dogness's sales of low-tech products such as buckles or locks used in dog and cat leashes and safety belts (referred to by the company as "climbing hooks") have more than tripled to $5.76 million, accounting for 28% of sales.

Despite overall revenue growth, the company continues to incur losses. However, the latest annual net loss of $5.1 million is an improvement from the previous year's $6.1 million, indicating steady progress on the path to profitability.

Even as Dogness's sales return to a high-growth trajectory, it continues to face losses, partly due to intense competition, especially in emerging fields like pet technology, where companies are competing to capture market share by cutting prices. From 2022 to 2025, even if the company's traditional product sales see a slight increase of 0.3%, smart product sales are expected to grow significantly by 61.7%, but the prices of both categories are on a downward trend; Only the buckles and locks rose against the trend, but the average price only increased by 0.3%.

After the earnings report was released, Dogness's stock price slightly rose, but then it gave back all its gains and further declined, now down nearly 20% from the level before the announcement. The stock has fallen about 75% this year, contrary to the strong upward trend of most Chinese concept stocks during the same period, indicating that the company has yet to convince investors that it can escape the quagmire of losses and regain profitability.

Abundant Cash Flow

Of course, Dogness also has advantages worth re-evaluating by the market. After being dragged down by $3.4 million in construction projects last year, this year, cash reserves nearly doubled to $12.8 million. The company has also smoothly raised funds through targeted capital increases, including $5.9 million raised this year and $4.9 million planned for 2024.

Chen Silong stated in the latest earnings report that U.S. tariffs have not yet affected Dogness, with the company's total international sales growing steadily by 35.4% to $13.6 million for the year, but still lagging behind the domestic sales growth of 48.1% (reaching $7.1 million). Among these, sales to the U.S. are expected to jump from $2.8 million in 2024 to $4.5 million in 2025, nearly doubling.

Industry competition is becoming increasingly fierce. Data platform Tracxn shows that among 137 pet tech companies in China, only three of the top five have successfully gone public. Dogness, along with BQ.US and 301335.SZ, is among them. The other two companies, Yichong and Shanghai-based Petkit, also have financing movements.

Focusing on pet food, care, and community e-commerce, BQ.US has seen its stock price plummet since going public in 2020, with a current market value of only $23.6 million. The company's difficulties are similar to those of Dogness during the post-pandemic pet boom decline, with a sharp drop in revenue and three consecutive years of losses.

301335.SZ spans the pet supplies and food sectors, with a market value of up to 3.84 billion yuan ($540 million). The company is expected to exceed the other two listed companies with a revenue of 2.7 billion yuan in 2024. Unlike its peers, 301335.SZ's continued profitability in recent years (despite a decline in profits) is particularly notable.

The Chinese market, which accounts for about one-third of Dogness's total revenue, remains its largest market, driven by a tech-savvy young demographic, a steadily growing pet ownership rate, and a declining birth rate. Similar to Dogness, Petkit produces smart connected feeders, water dispensers, and automatic odor-removing litter boxes for cats. Both companies have developed remote-controlled feeders and litter boxes, along with applications to track pet locations