Walmart expands its pet services with the opening of five additional veterinary and grooming centers.

• Walmart is opening five more pet services centers over the next month.
• The retailer aims to increase competition with specialty retailers like Chewy by capitalizing on a popular high-frequency category that appeals to customers of all ages.
• Despite stating that it couldn't make the finances work, the big-box retailer closed all of its health clinics for people.

Although its doctor offices are closed, the nation's largest retailer is expanding its pet care business.

The company announced the opening of five more pet services centers in October and early November, with locations in Arizona and Georgia offering veterinary care and grooming. Walmart opened its first pet services center last year in the Atlanta area.

The pet category at Walmart presents a promising growth opportunity as it encourages repeat purchases, appeals to customers of all ages, and remains stable even during financial constraints, according to Kaitlyn Shadiow, vice president of merchandising for pets at Walmart U.S.

PetIQ employees will staff Walmart's pet services centers, which will have a dedicated entrance next to a store. These centers, under the Walmart name, will offer routine vet care and grooming for cats and dogs.

Walmart decided to expand its pet services after observing strong visits and repeat rates at its first location. Approximately 25% of customers were new to Walmart for pet items, according to Shadiow. When customers visited the store for veterinary or grooming services, it resulted in a "halo effect" that boosted sales of pet food and other supplies, she said.

""The business case for pet services is evident, as we already cater to the needs of numerous pet parents and can further enhance our services in a single, convenient location or trip," she stated."

Walmart has expanded into pet services, with Petco using its stores to become a major vet provider. The services are higher margin than pet food, but are needed more often than other supplies like leashes, pet beds and crates.

The Covid pandemic caused a surge in pet ownership, resulting in increased spending on pets and a growing demand for veterinary services. By 2026, it is predicted that annual household spending on pets will reach $1,445 per animal, and by 2030, it will reach $1,733. This represents a significant increase in the total industry spending from $122 billion in 2019 to $261 billion by 2030, according to a recent survey by Morgan Stanley Research.

According to Venessa Yates, senior vice president and general manager of Walmart+, the retailer's membership program and answer to Prime, Pawp, a veterinary telehealth provider, was the most popular limited-time offer for Walmart+. Starting next week, it will become a permanent benefit.

Walmart's pet category has been a way to reach younger and more affluent shoppers, according to Shadiow. The fastest-growing segment for Walmart's pet category is Gen Z, as they age into pet ownership, she said. The number of customers shopping the pet category with a household income of over $100,000 grew by 36% year over year, as of the end of July, she said.

Earlier this year, Walmart announced the closure of its 51 health-care clinics, citing the "challenging reimbursement environment and escalating operating costs" as the reasons. These clinics provided lower-priced doctor visits, dentist appointments, and therapy sessions.

In 2021, Walmart acquired a human telehealth provider, which it later closed. The company had previously tested the pet services concept in Dallas, Georgia, where it opened its first health clinic for people in 2019.

Shadow stated that pet care is a more profitable business with fewer people paying for it through insurance, allowing for smaller centers. Transparent pricing is important to customers who often pay out of pocket. Additionally, Walmart serves as a one-stop shop for customers who need related products, such as pet prescriptions or food.

"She expressed confidence in the long-term success of this endeavor," I said.

— CNBC's Gabrielle Fonrouge contributed to this report.