Shares in Pets at Home (PETS) scurried 7.5% higher to an all-time high of 449p on Friday as the pet care business raised annual profit guidance following stronger than expected Christmas sales.
In an earlier than expected update covering the third quarter to 31 December, Pets at Home said it now expects underlying pre-tax profit for the year to March 2021, including the repayment of £28.9 million of business rates relief, to be at least £77 million.
That is roughly 20% ahead of previous guidance, though the forecast rests on the assumption that recent guidance on the permitted work by vets doesn’t change.
ACCELERATING MOMENTUM
The dog food, cat litter and veterinary services seller said the positive momentum seen in the second quarter ‘accelerated across all channels’ during the third quarter, with the retailer achieving ‘high-teens’ group like-for-like sales growth during December amid strength in both the retail and veterinary business.
During the pandemic, the designated ‘essential retailer’ has benefited from a rise in pet ownership with more consumers working from home.
‘While renewed COVID-related restrictions on a national level may constrain trade, we remain an “essential” retailer and the measures we continue to take across our stores, veterinary practices and online operations are ensuring we remain in a strong position to meet all of our customers’ pet care needs’, insisted Pets at Home.
Numis Securities upgraded its 2021 pre-tax profit forecast by £13.5 million to £78 million and its 2022 estimate by £1 million to £107 million on the news, while also nudging up its price target from 515p 530p.
‘The extent of this upgrade partly reflects how conservative previous guidance was, but nonetheless the strength of demand still looks to be comfortably ahead of where we believe expectations likely lay,’ commented Numis.
‘This offers further evidence of excellent execution of a compelling strategy in an attractive market.’
In December, Shore Capital placed Pets at Home under review as the broker needed to rejig estimates to account for a veterinary telehealth acquisition, the balance sheet bolstering sale of the specialist hospitals division, together with the business rates relief repayment.
While its rating remains under review, the broker continues to ‘like the Pets investment story that mixes products and services, together with subscriptions business.’
