- Pet care leader delivers 6% like-for-like growth
- Reiterates full year pre-tax profit guidance
- Retailer ‘proactively’ managing inflation through self-help measures
Shares in Pets at Home (PETS) improved 0.2% to 338.4p after the pet care business reported robust first quarter trading in the face of demanding Covid-inflated comparatives and the squeeze on consumer spending.
While like-for-like sales growth slowed to 6% against an exacting 30.2% year-on-year comparator and the 10.5% growth generated in the fourth quarter, there was relief as the pet food-to-veterinary services seller left its sales and margin outlook unchanged.
Among the retail sector’s most resilient operators, Pets at Home also reiterated guidance for year-to-March 2023 underlying pre-tax profit to be in line with the £131 million analyst consensus as it ‘proactively’ manages cost inflation through self-help initiatives.
LIKE-FOR-LIKES REMAIN IN GROWTH
Despite lapping tough comparatives, Pets at Home’s group-level like-for-like sales grew by 6% in the first quarter to 21 July 2022, with both the retail and veterinary services businesses remaining in growth.
The FTSE 250 retailer highlighted continued growth in new customers and ‘strong retention’ of the 1.1 million customers acquired last year, and said ongoing growth in spend was supported by the non-discretionary nature of its affordable pet care proposition.
Sign-ups to the company’s Puppy and Kitten Club ‘continued at pace’ in the quarter, averaging 25,000 per week, three times higher than before the pandemic, while new client registrations across Pets at Home’s First Opinion veterinary practices remained strong, averaging over 8,500 per week.
Lyssa McGowan (pictured below with her dog Freddie), who succeeded Peter Pritchard as chief executive in June, said: ‘We operate a unique omnichannel model, in a market in structural growth, where the passion and expertise of our colleagues and partners is a key competitive advantage.
‘I would like to thank them for their warm welcome, their continued efforts in helping our record number of customers care for their pets in these challenging times, and their ongoing commitment to building the best pet care business in the world.’
AJ Bell investment director Russ Mould said the specialist retailer’s latest update provides further evidence that ‘Britain loves its pets like few other nations’.
He added: ‘Items like pet food purchased for furry friends don’t seem to be experiencing a slide in demand impacted by higher prices, perhaps because that outlay typically represents a modest portion of overall household spending.
‘The pandemic also saw the UK’s pet population increase as people welcomed lockdown puppies, kittens and other cute critters to their home.
‘While some may have subsequently lost interest in their new additions, the emotional attachment involved means the majority of pet owners will still keep catering to the needs of their furry friends.’
Mould pointed out Pets at Home does face competition from non-specialists like the supermarkets, ‘although because it offers grooming and veterinary services under the same roof, it has a convenience factor which rivals can’t match.
‘Successful loyalty schemes are also supporting customer retention even if the spiralling cost-of-living crisis is going to put Britons’ commitment to their pets to the test.’
Liberum Capital said: ‘This is a very impressive update, especially against the current backdrop, demonstrating the strength of Pets at Home’s model, its clear market leadership and the resilience of its earnings’, though the broker highlighted ‘some risk from customers trading down in food and cutting marginal accessories spend.’
Walid Koudmani, chief market analyst at financial brokerage XTB, explained: ‘It’s looking like consumers are yet to tone down their level of spend on pet goods and necessities yet, which should give Pet at Home earnings stability.
‘Of course, with UK inflation now expected to top 13% and the Bank of England warning about a long recession at the end of this year, more focus on data trends is needed. Nevertheless, this earnings report should give shareholders a degree of confidence, at least in the short term.’
DISCLAIMER: Financial services company AJ Bell referenced in this article owns Shares magazine. The author of this article (James Crux) and the editor (Ian Conway) own shares in AJ Bell.