- Pre-tax profit down 3.2%
- CEO heralds ‘pivotal’ year
- Relief rally as guidance maintained
Pets at Home’s (PETS) shares have been buffeted by weakening demand and a CMA (Competition & Markets Authority) probe into the vet industry.
However, the stock rallied 4.2% to 295.2p on Wednesday, despite news of a full-year profits decline.
Investors were relieved as the dog food-to-cat litter seller stuck with guidance for the new financial year amid resilient pet care spend and with the benefits from previous investments and productivity programs to come.
The launch of a £25 million share buyback for the new financial year also demonstrated the FTSE 250 retailer’s confidence in its future prospects.
UNDER PRESSURE
Results for the year to 28 March 2024 revealed a 3.2% drop in underling pre-tax profit to £132 million, in line with the guidance downgraded in January.
The UK pet care leader’s earnings were impacted by short-term product availability issues and soft sales of discretionary accessories as pet owners grappled with cost-of-living pressures.
Total group revenue ticked up 5.2% to £1.5 billion last year, with group like-for-like sales rising 5.1%.
Yet whereas vet group like-for-like sales rose by a healthy 16.5%, retail like-for-like growth was subdued at 4.1% amid slowing food inflation and a softer performance within accessories, with Pets at Home also calling out the timing impacts of normalised numbers of new puppies and kittens.
Returning accessories to growth is a key focus in the year ahead, with management noting a ‘strong plan to do so’.
SLOW START
Retail sales were down 2% over the first six weeks of the new financial year as Pets at Home lapped tough comparatives and transitioned to its new digital app, although the retailer expects industry growth to ‘progressively return closer to historic levels over the coming quarters’.
As a result Pets at Home, which has welcomed the CMA probe into the vets market, said it is ‘comfortable’ with the current analyst consensus for pre-tax profits of £144 million, implying 9% year-on-year growth.
WHAT DID THE CEO SAY?
CEO Lyssa McGowan explained that full year 2024 was ‘a pivotal year for the business’ in which Pets at Home ‘delivered some key building blocks of our platform for long-term growth.’
McGowan stressed that ‘the fundamental strengths of the business position us well to deliver growth. We hold a leading position in a structurally growing market, with an unrivalled retail store network, and a unique, differentiated and integrated vet business.’
AJ Bell investment analyst Dan Coatsworth commented: ‘It’s no secret that Britons love their pets but while people might still buy the basics, demand for all the little extras like toys and treats, which are lucrative sales for Pets at Home, has waned.’
Coatsworth added: ‘By offering everything under one roof, including grooming and veterinary services, Pets at Home hopes to drive loyalty and bat off the competitive threat from non-specialists like the supermarkets.’
DISCLAIMER: Financial services company AJ Bell referenced in this article owns Shares magazine. The author of this article (James Crux) and the editor (Steven Frazer) own shares in AJ Bell.
