- Pet care leader posts positive first half results
- Maintains full year earnings guidance
- Sets new records for customer numbers
Resilient pet food-to-vet services specialist Pets at Home (PETS) scurried in with positive results for the first half ended 13 October 2022 and reiterated full year earnings guidance despite the challenges facing the retail sector.
However, shares in the FTSE 250 specialist retailer cheapened 9% to 276.6p as investors focused on a 9.3% drop in pre-tax profit to £59.2 million pinned on increased freight and energy costs and a year-on-year increase in investment in digital assets.
And while the business, and the wider pet care market, remains resilient and in growth despite the cost-of-living crisis, management conceded that high inflation is ‘creating pressures for both our customers and the business’.
RECORD CUSTOMER LEVELS
Thanks to record customer levels, the UK’s pet care leader generated a 7.3% rise in first half total revenue to £727.2 million, with second quarter like-for-like sales growth accelerating to 6.8%.
First half retail revenue growth was robust at 6.8% with like-for-like growth of 5.9%, while Pets at Home reported a further acceleration in Vet Group sales, with revenue up 12.4% and like-for-like sales 10.5% ahead.
Pets at Home has made impressive progress in acquiring new customers, with new client registrations across its veterinary practices growing at an impressive 8,800 per week while the number of subscription plans grew 11% year-on-year to 1.6 million.
Though Pets at Home posted an encouraging first half performance, management is understandably mindful of the challenging economic environment and left full year 2023 underlying pre-tax profit guidance unchanged, with consensus calling for £131 million with a range of £121 million to £136 million.
WHAT DID NEW CEO McGOWAN SAY?
New CEO Lyssa McGowan (pictured below), who took over from Peter Pritchard earlier this year, insisted she is ‘more convinced that Pets at Home is well positioned to capitalise on an attractive growth opportunity in our structurally growing pet care market’.
She said her charge’s first half performance ‘shows progress and resilience across the business.
‘In a challenging macro-environment, the pet care industry remains in growth across all channels, and we have continued to acquire new customers at an impressive rate, setting new records for customer numbers in recent months.’
EXPERT VIEWS
Russell Pointon, director of consumer at investment research firm Edison, said that despite the cost-of-living crisis, ‘man’s best friend continues to ring true with a post-lockdown record number of UK pet owners continuing to prioritise spending on their pets, which the group states is “underpinned by the structural trends of humanisation and premiumisation.”.
He continued: ‘Looking ahead, the group will continue to manage industry-wide cost headwinds and look to deepen its relationship with its VIP customers, while leveraging investment in technology, such as its newly updated app, to drive customer engagement and optimise its local store ranges.’
Shore Capital commented: ‘The pet care market, in our view, remains resilient despite the macro backdrop, and companies anticipate an improving trajectory as inflation, and other economic pressures dissipate (i.e., freight costs).’
The broker continues to believe that Pets at Home’s valuation ‘does not reflect the underlying quality and resilience of the business in a challenging consumer environment’.
Shore Capital thinks Pets at Home ‘represents an opportunity within a retail sector where there are significant challenges but little in terms of value’.
