Pets At Home shares bound higher on profit cheer
The retailer reported underlying pre-tax profits surging 18.9% higher to £45 million over the six months to October 28.
Retailer Pets At Home has seen shares soar higher after delivering a dose of profit cheer following strong half-year sales and earnings.
Shares rose as much as 13% after the group said it expected full-year profits towards the top end of expectations after reporting a 7.8% rise in half-year like-for-like retail sales, with vet group sales up 6.4%.
Underlying pre-tax profits leapt 18.9% higher to £45 million over the six months to October 28.
Chief executive Peter Pritchard said the firm was now ahead of plan on aims to return to profit growth, with a full-year result now expected close to the top of the £87 million to £93 million underlying profit range.
It posted underlying profits of £89.7 million for the previous financial year.
The bullish outlook comes despite its caution over ongoing consumer “uncertainty”.
But Mr Pritchard told the PA news agency the General Election and Brexit uncertainty had not impacted demand for pet products and services.
He said: “Irrespective of what’s going on, pets still want to be fed and looked after.
“They’re part of the family and when times are changing, people concentrate on family.”
He said the group’s “bold decisions” over the last two years were paying off, with the group set to return to annual profit growth a year ahead of plan.
Pets has invested £26 million in reducing prices over the last two years.
It also now boasts a record 790,000 subscription customers as it looks to branch out from being a retailer to offering services, such as pet grooming, flea treatment subscriptions, as well as veterinary care.
Services business currently makes up 35% of revenues, but Pets is aiming for 50% eventually.
However, the group cautioned it remained at risk of a sharp hit to the pound, given that it buys around 70 million US dollars (£54 million) worth of products from Asia every year.
It has taken action to hedge against an impact in the current financial year, but Mr Pritchard said there was a risk prices could be impacted if a sterling tumble sent its buying costs up sharply.
Pets at Home’s results suggest there’s bite behind the bark Sophie Lund-Yates, Hargreaves
He said they would “do everything we can” to keep prices competitive.
Pets At Home has also been overhauling its chain of veterinary practices after rapid expansion in recent years.
It bought out 57 of its joint venture vet practices from the 471-strong Vet Group chain, of which 36 have closed.
The remaining 21 have been retained as company managed practices.
The group added that chairman Tony DeNunzio plans to stand down after more than nine years in the role.
The move has kicked off the hunt for his successor and he will stay in post to ensure a smooth handover.
Sophie Lund-Yates, equity analyst at Hargreaves Lansdown, said: “Pets at Home’s results suggest there’s bite behind the bark.
“In a time when retailers are struggling, the group is well and truly bucking the trend.”
But she cautioned sales are “tilted towards lower-margin food products, rather than more expensive items like accessories”, which may need to be addressed in future.