Pets at Home raises annual profit forecast after strong festive period

Pets at Home (PAH) expects to see larger than anticipated annual profits after recording a significant rise in like-for-like sales over the festive period.

The retailer said it achieved ‘high-teens’ levels of revenue growth in December as the boom in pet ownership and purchases of pets supplies due to the coronavirus pandemic continued.

Underlying pre-tax profits for the 2021 financial year are now forecast to be ‘at least’ £77million compared to previous guidance of £65million, even though it has agreed to pay back £28.9million in business rates relief to the government.

Pets at Home Group now forecasts underlying pre-tax profits for the 2021 financial year will be ‘at least’ £77million compared to previous guidance of £65million

Shares in the FTSE 250 firm jumped 4.9 per cent to 438.2p during the mid-afternoon as it also stated it was in a ‘strong position to meet all of its customers’ pet care needs’ because of its status as an essential retailer.

This has allowed the Cheshire-based group’s stores to remain open during the lockdown, alongside supermarkets, hardware shops, garden centres, newsagents, and pharmacies.

Demand for its accessories and veterinary services has soared as has membership of its Puppy and Kitten Club and VIP clubs as Britons adopt more animals like dogs, cats and goldfish.

Even before the coronavirus pandemic though, family spending on pets was undergoing a decade-long boom, with Office for National Statistics figures showing it more than doubled from £3.34billion in 2009 to £6.9billion in 2019.

The lockdown that began last March encouraged even more people to acquire pets to keep them company as they spent more time working from home and less money on going out.

Pets at Home, which operates 451 retail stores, did experience some trouble in the pandemic’s initial stages when it closed its grooming salons, and pet sales were stopped, causing lower revenues and greater costs.

Pets at Home sold its specialist veterinary business to Linnaeus Group for £100million in 2020

But trade recovered well, and its revenues in the 28 weeks to October 8 increased by 5.3 per cent to £574.4million.

Thanks to the impressive sales, it pledged in early December to repay all publicly-funded Covid-19 support it received. Other retailers who have made the promise include B&Q owner Kingfisher, and supermarkets Lidl, Asda and Tesco.

Its strong performance has enabled its share price to jump 89.8 per cent in value over the preceding six months, making it the ninth top-riser on the FTSE 250, just ahead of Aston Martin Lagonda.

In November, the firm bought veterinary ‘telehealth’ company The Vet Connection for £15million as it sought to cash in on the growing number of remote consultations during the pandemic.

The next day, it sold five specialist veterinary centres to rival Linnaeus Group for £100million, which it said today had made its balance sheet more ‘robust’ and further enhanced its liquidity position.

‘Clearly, the fourth quarter will be good again for Pets at Home, and the upgrade is not unexpected but certainly worth having,’ remarked analysts at Peel Hunt.