23rd Nov 2022 15:47
(Alliance News) - Pet supplies retailer Pets at Home Group PLC enjoyed a major tailwind during the pandemic thanks to a surge in demand for pets, but higher freight and energy costs have knocked its profit since.
In the six months ended October 13, pretax profit was GBP53.4 million, down 19% from GBP65.7 million a year before, despite revenue climbing by 7.3% to GBP727.2 million from GBP677.6 million.
Underlying pretax profit was GBP59.2 million, down 9.3% from GBP65.3 million a year prior, due to GBP4.0 million and GBP4.9 million hits from higher freight and energy costs, respectively.
For Susannah Streeter at Hargreaves Lansdown, however, these rising costs were only part of the picture.
"Higher energy prices are partly why the Pets At Home update has put the cat among the pigeons but changing customer behaviour during the cost-of-living crisis is also behind the dent to profits," she explained.
interactive investor's Victoria Scholar agreed, suggesting that the current cooling economic backdrop could weigh on Pets at Home's sales moving forward, "particularly" on more luxury services like grooming and more expensive accessories as households look for ways to reduce spending.
However, both Scholar and Streeter remained confident in the resilience of Pets at Home's more essential offerings, with items like cat litter and hygiene products providing a "sunnier spot" of rising sales. In addition, the firm's growing customer base demonstrated further resilience against a downturn for Streeter.
"That's helped keep full year guidance unchanged, with full-year profits still expected in line with expectations but until inflationary pressures ease there will be a distinct lack of cat nip in updates," Streeter cautioned.
Looking ahead, Pets at Home said there was no change to its financial 2023 guidance for underlying pretax profit of GBP131 million, with a range of GBP121 million to GBP136 million. This would be flat on GBP130.1 million in financial 2022, which was a 53-week year.
The cautious outlook sent Pets at Home shares falling 4.9% at 289.00 pence on Wednesday afternoon in London. In the year-to-date, the stock was down 38%.
"All in all, it's not the best start for new CEO Lyssa McGowan who had a hard act to follow. Her predecessor Peter Pritchard helped to lay the foundations for the company's recent success. Investors will be hoping she can use her consumer-facing experience at pay-TV broadcaster Sky to better understand and serve its customer base during what is likely to be a tricky period," concluded Russ Mould, investment director at AJ Bell.
By Heather Rydings; [email protected]
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