19th Jan 2017 10:51
LONDON (Alliance News) - Pets at Home Group PLC on Thursday reported growth in revenue in the third quarter of its financial year thanks to continued good growth in its services division, but the retailer's shares sank as its merchandise business showed signs of deterioration.
Shares in Pets at Home were down 9.7% to 215.00 pence following the news, the worst performer in the FTSE 250 on Thursday.
The retailer for pet owners said group revenue in the 12 weeks ended January 5 grew by 4.4% year-on-year to GBP203.7 million, as services revenue rose by almost half to GBP26.3 million but merchandise revenue remained flat at GBP177.4 million.
Like-for-like revenue, meanwhile, rose by 0.1% thanks to 7.0% growth in services which just managed to offset a 0.5% decline in merchandise.
Pets at Home said the big increase in services revenue reflected vet practice fee income from joint ventures and a contribution from its newly-acquired specialist referral centres, the latter of which it said is already demonstrating best practice and cost benefits across the business.
Trading in the merchandise business remained "subdued", however, after the retailer warned late last year that trading had been soft since the end of its first half.
In the first half, which ran to October 13, Pets at Home recorded growth in revenue to GBP441.3 million from GBP404.5 million in the first half of the prior year, helping pretax profit to rise to GBP46.0 million from GBP40.9 million.
Services revenue increased to GBP61.9 million from GBP41.9 million in the half, as merchandise revenue grew to GBP379.5 million from GBP362.6 million. Like-for-like sales were up 8.7% in services and 1.9% in merchandise.
At that time, Pets at Home warned that trading in the first few weeks of the second half had been softer, but reiterated that its full-year profit outlook remained in line with expectations.
On Thursday, Pets at Home noted that despite the poorer merchandise performance in the third quarter, online sales grew strongly while it saw a good performance in its Christmas range.
It added that it will launch new product ranges later this year and will focus on communicating to customers about the benefits of its "high quality, UK produced private label foods", where it says it will leverage its competitive advantage.
Pets at Home once again reiterated that its profit outlook remains in line with expectations.
"With a quarter to go, our profit outlook for the year remains in line with expectations, reflecting both the continued investment in our customer offer and ongoing efficiency initiatives. Our focus on becoming more specialist, and doing the right thing for our customers, remains at the forefront of our strategy," Chief Executive Ian Kellett said in a statement.
Pets at Home added that its store and services roll-out is on track, having opened two superstores, six vet practices and 11 grooming salons in the quarter. It aims to have opened between 15 and 20 superstores, 45-55 vet practices and 50-60 grooming salons in the full year.
It also noted that the number of active VIP club members is now at 3.7 million, an increase of about 280,000 since the end of financial 2016.
By Karolina Kaminska; [email protected]; @KarolinaAllNews
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