31st Jan 2023 18:01
(Alliance News) - Despite a challenging macro-economic Pets At Home Group PLC on Tuesday raised its annual profit guidance on Tuesday as it reported a quarterly profit hike on "record" consumer numbers.
The pet supplies retailer said that consumer-facing revenue in its third quarter to January 5 climbed 9% year-on-year, with growth underpinned by a record number of consumers and volume growth.
Consumer revenue was up 30% compared to pre-pandemic levels. Vet Group revenue was up by 18% on both a total and like-for-like basis.
Total revenue increased by 8.8% in the quarter to GBP347.5 million from GBP319.4 million a year ago, with like-for-like revenue up 8.3%.
Russ Mould at AJ Bell said the trading showed that consumers weren't just treating themselves over Christmas, with the nation's furry friends benefiting from "surprisingly resilient" spending.
"The company was boosted by a big increase in the UK's pet population during lockdown and unlike other pandemic fads this involved a long-term commitment on the part of owners. Pets at Home benefited from this trend in three main ways. First through people buying food, treats, bedding and toys for their animals; second as people look to keep their furry friends clean and tidy at its in-store grooming salons; and third by providing veterinary services," Mould explained.
Shares in Pets at Home closed up 6.3% at 352.40 pence on Tuesday afternoon in London. Over the past 12-months, the stock is down 18%.
Walid Koudmani, chief market analyst at XTB, said the strong share price performance on Tuesday comes after a "difficult start to the week" and "growing uncertainty related to the general macroeconomic situation with consumers facing increasing cost of living issues."
"Both the reported increase in revenue and rise in share price could be considered encouraging signs for the company as it heads into the new year, but the key will be maintaining this positive performance and not disappointing investors now that the bar has been raised or risk a potential noticeable drop in share price," Koudmani added.
Looking ahead, Pets at Home said it now expects pretax profit to be at the upper end of the current market consensus range of between GBP126 million and GBP136 million. Previously, the company had guided pretax profit of around GBP131 million.
For AJ Bell's Mould, Tuesday's strong trading update shows that Chief Executive Officer Lyssa McGowan is doing a "good job of stepping into some big shoes to fill in the form of her predecessor Peter Pritchard" who Mould said led a successful turnaround of the business.
"She still needs to navigate inflationary pressures and stay ahead of the game when it comes to fighting off competition from non-specialists like the supermarkets, but she's undoubtedly off to a good start," he said.
Analysts at Shore Capital were even more positive, crowning Pets at Home to be the "best-positioned player in the pet care industry, based on current macroeconomic and inflationary conditions.
By Heather Rydings, Alliance News senior economics reporter
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