Pets at Home’s share price dropped as weaker-than-expected sales in the third quarter prompted it to cut forecasts.
At 284p per share, the FTSE 250 company was dealing 3.1% lower in Tuesday trading.
Revenues at the retailer and veterinary services provider rose 4.3% during the 12 weeks to 4 January, to £362.4 million. On a like for like basis, sales were up 4.4% year on year.
Turnover at the firm’s core retail unit rose 3.5% or 3.7% on a like-for-like basis. Sales of pet food, accessories and the like across the division made up around 70% of group turnover in the first fiscal half.
Pets at Home described retail sales as “resilient against very strong performance last year,” and added that “we were pleased to see volume growth and share gains across food against a slowing market backdrop.”
However, sales were below forecasts which prompted the company to cut forecasts. Pre-tax profit for the full year (to March 2024) are now tipped at £132 million. Pets at Home recorded profits of £122.5 million during financial 2023.
Sales at its veterinary unit rose a more impressive 13.4% (or 13.3% from a like-for-like standpoint), Pets at Home said. This increase was thanks to “good progress in adding vet talent and by sustained growth in average spend, driven by a blend of price and a shift to more advanced procedures,” the firm commented.
Record Sales Performance
Chief executive Lyssa McGowan said that “our colleagues came together over our peak trading period to deliver a record sales performance, growing against a very strong performance in the prior year.”
She added that “while a slower market over peak meant our sales growth didn’t quite hit the levels we expected, the business remains well positioned to benefit from long term growth in the sector as we continue to win share and grow volumes across food and deliver differentiated performance through our unique vets business.”
McGowan said the firm would soon follow the opening of a new distribution centre with the launch of a new digital platform, which she described as “a key foundation of our growth strategy.”
She said that the new platform will bring “vastly improved user experience to our consumers” as well as “[create] opportunities to improve cross-sell into accessories and further grow share of wallet.”
In The Dog House
Analyst Sophie Lund-Yates of Hargreaves Lansdown commented that “the profit downgrade won’t be taken kindly by investors, who have long been hailing the brand as a resilient option amid consumer pressure.”
She added that “pet owners are continuing to shy away from buying more lucrative, but less essential, extras for their furry companions amid cost-of-living pressures.”
Lund-Yates noted that Pets at Home has introduced steps like store refurbishments and bringing new brands online to improve sales. However, she said that “there isn’t a clear-cut path” for the company to overcome its current troubles.
“The new digital platform could help spark a bit more activity but given the very physical nature of Pets at Home’s appeal, it may not be the cure-all management’s hoping for,” she added.