Pets at Home, ‘sales have been let off the leash’

Retail

Dog

UK pet care business Pets at Home have released their trading update for the third quarter, revealing that total group revenue rose 18.0% to £302.0m with like for like revenue up 17.6%.

Peter Pritchard, Group Chief Executive Officer, commented: “Against a backdrop of continued uncertainty our pet care model remains robust, with our performance during the third quarter testament not only to the advantages of our scalable omnichannel pet care platform and unique joint venture veterinary model, but also the hard work and commitment of all our colleagues across the Group, to whom I express sincere thanks.

“We entered our final quarter facing renewed challenges in the form of higher COVID infection rates and restrictions on a national level, and our priority remains the health, safety and wellbeing of all of our colleagues, partners and customers.

“Mindful of this challenging environment, I remain confident that the changes we have made to our business enable us to continue providing essential pet care to our customers in a safe and appropriate manner, not only through strict adherence to the protocols which we introduced across our stores and veterinary practices at the onset of the pandemic, and continue to strengthen, but also in a number of other ways, from contactless collection and delivery of pet products to virtual heath care consultations.

“I am very pleased with the progress we have made in this quarter, in particular how we have adapted to the changing environment in which we operate. We remain as determined as ever to create the best pet care platform in the world, and our strong liquidity gives us the capacity to make the right investments to support our ambition”.

Industry Reaction

Sophie Lund-Yates, Equity Analyst at Hargreaves Lansdown: “The lockdown puppy boom is doing wonders for Pets at Home’s revenues. The sales of the items needed to get a new furry friend set up at home will have boosted performance. But it’s the other aspect of increased UK pet ownership that makes ears prick up. The continued rise in the group’s VIP and Puppy and Kitten Club memberships have long-term benefits. The increased data these memberships provide will help Pets at Home hone its offering, which should act as a sales boost. From a margin perspective, these members are shopping across channels which is great news for potential profitability. This nut has only just started to be cracked, so there’s big potential.

“The group’s acquisition of a telehealth provider is also worth noting. While small in size, it’s indicative of Pets at Home’s commitment to digital transformation. The chain’s biggest unique selling point, which it needs to leverage if it wants to keep online competitors at bay, is its ability to cross sell services. Giving the vet business an online presence should bolster this capability and tap into our new virtual way of living.

“It will be interesting to see if customers are buying higher-margin goods like supplements or accessories when we get to the full year. Gross margins had been subdued by a lockdown penchant for less lucrative items like cat litter. This is by no means the makings of a dog’s dinner, but for margin progression to really kick in it would be good to see a bit of a spending shift alongside growing volumes.”

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