Pets at Home exceeds expectations as new strategy bears fruit, says GlobalData

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Following today’s release of Pets at Home FY figures for 2018/19, Amy Higginbotham, retail analyst at GlobalData, a leading data and analytics company, comments: ‘‘Pets at Home CEO Peter Pritchard has much to celebrate this morning, with the group’s full year results indicating that investment in its new per care strategy, which caused a dip in profits in H1, is paying off. Group revenue increased £62.1m to £961m and l-f-ls grew on strong comparatives in both its retail and vet group divisions, as the retailer continues to win over new customers and drive loyalty. Group underlying profit before tax rose 6.1% to £89.7m for the full year, exceeding the £80-85m outlined in its H1 trading update, with the group’s retail division returning to profit more quickly than expected.

“The pet specialist’s vet group division continues to outperform as it restructures (it has bought out 48 of its Joint Venture practices and has closed 19 during the year), with sales rising 13.1% to £106.4m. The retailer’s strategy to bring together its veterinary and retail divisions by encouraging cross-group purchases resonates with shoppers and helps drive loyalty — revenue from VIP loyalty members increased 17.7% during the year while the number of subscription plan customers grew to over 700,000. Pet care services now account for 34.0% of overall group sales, up 1.8ppts on last year, helping strengthen the retailer’s specialist credentials and fend off competition from non-specialists such as the grocers and Amazon, which continue to expand their pet care ranges.

“Online sales continue to grow at an impressive rate, as the “Easy Repeat” online food subscription service and instore Pets Pads (which allow customers to purchase from the retailer’s website instore) prove popular among consumers. The retailer also points to improved online conversion rates, aided by the relaunch of its website, and competitive prices, which are now within 5% of its online competitors for what Pets at Home deem to be “comparable items”. But Pets at Home’s online division continues to erode margins given its higher mix of lower margin items such as food, while price investments across its retail business overall further dent margins as it strives towards providing everyday low prices online and instore. Underlying group gross margin fell 102bps during the year, despite the uptick in gross margin in its vet group division.

“Pets at Home’s willingness to adapt to changing consumer behaviour and invest in new initiatives to help futureproof the business positions it well to continue growing in FY2019/20. Its new store concept (currently in Chesterfield and Stockport) focuses on customer experience and pet care services, and features a groom room, cat adoption lounge and a ‘pet village’ which includes dog washing stations. This will help drive footfall, with the retailer planning to roll this out further, and will bring its veterinary and retail divisions even closer together.”