Record-breaking year for Pets at Home dampened by cautious COVID-19 outlook, says GlobalData

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Following today’s release of Pets at Home FY figures for 2019/20, Hannah Richards, retail analyst at GlobalData, comments: ‘‘With an outstanding performance in Q42019/20, Pets at Home delivered an exceptional full year trading, with total group revenue surpassing the billion pound mark, rising 10.2% to £1,058.8m. It achieved growth across the group’s functions, ahead of expectations, with profit before tax growth of 11.0% to £99.5m, and l-f-l revenue growth in Q4 alone hit 15.9%. While Pets at Home achieved impressive store l-f-l revenue growth of 7.7%, and stores have remained open throughout COVID-19, naturally its online channel has seen a surge in demand from shoppers staying at home with omni-channel revenue growing 27.8% to £93.9m.

“Despite its admirable full year performance, Pets at Home remain cautious on its outlook post COVID-19 and share price has fallen by 11% this morning. Priority throughout the pandemic has been cash preservation, with the reduction of senior management remuneration, and deferring spend where possible. Though short-term cash flow may be protected, Pets at Home will need to shift focus to maintain its current levels of profitability. It expects H12020/21 profits to fall short of last year, noting a rapid decline in sales from Q4FY19/20, alongside £5m increased operational costs due to COVID-19, and though online traffic remains elevated, it is not enough to offset sales lost from instore footfall.

“Currently accounting for 10.0% of retail revenue, its ominchannel platform will continue to grow as consumers stay under lockdown measures, and will be hesitant about returning to stores post-pandemic. Though Pets at Home has a strong transactional platform, shoppers are less likely to buy big ticket items such as cages and aquariums, instead purchasing small pet accessories and food. Its high mix of food product has an overall dilutive effect on gross margin, and as a greater proportion of sales move online profit margins will continue to suffer.

“Although Q1FY2020/21 has so far been dampened by the woes of coronavirus, Pets at Home’s outlook remains more positive than other retailers with an unchanged pet population and a planned shift towards sales from pet care services to counteract declining retail sales and further set Pets at Home apart from its competitors. Pets at Home is also more resilient due to its location in retail parks, and despite a drastic reduction of footfall across shopping locations, retail parks will avoid as steep of a decline as high streets and enclosed shopping centres due to its wider open spaces, and frequent proximity to large supermarkets. With an average store size of 6,400sqft, Pets at Home stores will be able to implement potentially permanent social distancing measures with greater ease.”