Pets at Home was one of the FTSE 250’s best performers on Wednesday, as the retailer announced full-year results in line with January’s downgraded guidance.
At 294.2p per share, Pets at Home’s share price was last 3.8% higher in midweek trade.
Revenues at the petcare and veterinary services provider rose 5.2% in the 12 months to March, to £1.5 billion. On a like-for-like basis, sales were up 5.1% year on year.
But the firm’s gross margin dipped to 46.8% from 48% fiscal 2023. This was thanks to by a 137-basis-point-decline at its core retail unit, to 46.2%, which the firm said was “predominantly driven by food growing faster than accessories.”
Underlying pre-tax profit dropped 3.2% to £132 million, in line with January’s slimmed-down forecasts. The decline was driven by those weak accessories sales, along with costs associated with the opening of a new distribution centre.
On a statutory basis, profits were down 13.7% to £105.7 million.
Vets Steal The Show
Pets at Home’s veterinary unit was the star performer last year, with revenues rising 16.8% in the period to £146.5 billion. The company said that this record result was driven by “higher average transaction value, mix and visits as we increased clinical capacity.”
Vets like-for-like revenue growth increased to 16.5% from 13.4% in financial 2023.
Sales expansion was weaker at its core retail division due to that weaker accessories demand. Turnover increased 4% to £1.3 billion, though like-for-like sales growth cooled to 4.1% to 7.5%.
On a brighter note, member numbers at Pets at Home’s loyalty programme rose 2% to 7.8 million as of the end of the year. The company attributed this to “strong retention and a continued normalisation in new Puppy & Kitten sign ups as expected.”
The firm kept the full-year dividend locked at 15.8p per share. It also announced plans to repurchase more of its shares, with a target of £25 million laid out for this year.
“Pivotal Year”
Chief executive Lyssa McGowan commented that “[this] has been a pivotal year for the business, having delivered some key building blocks of our platform for long term growth. I am proud of the progress we have made in the year; we relaunched our brand, opened our new [distribution centre,] built our new digital platform, made progress in our sustainability agenda, and enhanced our physical estate. “
She added that “the business has come together brilliantly to navigate any challenges faced this year, and we have delivered some key milestones of our strategy.”
Pets at Home said that it is “comfortable” with City forecasts pointing to an uptick in underlying pre-tax profit this year, to £144 million.
“Fundamental Strengths”
Analyst Sophie-Lund Yates of Hargreaves Lansdown noted that Pets at Home is “not immune to a challenging consumer environment and has been hit hard by the need to keep prices low in order to stoke growth. Convincing pet owners to part with additional cash for money-makers like accessories has been a far more arduous task then when people feel flush with cash.”
However, she added that “the more difficult backdrop is masking some fundamental strengths,” commenting that the company “remains in a more resilient position than the average retailer. The group is primed to benefit from the huge boost in pet ownership, and a broader step change in ways of life, which includes putting our four-legged friends at the centre of our lives.”
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