Pets group continues strong momentum into fourth quarter

Cheshire pet care group, Pets at Home, enjoyed strong third quarter trading, a market update today shows.

The Handforth group said total group revenue grew 18% to £302m, in the 12 weeks to December 31, 2020, compared with the period to January 2, 2020.

Retail revenue grew by 17.5%, despite COVID-related restrictions on both a regional and national level in the period.

Omnichannel revenues grew by 70.7%, supported by previous investment in distribution capacity.

Omnichannel includes orders placed online at petsathome.com and in-store using the order-in-store service, plus subscriptions to monthly flea & worm treatments via the ‘Subscribe & Save’ platform.

Vet Group revenue was up 22.1%.

The group’s robust balance sheet was strengthened further in the period through £80m in initial cash proceeds relating to the completion of the disposal of the Specialist Hospital Division.

Total liquidity as at December 31, 2020, comprising cash balances and undrawn portion of banking facilities including the additional £100m revolving credit facility raised in May 2020, was £391.7m.

The group said it anticipates a full-year underlying pre-tax profit – including the previously announced repayment of business rates relief of £28.9m – of at least £77m.

Group chief executive, Peter Pritchard, said: “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.

“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.”

He added: “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.”

Russ Mould, investment director at Manchester investment platform AJ Bell, said: “Pets at Home still appears to have plenty of pep as it benefits from an ongoing turnaround of the business and the so-called ‘pandemic puppy’ craze with pet ownership rising as people work from home.

“Able to operate as an essential retailer, the dog food, cat litter and veterinary services seller has demonstrated that the UK remains a nation of animal lovers.

“Pet retailing is a resilient niche engendering high levels of repeat business, since pet owners spend regularly on consumables and impulse-led accessories.

“Pets at Home is the market leader and offers a wide range of products, a significant own-brand offering and pet-related services (vets and grooming).

“And while it faces a competitive threat from non-specialists like the supermarkets and Amazon, under CEO Peter Pritchard, appointed in 2018, the company has introduced more customers to Pets’ complete pet care offer and signed up lots of loyalty card members.

“This has helped the company capture a greater share of their overall spend and increase its subscription-led income.

“The company has coped well with a shift online, ramping up its distribution capacity and the recent sale of its animal hospital business has boosted the balance sheet.

“This deal suggests the company is narrowing its focus to the online and retail stores and so-called ‘first opinion’ vet practices, though it also acquired an animal health telephone business at the same time in a smaller transaction.”