Pets at Home upgraded its profit expectations for the second time in three months, prompting a sharp rise in its share price.
The pet care retailer said on Tuesday that full-year profits would be towards the top end of market expectations despite weak UK consumer confidence.
The Manchester-based group has focused on boosting services for pet owners and has benefited from making its pricing more competitive and restructuring its veterinary practices.
Its share price rose 15 per cent to 246.8p on Tuesday.
“Their strategy has been retail meets service,” said Greg Lawless, a retail analyst at Shore Capital. He pointed to the success of subscription services for products such as medicines and food, which have 790,000 customers, a 21.5 per cent increase compared with 2018. “They have moved the agenda from pricing against Amazon to service, and that has been quite clever.”
Dog grooming is one example of these services. Pets At Home said 460,000 pets had been groomed in the first half of the year, and that 25,000 were expected to receive treatments in the week before Christmas.
Underlying pre-tax profit rose 19 per cent to £45m in the six months to October 10.
Pets At Home said it expected full-year underlying profits to be towards the top end of analysts’ forecasts, which range from £87m to £93m. In its first-quarter trading statement, the group had said it expected underlying profits to be “slightly above market expectations”.
Retail revenue, which constitutes the majority of sales, rose 8.1 per cent year on year to £480m in the first half. Revenues for the group’s veterinary operations, which it runs as joint ventures with independent practices, increased by 19.6 per cent to £66.5m. The group has now had 11 consecutive quarters of revenue growth.
“We have executed our plans well, and this has been reflected in the strong customer sales growth across the group,” said chief executive Peter Pritchard.
The company has also completed the buyout of 57 veterinary practices during the past year, closing 36 of them.
Pets At Home has an estate of 452 stores, located primarily in out-of-town retail parks. It said there would be the opportunity to renegotiate about 200 leases in the next five years and saw “significant scope for rent reduction”.
The company nevertheless raised concerns over the potential impact of Brexit on its vet group and distribution centres, which employ “a significant number” of EU nationals.
The company’s share price has doubled over the past year. During trading on Tuesday it surpassed the 245p price of the company’s 2014 initial public offering for the first time in about three years.
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