Shares in Pets at Home (LON:PETS) perked up after the specialist retailer reported a rise in Q1 sales. There was also relief as the FTSE 250 firm maintained FY27 guidance in the face of subdued consumer confidence.
The update confirmed CEO James Bailey’s turnaround plan is working and helping the company extend its leadership of the UK pet care market.
The pet food-to-vet services purveyor is ‘encouraged’ by its start to FY27. And the Cheshire-based firm is set up well for the remainder of the year where it will be lapping a ‘more stable retail performance’.
First quarter treats
For the 16 weeks to 16 July, Pets at Home’s total sales ticked up 3.9% to £614 million. That included a 4.9% jump in retail revenue to £399 million as the company won market share.
Store refreshes and ‘category resets’ on dog food, cat food and treats boosted takings at the tills. Pets at Home also attributed the performance to ‘strong improvements in value for money, product availability and ease of instore order collection’.
Vet Group consumer revenue grew 1.9% to £215 million, underpinned by strong care plan sign-ups and higher average transaction values.
Turnaround gaining traction
‘We have made an encouraging start to FY27,’ said ex-Waitrose boss Bailey, ‘trading in line with expectations and clear further signs that our retail turnaround plan is gaining traction. Retail saw stronger momentum, with all categories delivering sales and volume growth, while our Vet Group continued to grow ahead of the market.’
Bailey added: ‘We remain focused on delivering better value, stronger execution and more convenient pet care for customers, while building a more resilient and profitable business.’
Shares in Pets at Home are down 55% on a five-year view. We still think this weakness offers a compelling entry point for patient investors.
Admittedly, pet owners have been cutting back on discretionary items including pet accessories as cost-of-living pressures eat into disposable incomes. Yet Pets at Home remains the clear leader in a resilient pet care market which benefits from trends towards premiumisation and humanisation.
We believe there is more to come from the turnaround under Bailey’s stewardship. And Pets at Home’s ongoing share buyback programme should help support the stock price.
One negative in the update was a 13.6% year-on-year drop in active pets club members to seven million. However, this reflected a change in how Pets at Home’s retail workers are able to look up Pet Club member records in the till system.
While this change resulted in a reduction in lower spending customers in the active Pets Club members base. Correspondingly, the number of non-Pets Club transactions increased.
Read the press release here: https://www.petsathomeplc.com/investors/
