Pets at Home shares could fall further amid uncertain outlook

Pets at Home Group shares are down 10% and could fall further after its management warned that its first-half performance will take a hit due to the Covid-19 crisis.

On Thursday, the pet supplies retailer unveiled its full-year results and despite its annual sales climbing 10.2% to £1.1 billion – the first time the company has hit that milestone – investors drove its share price lower amid its uncertain outlook.

‘As anticipated in our full-year trading update on 2 April, nearly all of the exceptional demand witnessed in the closing weeks of Q4 has unwound during Q1 of the current year which, combined with our adherence to guidelines on social distancing across our operations and restrictions on the sale of pet products and health care services deemed non-essential, has temporarily depressed normal levels of group turnover,’ Pets at Home said in a statement.

The company acknowledged that it will not be ‘immune’ to the economic fallout from the Covid-19 pandemic, with the retailer reviewing its business model to adapt to changing consumer habits that could persist post-lockdown.

Pets at Home full-year results: key figures

• The retailer saw underlying pre-tax profit increase 11% to £99.4 million on a pre-IFRS16 basis, reflecting a surge in sales in March as a result of stockpiling by consumers.

• Retail like-for-like sales grew 9.4%, while omnichannel revenue climbed 27.8% higher, with Vet Group like-for-like revenue rising 5.6% over the period.

• The company also maintained its dividend unlike other retailers, with its final pay-out to shareholders coming in at 5p per share, reflecting the business’ strong performance in 2020 and the strength of its balance sheet.

‘In normal circumstances, it would have given me great pleasure to reflect on another year in which we have grown sales and profits and successfully executed our proven pet care strategy,’ Pets at Home Group CEO Peter Pritchard said.

‘These are, however, far from normal circumstances with the rapid, wide-ranging and devastating effects of COVID-19 having an unprecedented impact on all of our lives,’ he added.

Morgan Stanley upgrades Pets at Home in May

Analysts at Morgan Stanley upgraded Pets at Home from ‘underweight’ to ‘equal weight’ and raised its target price for the stock to 200p per share this month.

Following its full-year results, Pets at Home looks likely to close well above Morgan Stanley's target price, with the stock trading at 223p per share as of 16:15 (BST) on Thursday.

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