Pets at Home Group plc reported a positive performance across the business, with group revenue up 9.9% to £303.4million for the 16 weeks ended July 19 and now predicts underlying profit for the year will be “slightly above current market expectations”.
Retail delivered strong results, with like-for-like revenue growth of 8.2% for the period, where the pet care specialist said investment in convenient, competitive and innovative shopping has brought success across categories, in particular with acquiring new customers and their pet food shop. Pets at Home’s omni-channel business on the retail side “continues to grow at pace”, delivering year-on-year revenue growth of 36% to £26million.
Group CEO Peter Pritchard said of today’s figures: “The momentum with which we exited FY18 has continued into the first quarter of FY19. We have seen a strong sales performance across the business, particularly in retail where like-for-like sales were 8.2% - an impressive 14% on a two-year basis.”
He continued: “After ending FY19 with our strongest quarter of retail like-for-like growth, we have accelerated that further still… We are seeing more new customers and more shoppers using digital channels. This demonstrates how successful recent initiatives have been, whether that’s in terms of competitive pricing or making it even easier for customers to shop with us.”
The good transaction and cash growth in this side of the business has “more than offset adverse margin mix”, said the company.
Mr Pritchard explained: “We know that customers generally prefer to shop with us when they are buying food but they then move to other purchases such as accessories or services. So, although we’ve seen a gross margin effect in the quarter, as a result of our new customer acquisition and a weighting towards food, it has delivered an overall cash benefit. I’m not worried about this, since by acquiring new food customers today, we have a big opportunity to drive incremental revenue across the lifetime of the pet. We’re really pleased with our sustained momentum in retail.”
The past two years spent re-addressing the company’s pricing position has also paid off, as the company describes competition in the market as “relatively benign”.
Mr Pritchard said today that the pricing work is now complete “from an investment phase”, adding: “We are now into a maintenance phase but we’ve seen no significant reaction from any our competitors and we are managing to hold our price gap within the expectations we set ourselves.”
Group like-for-like revenue grew 8%, also bolstered by a positive performance in the company’s variety of services, including the Groom Room and First Opinion vets.
Pets at Home also formed a strategic partnership through an investment in Tailster.com, a leading online marketplace in the UK for pet walking, sitting and boarding services, which it hopes will enhance its pet care services to customers
Mr Pritchard added: “We are also making good progress in our vet group. Our plans to buy out a number of joint venture vet practices have been carefully executed, whilst performance in the ongoing estate remains strong. We have the right foundations in place to accelerate the maturity of our vet practices in a sustainable way, delivering cashflow benefits to both joint venture partners and Pets at Home.
“At this early stage in the year, and with ongoing uncertainty across the wider retail sector, we remain cautiously optimistic and focused on delivering our pet care strategy."
Currency fluctuations are also something the business is having to consider closely. Pets at Home purchases around £70million dollars-worth of goods at cost price every year. Most of these are pet accessories from the Middle East and Mr Pritchard explained that the company’s hedging policy has mainly covered it for this year but that action is now having to be put in place going forward. “We hedge out about 95% of the next 12 months,” he said. “So, we’ve partly hedged some of FY20 but, clearly with the movement of the dollar, we have already looked at ways to mitigate the impact of the dollar swings over the last couple of weeks.”