FTSE: Pets at Home profits hit by higher freight and energy costs
Pets at Home (PETS.L) fell out of favour with investors on Wednesday after it posted lower first-half profits.
The company, which is Britain’s largest pet supplies chain, blamed a surge in freight and energy costs for the weak performance.
Underlying pre-tax profit fell by 9.3% to £59.2m ($70.9m) over the period to 13 October, compared with the same period last year.
Although its puppy and kitten club remained a key source of revenue, it added that people were buying fewer toys and other accessories for their dogs amid the sharpest cost of living squeeze in a century.
However customers were still spending money on essentials like food and litter, and on Christmas ranges.
It comes as Brits bought more pets during the COVID pandemic as they spent more time at home.
“I am more convinced that Pets at Home is well-positioned to capitalise on an attractive growth opportunity in our structurally-growing pet care market, supported by our unique blend of products and services, deeply-embedded culture and expert, passionate colleagues and partners,” Lyssa McGowan, chief executive, said.
“Our first-half performance shows progress and resilience across the business.”
McGowan, who has been at the helm for six months, added: “We are conscious of the challenges faced by many consumers, and continue to prioritise making pet care as convenient and affordable as possible. We will never let price be a reason not to shop with us.”
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The group reiterated its full-year guidance of an underlying profit of around £131m, but shares were down 7% in London on the back of the update.
Pets at Home has a total of 457 stores, many of which also have vet practices and grooming salons.
Analysts at RBC said: “Pets is starting to see some evidence of consumers trading down, with new customers buying more of the lower price point, grocery products and more own-brand product.”
Meanwhile, Lara Martinez, analyst at Third Bridge, said: “Our experts say that if Pets at Home is to gain wallet share it should start by looking at its existing VIP pet base. There are tremendous opportunities to increase cross-selling from retail to veterinary divisions and move VIP customers into more subscription and healthcare plans.”
“Pets at Home does really well in terms of advanced nutrition pet foods. The availability of consultants in the stores is an important differentiator from pure online players such as Amazon (AMZN).”