Brexit may have the undermined of public confidence in the economy, led to market volatility and created political uncertainty, but the Pets at Home first quarter results showed that it doesn't seem to have affected one of the British people's most important wants: the desire to pamper our pooches.
Group revenue increased nearly nine per cent from £224m to £244m. A key driver of this was the service revenue leaping 43 per cent from £24m to £34m. A large contributor to the service performance were revenues from a joint venture with vet practices and a newly acquired specialist referral centre.
Like for like growth increased 2.7 per cent overall with 2.2 per cent growth in merchandise sales and 7.5 per cent growth in services sales.
The company launched four new stores in the quarter, the same number as in the first quarter of last year. It launched 27 stores in total during the previous financial year.
Dollar purchases each year total $50m(£38m)-$55m, and although the company has a policy of hedging 95 per cent of this exposure, it expects operating profit to be adversely impacted by £2m as a result of the deterioration of the pound.
Why it's interesting
The growth in selling services rather than merchandise is eye-catching. Previously 90 per cent of revenue mix came from merchandise. This has dropped to 86 per cent with the remainder from sales of services.
Another area that it is expanding faster than its core merchandise business is the "Groom Room". The number of stores with a groomer increased from 46 per cent to 57 per cent - the company now employs 246 groomers, up from 185 at the same point last year.
Pets at Home has successfully pushed its "VIP club" - an initiative that the company markets as "What would your very important pet really love?". Although this wasn't launched last year, it has added 200,000 new members since the end of March, taking the total number to 3.5m active members.
Brokers have a split opinion on Pets at Home, with a majority maintaining "buy" advice through 2016. The one exception is Liberum which this morning re-affirmed its "sell" downgrade from early July. Liberum cited top-line volatility and low-margin in services as the reasons for the recommendation.
Results are in line with market expectations, and Panmure Gordon has previously noted that the company enjoys over half of the advanced nutrition food market and over a third of the pet accessories market in Britain.
4 August 2016 @ 11:00amPets At Home Group (PETS)
What Pets at Home said
Chief executive Ian Kellett said:
"We are pleased with our positive start to the year, delivered through consistent performance in our core strengths of Advanced Nutrition, vet and grooming services, with a continued underpin from the growth in sales to our VIP members.
Whilst the consumer outlook is uncertain, we remain confident in our long term strategy and are reassured by the historical resilience of the pet market in times of economic downturn.
Our full year outlook remains in-line with market expectations."