LONDON (ShareCast) - (ShareCast News) - First-quarter numbers from Pets at Home showed encouraging improvements as the retailer's management took action after a disappointing previous period.
Group revenue in the 16 weeks to 21 July climbed 5.0% to £256.5m as like-for-like revenue swelled 2.7% thanks to strong growth in specialist referral vet services and continued momentum in merchandise.

Merchandise revenue grew 2.8% to £216.4m, with merchandise LFL growth accelerating to 1.5% thanks to some investment in price.

Services revenue galloped up 18.8% to £40.1m, including joint venture vet practice income up 19.7% to £16.2m.

Other initiatives to drive growth included the launch of a second product in licensed medicine, 'Subscribe and Save'.

Omnichannel revenue mushroomed 80% during the quarter, with around 60% of digital revenues now involve colleague assistance or via a store through the Click & Collect, Order-In-Store and subscription services.

During the period, there were five Pets at Home superstores opened, two Vets4Pets practices and six Groom Room salons.

Chief executive Ian Kellett stated that the profit outlook for the full year remains in line with expectations as the merchandise price investment and operational cost savings continued as planned.

The group is on track to deliver full year opening targets of around 10 superstores, 40-50 vet practices and 40-50 grooming salons.

Said Kellett: "We have continued our everyday lower price repositioning and reduced the reliance on short term promotional discounts. We remain encouraged by the overall response to our pricing changes and by the number of both new customers and those we have welcomed back.

"We have also strengthened our omnichannel capabilities substantially, with subscription services, Order-In-Store and Click & Collect performing particularly well. This underlines the importance of our store environment where customers benefit from products, services and colleague advice."

Pets shares trotted up 8% to a three-month above 185p in early trade on Tuesday.

Analyst George Salmon at Hargreaves Lansdown said: "After a forgettable 2016, which saw sales momentum stutter badly in the second half, Pets has taken action to improve its competitive position by reducing prices."

But he pointed to an elephant in the room of the threat from online retailers, particularly Amazon.

"While cutting prices to defend market share feels sensible, especially given the potential for cross-selling once customers are in-store, this approach impacts profitability and few cross swords with Amazon and walk away victorious. However, through its 3.7m strong VIP membership, the group has the means to market its products intelligently to plenty of existing customers, and also upsell its vets and grooming services too.

"The extra competition is a significant challenge, but if Pets can hold its own there are plenty of reasons for investors to stay upbeat. The UK pet market is steadily growing, and the bond between a pet and its owner should mean the group's cash-generative business model is resilient regardless of any turbulence in the wider economy."

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