LONDON (ShareCast) - (Sharecast News) - Citi has upgraded its rating on Pets at Home, arguing that management has a "viable" plan to secure the company's future.
Citi now has a 'buy' recommendation on the London-listed company, which owns a string of retail outlets as well 450 veterinary practices, and a price target of 180p.

Analyst Matthew Garland said: "Concern about the sustainability of the retail business, and the longer-term performance of the vet group, has kept Pets at Home's share price at historically low levels.

"However, after the vet strategy update, we argue management has articulated a viable plan to turn around the business, supported by a combination of strong market dynamics and company initiatives. This should drive EBIT growth and a longer term free cash flow opportunity."

Garland conceded risks to gross margin remained in the retail business, but added: "Factors including private-label penetration and weighting of premium pricing in more discretionary categories could mitigate further dilution."

Shares in the company were head 3% at 159p by 1245GMT.

The UK high street is currently enduring a difficult period, as Brexit uncertainty weighs on consumer confidence However, Pets at Home said at its last update in January that like-for-like sales had grown 4.7% in its retail business in the 12 weeks to 3 January.

At its vet business, underlying revenues improved 9.1%, while group revenues were ahead 5.1% on the same basis.

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