LONDON (ShareCast) - (Sharecast News) - Pets at Home said on Thursday that full-year revenue topped £1bn for the first time but warned that its first-half will take a hit from the coronavirus.
In the year to 26 March 2020, total revenue rose 10.2% to £1.06bn, with group like-for-like revenue growth of 9%. Underlying pre-tax profit was up 11% to £99.5m on a pre-IFRS16 basis, thanks in part to a stockpiling surge in March.

Retail LFL revenue grew 9.4%, while omnichannel revenue was 27.8% higher and Vet Group LFL revenue rose 5.6%.

However, the company warned over its first half as the coronavirus lockdown is set to take its toll.

"As anticipated in our full-year trading update on 2 April, nearly all of the exceptional demand witnessed in the closing weeks of Q4 has unwound during Q1 of the current year which, combined with our adherence to guidelines on social distancing across our operations and restrictions on the sale of pet products and health care services deemed non-essential, has temporarily depressed normal levels of group turnover," it said.

Pets said that while online sales have remained at "materially elevated levels", they are unable to mitigate lower levels of in-store sales. In addition, their weighting towards food, together with an additional £5m of costs relating to its initial response to the virus outbreak, has had an adverse effect on profits, margins and cashflow in the financial year to date.

As a result, it now expects first-half FY21 pre-tax profit to be "materially below" the prior year.

"It remains difficult to make a clear assessment of how consumers will react as we emerge from lockdown and we, therefore, do not feel it is prudent to provide full-year guidance at this stage. We will, however, reassess this at our Q1 update at the end of July."

Sophie Lund-Yates, equity analyst at Hargreaves Lansdown, said: "As an essential retailer, Pets has been able to keep trading throughout lockdown, giving it an edge over its peers. However there are problems with being a chosen one. The higher costs involved with keeping staff and customers safe, as well as ramping up supply to meet demand comes with costs. Coupled with the fact sales are still lower than they were this time last year, and profits and cashflow are being dragged down. The spike in demand seen in mid-March has simply poached revenue from further down the line.

"Nor is this the end of the line when it comes to changes. Lockdowns mean a lot of pet-owners are going to come out appreciating their furry companions more than ever before. That could lead to a spike in demand for higher-margin accessories to pamper our pets with, as well as items to aid wellbeing like more expensive foods or supplements. On the other hand, a severe recession could lead to customers sliding backwards on the value ladder, which would have the opposite effect, serving as a profit dilutor."

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