LONDON (ShareCast) - (Sharecast News) - Pets at Home shares failed to find favour with investors on Tuesday, despite reporting a solid rise in profits for the half year as analysts at Shore Capital placed the stock under review.
Shares in the company fell 6% in early trade after the broker noted caution around Pets at Home's outlook statement for the full year, with Covid-19 creating "material uncertainties around the near-term trading environment".

The FTSE 250-listed firm, classed as "essential" retailer during the coronavirus lockdown, made a pre-tax profit of £38.9m for the 28 weeks to October 8, compared with £34m a year earlier. Underlying pre-tax profits, which strips out one-off costs, was down 5.1% to £39.6m.

"We note that the multiples are relatively fulsome now, but this is time for Pets to shine being the right business in the right market, given the current trading environment," Shore said.

"We like the self-help levers available to the company but with the outlook statement believe that the share price has already arrived at its destination. We place our recommendation under review - from 'buy'."



Ross Hindle, analyst at Third Bridge, said Pets at Home benefited from its "essential" status during the coronavirus lockdown, but wondered about the sustainability of the company's momentum into next year.

"Pets at Home is benefiting from a rise in pet ownership during lockdown and a growing trend of pet food premiumisation. This means a growth in pet accessories as well as increased demand for higher-margin pet foods. The retailer's online sales are now nudging close to 20% penetration," he said.

"Collectively this means Pets at Home is expected to outperform the market, with margin expansion aided by a strong private label offering. The big questions are, how much did social distancing and other safety measures impact margins and how sustainable will their success be in 2021?"

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