Pets at Home interim profits fall as freight, energy costs rise
By Michele Maatouk
Date: Wednesday 23 Nov 2022
(Sharecast News) - Pets at Home reported a drop in interim profit on Wednesday as energy and freight costs rose, but backed its full-year profit guidance.
In the 28 weeks to 13 October, underlying pre-tax profit fell 9.3% to £59.2m. The pet supplies retailer said this was "in line with the plan", impacted by increased freight and energy costs and the year-over-year increase in investment in digital assets.
Total revenue grew 7.3% to £727.2m, with group like-for-like revenues up 6.4%. Pets said the second-quarter LFL rate accelerated versus the first-quarter run rate.
The retailer said it continues to expect full-year underlying pre-tax profit to be in line with consensus expectations of £131m.
Pets said the business, and the wider pet care market, remains resilient and in growth. New customer acquisition remains strong, it said, with registrations into its Puppy & Kitten club accelerating throughout the second and customer spend maintained across the group.
"Consumer demand remains strong, with a record number of UK pet owners continuing to prioritise spending on their pets, underpinned by the structural trends of humanisation and premiumisation.
"Trading post period end has continued in line with the Q2 run rate with LFLs in mid-single digits."
At 0920 GMT, the shares were down 5.2% at 288.06p.
Susannah Streeter, senior investment and markets analyst at Hargreaves Lansdown, said: "Higher energy prices are partly why the Pets At Home update has put the cat among the pigeons but changing customer behaviour during the cost-of-living crisis is also behind the dent to profits. Rising costs pushed down underlying pre-tax profit by 9.3% with higher freight and energy bills taking their toll.
"Although essentials like cat litter and hygiene products have provided a sunnier spot of rising sales, people are clearly putting off highly discretionary spending on toys and fashion for pets with accessories spending down 3.5%. The group's growing customer base does add resilience though because overall petfood sales grew by more than 15.1%. That's helped keep full year guidance unchanged, with full-year profits still expected in line with expectations but until inflationary pressures ease there will be a distinct lack of cat nip in updates."
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