Pets at Home investors purring after price cuts lure shoppers back
PETS at Home shares leapt by almost 6pc after the company revealed that its efforts to lower prices were encouraging shoppers to return to its stores.
The company posted a 5pc rise in sales to £256.5m for the 16 weeks to July 20, delivering fresh evidence that consumers’ enthusiasm for treating their animals remains undiminished.
The retailer has lowered prices on everything from dog chews to kennels amid concerns that it was losing shoppers to discount chains such as
B&M Bargains.
Pets at Home shares have been under pressure since the start of the year and, in May, Morgan Stanley slashed its earning forecasts for the group arguing that the pet food chain had a “value perception” problem because the same products were typically 20pc cheaper online or at discounters.
Following a dismal Christmas, Pets at Home has since rejigged its strategy to be more competitive on price, and investors cheered the lift in first quarter sales. Ian Kellett, the group’s chief executive, said: “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.”
Like-for-like sales grew by 2.7pc during the quarter, helped by strong sales of its new pet nutrition brands and its services division. The company has focused on the growing demand for pet grooming and veterinary services with plans to open a further 10 superstores, between 40 and 50 vet practices and the same amount of grooming salons. Services revenues grew by 18.8pc during the quarter to £40.1m, while its joint venture vet practice lifted sales by 19.7pc to £16.7m.
“Whilst it is still early in the year, the financial outlook is in line with our expectations,” said Mr Kellett.
“We are confident the investments we are making to grow our veterinary business and to reposition our pricing and deliver everyday value for our customers are creating a strong platform for sustainable future growth.”
Pets at Home bought Pets4vets in 2013 for £40m and now has 440 vet practices and 246 pet groomers alongside its 447 retail stores.
“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,” said George Salmon at Hargreaves Lansdown. “This tactic seems to be paying off with like-forlike sales on an upward trend.” He added that the threat from online retailers continued to be “the elephant in the room” for Pets at Home. Shares rose 9.8p to close at 182.1p yesterday.