Pat on the head for Pets at Home
PETS AT HOME (PETS) 205.4p
Loss to date: 3.6%
Original entry point: Buy at 213p, 5 September 2019
While our recent call on specialist retailer Pets at Home (PETS) has still to produce a positive return, we note that Liberum Capital has issued a ‘buy’ recommendation on the UK’s leading pet care business for the first time in three years, validating our investment thesis.
The broker says Pets at Home’s decisive actions, including own-brand price cuts, are delivering results, giving it greater confidence that the retailer’s pre-tax profit will start to grow again soon.
Liberum also thinks first-half results on 26 November should reassure that momentum is continuing. It believes retail like-for-like growth of 6%-to-7% is ‘probable’ and sees share price upside as the market gains more confidence in Pets at Home’s earnings and free cash flow improvement potential.
The broker says this is ‘shaping up to be one of the most impressive turnarounds in the sector of recent times’.
SHARES SAYS: Pet retailing is a resilient niche and we’re sticking with the turnaround underway at Pets at Home. Keep buying at 205.4p.