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We remain bullish on Pets at Home despite profit warning
PETS AT HOME (PETS) 235.6p
Gain to date: 10.6%
Original entry point: Buy at 213p, 5 September 2019
Our positive call on Pets at Home (PETS) remains 10.6% in the money, even after a warning that first half pre-tax profit will be ‘materially below the prior year’.
Strong results for the year ended 26 March 2020 showed underlying pre-tax profit rising 11% to £99.5m as pet owners stocked up on food and basic medicines during lockdown.
Unfortunately, nearly all of the ‘exceptional demand’ witnessed in the closing weeks of its fourth quarter unwound during the first quarter of its new financial year.
Pets at Home added that the weighting of higher online sales towards food, together with additional coronavirus-related costs, have had an adverse effect on profits, margins and cash flow in the new financial year.
Reassuringly, Pets at Home’s balance sheet health enabled it to maintain the 2020 final dividend at 7.5p, in contrast to most other retailers that have suspended payouts.
Chief executive Peter Pritchard also bought almost £250,000 of shares on results day, demonstrating his confidence that
Pets at Home will emerge as a stronger pet care business in a post-pandemic future.
SHARES SAYS: While the profit warning is disappointing, pet retailing remains a resilient niche. Keep buying.