Pets at Home ends year ahead of forecasts as demand spikes

(Sharecast News) - Pets at Home has finished the year ahead of expectations, helped by a sudden spike in demand following the outbreak of coronavirus.
Updating investors on trading for the year to 26 March, Pets At Home - which has 453 stores and a 440-strong chain of small animal veterinary practices - said it had traded in line with expectations for most of the fourth quarter.

But in the closing weeks it experienced "exceptional levels of demand", both in store and online, as customers stocked up on pet supplies. Pets At Home said there had been both a jump in new customers, while the average basket size of existing customers had also jumped.

As a consequence, Pets at Home now expects underlying full-year profits to be "slightly above" the top range of market expectations. Most analysts were looking for 2020 underlying profits of between ?92m and ?97m.

The FTSE 250 company has designated an essential retailer so remains open following the more stringent lockdown measures introduced by government on 23 March.

But despite that, it opted to pull guidance for the current year, noting that it would be inappropriate given the "uncertain backdrop".

Peter Pritchard, chief executive, said: "While 2020 has undoubtedly ended strongly for Pets at Home during this unprecedented time, the period ahead is uncertain for us all, and Pets at Home will not be immune to these challenges that we collectively face."

The retailer said its balance sheet was resilient, with "extensive headroom" on debt capacity and covenants, and a "significant proportion" of its committed ?248m revolving credit facility remained available for drawdown.

Shore Capital, which last week upgraded Pets At Home to a 'buy' from 'hold', reiterated its recommendation but temporarily pulled 2021 forecasts.

It added: "With good cash generation, a strong balance sheet and a strategy that mixes products and services, we believe that it is perhaps time for investors to look again at the investment case."

As at 0830 BST, shares in Pets at Home were off 3% at 233.0p.