Pets at Home share price jumps to all-time high after profitable summer

Posted: 28 September 2020 11:09 am
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Pets at home shares

Shares in British retailer Pets at Home reach a record-high as annual earnings are expected to beat market expectations.

Pets at Home shares rose 20% on 24 September, following a positive update from the company regarding second-quarter sales. The pet supplies retailer’s shares closed the week trading at 394p – a record-high for a company that has been one of the few winners of the coronavirus pandemic so far. Pets at Home’s share price is up over 100% at the time of writing since the UK’s first coronavirus lockdown was announced on 16 March.

“Double-digit” sales growth

Sales have been steadily increasing for the pet supplies retailer, as lockdown restrictions have eased in the UK and consumers’ shopping habits have begun to return to normal.

With “double-digit” growth in like-for-like sales during the second quarter, the company’s management announced on Thursday that it expects underlying pre-tax profits for the year (ending May 2021) to be “ahead of current market expectations”.

This is extremely positive news for the retailer’s shareholders, with the company now representing the best-performing UK retail stock this quarter.

Why has Pets at Home been so successful during the pandemic?

Part of the FTSE 250 company’s success during the pandemic can be attributed to the diverse range of services it offers consumers. Founded in 1991, the company sells pet supplies both online and in-store, as well as offering grooming, microchipping and veterinary services in its salons across the country.

This has meant that despite social distancing measures restricting the ability for its salon services to operate as normal, sales in other areas such as pet food and accessories have increased. In fact, the demand for pets, in particular dogs, has increased in the last six months. It seems many of the public have turned to animals for comfort, as lockdown placed increased strain on both physical and mental health.

Despite the company’s high price-to-earnings ratio of 29x, Pets at Home’s unique in-store experience along with the UK’s increased dog ownership means investors still expect the company to perform well for some time to come. For potential investors, the company therefore doesn’t look a bad bet for the medium to long term. However, each investment bears its own risks, especially in the current market.

The company itself remarked on Thursday that “COVID-19 continues to create a number of material uncertainties around the trading environment, including the risk of a second lockdown”, and investors should bear this in mind before making any future investment decisions.

This article offers general information about investing and the stock market, but should not be construed as personal investment advice. It has been provided without consideration of your personal circumstances or objectives. It should not be interpreted as an inducement, invitation or recommendation relating to any of the products listed or referred to. The value of investments can fall as well as rise, and you may get back less than you invested. Past performance is no guarantee of future results. If you’re not sure which investments are right for you, please get financial advice. The author holds no positions in any share mentioned.

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