Pets at Home shares could fall further amid uncertain outlook

The UK-based pet supplies retailer saw its annual sales top £1 billion for the first time, but its share price plummeted after management warned its first-half performance will take a hit due to the Covid-19 pandemic.

Pets at Home Group shares are down 10% and could fall further after its management warned that its first-half performance will take a hit due to the Covid-19 crisis.

On Thursday, the pet supplies retailer unveiled its full-year results and despite its annual sales climbing 10.2% to £1.1 billion – the first time the company has hit that milestone – investors drove its share price lower amid its uncertain outlook.

‘As anticipated in our full-year trading update on 2 April, nearly all of the exceptional demand witnessed in the closing weeks of Q4 has unwound during Q1 of the current year which, combined with our adherence to guidelines on social distancing across our operations and restrictions on the sale of pet products and health care services deemed non-essential, has temporarily depressed normal levels of group turnover,’ Pets at Home said in a statement.

The company acknowledged that it will not be ‘immune’ to the economic fallout from the Covid-19 pandemic, with the retailer reviewing its business model to adapt to changing consumer habits that could persist post-lockdown.

Pets at Home full-year results: key figures

  • The retailer saw underlying pre-tax profit increase 11% to £99.4 million on a pre-IFRS16 basis, reflecting a surge in sales in March as a result of stockpiling by consumers.

  • Retail like-for-like sales grew 9.4%, while omnichannel revenue climbed 27.8% higher, with Vet Group like-for-like revenue rising 5.6% over the period.

  • The company also maintained its dividend unlike other retailers, with its final pay-out to shareholders coming in at 5p per share, reflecting the business’ strong performance in 2020 and the strength of its balance sheet.

‘In normal circumstances, it would have given me great pleasure to reflect on another year in which we have grown sales and profits and successfully executed our proven pet care strategy,’ Pets at Home Group CEO Peter Pritchard said.

‘These are, however, far from normal circumstances with the rapid, wide-ranging and devastating effects of COVID-19 having an unprecedented impact on all of our lives,’ he added.

Morgan Stanley upgrades Pets at Home in May

Analysts at Morgan Stanley upgraded Pets at Home from ‘underweight’ to ‘equal weight’ and raised its target price for the stock to 200p per share this month.

Following its full-year results, Pets at Home looks likely to close well above Morgan Stanley's target price, with the stock trading at 223p per share as of 16:15 (BST) on Thursday.

How much does it cost to buy UK shares with IG?

There are three ways to ‘buy’ UK shares with IG: spread betting, trading CFDs or buying physical shares. The cost will depend on which method you choose. The table below illustrates how the costs to get exposure to £10,000 of Lloyds stock, which is equivalent to 16,000 shares (quoted at 62.5p a share).

Remember, spread bets and CFDs are derivatives, which come with higher risk and reward than investing.

Cost to get exposure to Lloyds stock

Spread betting CFD trading Share dealing
Action Buy £160 per point Buy 16,000 share CFDs Buy 16,000 shares
Capital required to open £2000 £2000 £10,000
Total fees £20.88 £20.88 £16

Ready to start trading shares? Open a live account or practise on a demo.

Note: Amounts do not include overnight funding charges and taxes. Spread bets are not subject to tax. CFDs are free from stamp duty, but subject to capital gains tax. Share dealing is subject to both stamp duty and capital gains tax.

IGA, may distribute information/research produced by its respective foreign affiliates within the IG Group of companies pursuant to an arrangement under Regulation 32C of the Financial Advisers Regulations. Where the research is distributed in Singapore to a person who is not an Accredited Investor, Expert Investor or an Institutional Investor, IGA accepts legal responsibility for the contents of the report to such persons only to the extent required by law. Singapore recipients should contact IGA at 6390 5118 for matters arising from, or in connection with the information distributed.

The information/research herein is prepared by IG Asia Pte Ltd (IGA) and its foreign affiliated companies (collectively known as the IG Group) and is intended for general circulation only. It does not take into account the specific investment objectives, financial situation, or particular needs of any particular person. You should take into account your specific investment objectives, financial situation, and particular needs before making a commitment to trade, including seeking advice from an independent financial adviser regarding the suitability of the investment, under a separate engagement, as you deem fit.

Please see important Research Disclaimer.

Seize a share opportunity today

Go long or short on thousands of international stocks.

  • Increase your market exposure with leverage
  • Get spreads from just 0.1% on major global shares
  • Trade CFDs straight into order books with direct market access

Live prices on most popular markets

  • Forex
  • Shares
  • Indices
liveprices.javascriptrequired
liveprices.javascriptrequired

Prices above are subject to our website terms and agreements. Prices are indicative only. All shares prices are delayed by at least 15 mins.

liveprices.javascriptrequired

Prices above are subject to our website terms and agreements. Prices are indicative only. All shares prices are delayed by at least 20 mins.

The Momentum Report

Get the week’s momentum report sent directly to your inbox every Monday for FREE. The Week Ahead gives you a full calendar of upcoming key events to monitor in the coming week, as well as commentary and insight from our expert analysts on the major indices to watch.

For more info on how we might use your data, see our privacy notice and access policy and privacy webpage.

You might be interested in…

Find out what charges your trades could incur with our transparent fee structure.

Discover why so many clients choose us, and what makes us a world-leading provider of CFDs.

Stay on top of upcoming market-moving events with our customisable economic calendar.