Lyssa McGowan, the new boss of Pets at Home, has told This is Money that the business has a ‘very strong balance sheet’ and is ‘uniquely placed’ to withstand the cost-of-living crisis and turbulence within the economy.
Ms McGowan, who joined the group in June, told This is Money she has been conducting a deep-dive into the company, which has seen her prepping cats for surgery and cleaning out fish tanks in stores.
The hands-on boss said the company’s latest half-year profits had fallen due to investment into its online channels, and, certain factors outside its control, like higher energy and freight costs.
Ms McGowan told This is Money that the group’s total energy bill has risen from £8million last year to around £22million this year. She said the group had taken a hit to its bottom line of around £5million this year due to higher energy costs.
In charge: Lyssa McGowan, the new boss of Pets at Home, spoke to This is Money
Ms McGowan said she could not predict how long the issue of surging energy bills would last, but expects sky-high freight costs to ease next year.
She told This is Money the group was stringently ‘focused on price competitiveness’ for shoppers during the cost-of-living crisis.
On investing heavily in the company’s online channels, Ms Gowan said she believed ‘it was absolutely the right thing to do.’
It is estimated that there are now around 35million pets within the UK, and Ms McGowan thinks this number will continue to rise.
She also flagged an increase in the ‘humanisation’ and ‘premiumisation’ of pets, which sees owners wanting to make their pets, in some ways, more like themselves. Pets have become, ‘part of the family’, she told This is Money.
Buying toys for pets is just one example of this phenomenon. Ms McGowan said the group had, within a short space of time, already sold 100,000 purple spotted dinosaur dog toys in the run up to Christmas.
Pets at Home has posted a fall in profits for the past six months as it came under pressure from higher energy and freight costs.
The group’s underlying pre-tax profit slipped 9.3 per cent to £59.2million in the six months to 13 October, against the same period last year.
The company said this was in line with expectations, as it held profit targets of around £131million for the year and hailed a ‘resilient’ pet care market.
Profit hit: Pets at Home has posted a fall in profits for the past six months
Pets at Home shares fell today and were down 5.07 per cent or 15.40p to 288.60p this afternoon, having fallen nearly 40 per cent in the past year.
Ms McGowan said the performance showed ‘progress’ as the business notched up ‘new records for customer numbers in recent months’.
Pets at Home said new customer numbers were ‘strong’ after it benefited from an acceleration in people registering for its Puppy & Kitten club membership over the half-year.
It highlighted that consumer demand has stayed strong as a result of record levels of UK pet ownership, despite pressure on household budgets.
Total revenue grew 7.3 per cent to £727.2million, with group like-for-like revenues up 6.4 per cent. Pets at Home said the second-quarter like-for-like sales rate accelerated versus the first-quarter run rate.
Pets at Home also told investors that it was actively managing cost headwinds, such as unfavourable foreign exchange rates, energy costs and wage increases.
Ms McGowan said in today’s results: ‘In my first six months as CEO, I have spent my time forming a deep understanding of the business and sector, learning from the ground up how the business operates.
‘I am more convinced that Pets at Home is well-positioned to capitalise on an attractive growth opportunity in our structurally-growing pet care market, supported by our unique blend of products and services, deeply-embedded culture and expert, passionate colleagues and partners.
‘Our first-half performance shows progress and resilience across the business.’
Maintained: Pets at Home maintained its full-year guidance today
Susannah Streeter, a senior investment and markets analyst at Hargreaves Lansdown, said: ‘Higher energy prices are partly why the Pets At Home update has put the cat among the pigeons but changing customer behaviour during the cost-of-living crisis is also behind the dent to profits.’
Sarah Riding, a retail partner at law firm Gowling WLG, said: ‘As consumers start to feel the economic pinch ever more so over the next few months, the company’s revenue may take a hit and investors will be wary of this eating into profits.
‘Areas of the business such as veterinary surgeries may well, therefore, play a pivotal role in tackling this challenge which contributes significant turnover and is an essential for many pet owners.
‘The second half of year will be a test for Ms McGowan as she battles managing increased costs due to rising inflation but shareholders will be rightly hopeful that she steers the business to further successes.’
Russell Pointon, director of consumer at Edison Group, said: ‘Despite the cost-of-living crisis, man’s best friend continues to ring true with a post-lockdown record number of UK pet owners continuing to prioritise spending on their pets, which the Group states is “underpinned by the structural trends of humanisation and premiumisation.”
‘Against a challenging macro-economic climate, chief executive Lyssa McGowan, six months in the role, has outlined a strategy to deliver long-term, sustainable growth.
‘Looking ahead, the Group will continue to manage industry-wide cost headwinds and look to deepen its relationship with its VIP customers, while leveraging investment in technology, such as its newly updated app, to drive customer engagement and optimise its local store ranges.’
The company, founded by British businessman Anthony Preston in 1991, maintained its full-year guidance.
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