Sales growth at Pets at Home stores was restrained to less than 6% in the first half of its financial year as the switch to a single distribution centre created shortfalls in availability.
Interim results for the 28-week period to 12 October 2023 show that retail revenue grew by 5.2% (like-for-like also 5.2%) during the period, with total consumer revenue, which includes all sales in the group’s veterinary division, exceeding £1bn with growth of 8.6%. Total sales for businesses entirely owned by the group grew by 6.5% to £774.2m (like-for-like 6.2%).
Following first quarter sales growth of 7.1%, availability fell from the normal levels of around 95%, to nearer 80% as the group’s new Stafford distribution centre came online, causing like for like (LFL) growth to dip to 2.7% in the second quarter. The impact was “contained and swiftly corrected”, says the company, with availability having “normalised” and LFL sales in the early weeks of the third quarter showing 4% growth. The centre is now fulfilling deliveries to all stores, with online operations to move across shortly and the transition away from all old distribution centres to be completed by mid-2024.
Pets at Home estimates that the period of disruption resulted in a 3% LFL drag on retail sales, and the retailer will incur extra logistics costs of £14m as a result. Underlying pre-tax profit was £47.8m, down by 19.3%, with statutory pre-tax profit declared as £34.7m, down by 35.2%, with costs of over £13m associated with the distribution centre transition, the consolidation of support offices and a writedown of investment in Tailster.
During the half-year, Pets at Home opened three new stores and four new groomers, taking the total beyond 450 pet care centres. The group also completed 24 refits during the period, and saw own-brand sales grow by 18%, boosted by the introduction of a new own-brand freeze-dried range. It has also agreed terms for exclusive distribution of freshly-cooked dog food from Butternut Box in the New Year, the company revealed. Membership of the chain’s VIP scheme grew by 3% YoY to 7.8 million.
Looking ahead, the group expects consumer sales to grow at around 7% and has made no change to its guidance for expected full-year pre-tax profit of £136m. Having recently completed a £25m share buyback, a second £25m tranche is to commence shortly.
Chief executive Lyssa McGowan said: “H1 has been a critical period in laying the foundations of our platform for future growth. This was the period of high activity when we relaunched our brand, launched our new DC, built our new digital platform, and made progress expanding and improving our physical assets across Retail and Vets.
“This period has not been without challenges, but we have been able to manage these well and are on track to finish FY24 with a refreshed, modernised infrastructure, fit to deliver growth for many years to come. I am incredibly proud of how our colleagues across the business have come together using their expertise and ingenuity to navigate this demanding period.
“As we stand today, through our point of peak investment, with the benefits of our new DC and new digital platform still ahead of us, we look to the future with confidence that we can deliver our plan, to build the world’s best pet care platform.”