New distribution centre costs take a bite out of Pets at Home profits
- Pets at Home reported statutory pre-tax profits fell 35.2% to £34.7 million
- The company incurred costs of £9.4 million for the transition to a new distribution centre
- Annual underlying profit before tax is expected to be approximately £136 million
Pets at Home Group’s profits fell by more than a third in the first half of the year as the costs of opening a new warehouse weighed on the retailer.
Statutory pre-tax profits at Britain’s biggest pet supplies retailer fell 35.2 per cent to £34.7m in the 28 weeks to October 12, after incurring £9.4m costs to move to a new distribution center of 60,000 square meters in Staffordshire.
It also caused short-term inventory problems, with the percentage of products available in the group’s stores falling to around 80 percent of regular levels at the worst point, compared to 95 percent in normal times.
No surprises: Pets at Home, Britain’s largest pet supplies retailer, reported statutory pre-tax profits fell 35.2 per cent to £34.7 million in the 28 weeks to October 12
Pets at Home estimates that the disruption affected like-for-like retail sales in the second quarter by 3 percent and will increase logistics costs for the full year by £14 million.
But the company maintained its annual guidance, with underlying pre-tax profits expected to be around £136m and consumer sales up 7 per cent.
Sales grew 6.5 percent to £774.2 million in the six-month period, supported by robust performance in the veterinary services division and strong first quarter sales in retail.
Pets at Home noted that trading had ‘started well’ since mid-October as the new warehouse center was able to support all stores, with a further boost coming from ‘record’ Halloween trading and solid demand for its Christmas ranges.
Lyssa McGowan, CEO, said: “With the benefits of our new DC and new digital platform still ahead of us, we look to the future with confidence and can deliver on our plan to build the world’s best pet care platform.”
Pet ownership has soared in popularity since the Covid-19 pandemic as Brits spent more time at home.
Although travel restrictions have ended and Britain faces a severe cost of living crisis, demand for companion animals has remained healthy as many consumers have prioritized spending on their pets.
Susannah Streeter, head of money and markets at Hargreaves Lansdown, said: ‘Fears that the lockdown wave would ease in property do not appear to be materialising.
“Working from home has kept the trend strong and recurring revenue is embedded.
“Given online competitiveness, however, the company must ensure it can keep everything in order as it continues to expand.”
Pets at Home also revealed it had met with the Competition and Markets Authority as part of the regulator’s investigation into the veterinary services sector.
The company told investors it expects “no impact on our growth strategy or ambitions” from the study, which was announced in early September.
Pets at Home Group shares were up 2.2 per cent at 285.2p late on Tuesday morning, making them one of the top five on the FTSE 250 Index.