Pets at Home's turnaround plan has legs, Citi believes
Citi has upgraded its rating on Pets at Home, arguing that management has a “viable” plan to secure the company’s future.
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Pets at Home Group
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16:34 19/04/24
Citi now has a ‘buy’ recommendation on the London-listed company, which owns a string of retail outlets as well 450 veterinary practices, and a price target of 180p.
Analyst Matthew Garland said: “Concern about the sustainability of the retail business, and the longer-term performance of the vet group, has kept Pets at Home’s share price at historically low levels.
“However, after the vet strategy update, we argue management has articulated a viable plan to turn around the business, supported by a combination of strong market dynamics and company initiatives. This should drive EBIT growth and a longer term free cash flow opportunity.”
Garland conceded risks to gross margin remained in the retail business, but added: “Factors including private-label penetration and weighting of premium pricing in more discretionary categories could mitigate further dilution.”
Shares in the company were head 3% at 159p by 1245GMT.
The UK high street is currently enduring a difficult period, as Brexit uncertainty weighs on consumer confidence However, Pets at Home said at its last update in January that like-for-like sales had grown 4.7% in its retail business in the 12 weeks to 3 January.
At its vet business, underlying revenues improved 9.1%, while group revenues were ahead 5.1% on the same basis.