Pets At Home: Hold Your Horses

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A commentary on Pets at Home Group PLC (LON:PETS) from Freetrade analyst Gemma Boothroyd.

Lyssa McGowan has big shoes to fill. With yet another record year in the books for Pets at Home, the incoming CEO has her work cut out for her.

2021 wasn’t just smooth sailing, it was a major success on practically all counts. Revenue, subscriptions, and VIP memberships skyrocketed, with pet owners proving how resilient the industry can be in times of turmoil.

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But things might get a bit trickier for McGowan as we enter the dog days of summer.

Red hot inflation and the growing cost of living mean the UK could continue to feel the heat. It’s not to say we’re about to stop feeding Fido, but we might stop buying matching collars and leashes in a range of styles and colours.

Pets At Home Isn't A One Hit Wonder

Pets at Home has proven it’s not a one hit wonder. The lockdown winner has maintained sustainable revenue growth as we emerge from the pandemic too. Though its ability to navigate the rest of the year really depends on how much it can raise prices, especially for its grooming and veterinary services.

It’s much harder to shop around for those services than it is for products, like an established kibble food brand. Pet owners also tend to simply pay the price on offer when it comes to keeping their pets healthy.

Pets at Home’s already proven its services segments are critical for its revenue growth. They’re also how the retailer can prove the value behind its brick and mortar locations, which provide the benefit of up-sell opportunities as well.

Services will also protect the firm from international behemoths like Amazon from gobbling up more of the UK retailer’s market share. Over the past 5 years, 60% of Pets at Home’s growth has been from market share gains.

It’s a dog eat dog industry, but Pets at Home has so far proved some solid footing in a very competitive landscape.