After shock departure, Pets at Home's performance reassures

The veterinary and grooming businesses - which fall into the services division - have had a particularly good year, with like-for-like revenues up 10 per cent. Gross margin in the division has been enhanced by 35 basis points thanks to the growth in the high-margin veterinary business. The group opened 50 new vets practices in the period, including 39 in-store, in line with the strategy to provide a 'one-stop shop' for pet owners. The percentage of stores with 'groom rooms' has also increased from 45 per cent to 56 per cent.

The group also opened 27 new stores in the period, taking the total number to 427, of which 419 are superstores. The target for the latter is 500. But store portfolio growth is expected to taper somewhat now due to a lack of prospective locations. Mr Kellet - who used to head up the retail division of the group - is confident in the new strategy of opening smaller high-street stores, trialled last year under the brand 'Whiskers 'n Paws'. These stores have higher margins as they have substantially lower rent than the superstores, and effective space usage means they can still be well stocked.

Hopefully those new high-street shops can help to revamp the group's merchandise division, which generates almost 90 per cent of overall revenue. Here sales have also been slowing, with like-for-like growth at 1.5 per cent, compared with 3.7 per cent last year. This was particularly evident in the accessories division, while food performed a little better, thanks to the launch of new brands Lily's Kitchen and Wellness.

Broker Stifel expects adjusted pre-tax profits of £97.8m in the year to March 2017 (£97.3m in FY2016), giving EPS of 15.3p.