There is a table in Pets at Home’s (PETS) annual report that sets out just how many board members have pets at home. The majority do, including chief executive Lyssa McGowan. The mini survey reflects well on a company that relies on an animal devotion. Indeed, “gifting and wellness” is now an important driver of sales, according to management, with customers buying “special birthday treats” for their furry companions. It is hard not to feel sceptical, but beneath the fluff there is a strong investment case for the Cheshire-based chain, which is defying the retail gloom and tapping into lucrative new markets.
- Good long-term prospects
- Highly cash generative
- Defensive veterinary division
- Cross-selling opportunities
- Consumer squeeze
- Competition from online rivals
It is reasonable to ask why we are looking at Pets at Home now. Consumer spending is clearly under pressure and the pandemic pet boom is old news. Meanwhile, a forward price-to-earnings ratio of 17.5 suggests the group’s shares are more expensive than retail peers like Next (NXT), Marks and Spencer (MKS) and WH Smith (SMWH).