TIDMPETS
RNS Number : 6863U
Pets At Home Group Plc
31 July 2020
FOR IMMEDIATE RELEASE, 31 July 2020
Pets at Home Group Plc: Q1 FY21 Trading Statement
Progressing investment to create a stronger pet care business;
early indications that pet ownership is growing
Pets at Home Group Plc, the UK's leading pet care business, is
pleased to provide a trading update covering the 16 week period
from 27 March to 16 July 2020, compared to the 16 week period from
29 March to 18 July 2019.
Financial highlights
-- Total Group revenue and like-for-like(1) (LFL) revenue was
down (1.0)% and (0.7)% respectively, with a LFL revenue decline of
(13.5)% over the initial eight weeks offset by LFL revenue growth
of 12.0% over the subsequent eight weeks.
o Retail revenue and LFL revenue both increased 0.4%, with
performance across the quarter as a whole reflecting strong
merchandise sales, which mitigated the revenue impact of closing
our grooming salons and sale of pets during the first eight weeks,
as well as a reversal of the exceptional, brought forward demand
witnessed in the closing weeks of Q4 FY20.
Omnichannel(3) revenues grew 71.0%, with previous investment in
capacity supporting record order volumes and a step change in
participation of Retail revenue from 9.8% in the prior year to
16.6% in Q1 FY21.
o Vet Group revenue and LFL revenue was down (10.9)% and (9.3)%
respectively, reflecting the impact of regulatory restrictions on
permitted procedures during the early stages of the pandemic on
Joint Venture fee income and customer sales in our company managed
First Opinion practices and Specialist Referral centres.
While LFL customer sales across all First Opinion practices were
down (9.3)% for the quarter as a whole, LFL growth of 4.6% over the
last eight weeks of the quarter bears testament to the advantages
of our unique owner-managed model.
-- Our liquidity remained strong throughout the period, with
cash balances and undrawn banking facilities, including the
additional GBP100m RCF raised in May, totalling GBP267m at the end
of the quarter. This, together with our designation as an
"Essential" retailer and sales momentum through the quarter,
underpinned our decision, across our Retail operations and
Specialist Referral Centres, not to participate in the government's
Job Retention Scheme (JRS) or the Job Retention Bonus, the combined
impact of which is estimated to be in excess of GBP8m.
Sales distribution by period
The start of our new financial year coincided almost exactly
with the implementation of lockdown across the UK. The table below,
showing customer behaviour both before and during full and partial
lockdown, as well as the impact of phased re-instatement of
services and permitted procedures across our Retail and Veterinary
operations, most of which was completed in June, clearly
illustrates that Retail LFL sales growth for the 20-week period
commencing 28 February 2020 is ahead of the 48-week period last
year, prior to the impact of the pandemic. For illustrative
purposes, Vet Group Sales LFL in the table below includes the gross
customer sales made by Joint Venture vet practices, company managed
vet practices and Specialist Referral centres only (and not the
Joint Venture fee income derived by Pets at Home from those
customer sales made by Joint Venture vet practices).
Sales LFL FY20 FY21 Cumulative
20-weeks
from 28-Feb
48-wks 4 w/c 4 w/c 4 w/c 4 w/c 4 w/c Q1
to 28-Feb 28-Feb 27-Mar 24-Apr 22-May 19-Jun
-------- -------- -------- -------- -------
Retail 7.2% 36.2% (20.0)% (3.3)% 8.4% 15.9% 0.4% 7.5%
Of which:
Stores(2) 5.3% 38.1% (29.4)% (11.8)% 1.4% 9.9% (7.3)% 1.6%
Omnichannel(3) 26.6% 39.7% 64.8% 74.2% 72.5% 72.3% 71.0% 64.9%
Vet Group(4) 13.4% 5.8% (31.1)% (16.7)% (0.1)% 11.9% (8.4)% (5.6)%
----------- -------- -------- --------
Group 8.9% 27.1% (23.2)% (7.4)% 5.9% 14.7% (2.2)% 3.5%
----------- -------- -------- -------- -------- -------- ------- -------------
Strategic highlights
At our FY20 results in May, we set out our initial thinking on
planning and actions in response to the pandemic, with the core aim
of emerging a stronger pet care business.
It has, therefore, been encouraging to see tangible signs of
heightened demand for pet ownership, a good proxy for longer term
growth in the market, as people adopt new attitudes to work and
leisure pursuits. This has also been reflected in some of our
recent initiatives to attract and retain new customers to our
products and services:
o The number of active VIP members grew 20.3% in the quarter,
YoY to 5.7m, with the number of VIPs who purchase both products and
a service growing 8.5% for the quarter, YoY.
o The number of Puppy and Kitten Club members grew 12.0% in the
quarter, YoY underpinning a steady increase in new client
registrations across our First Opinion practices, further improving
their economics and mitigating any requirement for the Group to
extend additional short-term financial support relating to
COVID.
o Subscription customers(5) across the Group grew to over
906,000, up 18.1% for the quarter, YoY.
With this positive backdrop in mind, our priorities in creating
a stronger pet care business are clearly focused on being
well-positioned as a beneficiary of this growth through a
combination of sales-led initiatives, progressing longer-term
investment and optimising our portfolio of products and
services.
Sales-led initiatives
Our designation as an "Essential" retailer enabled all of our
stores and nearly all of our First Opinion practices to remain open
during the quarter, giving us valuable insight into consumer
behaviour and preferences.
We have proactively adapted our operations to be well-placed to
grow revenues while adhering to guidelines around social distancing
and safe purchase of goods and services, and have successfully
trialled a number of initiatives, including:
o A "Call and Deliver-to-Car" service in Retail as well as
contactless click and collect from stores, utilising dedicated
parking bays and QR code notifications.
o Increased use of telemedicine amongst First Opinion practices,
providing opportunities to triage existing clients and acquire new
ones, as well as home delivery of certain First Opinion healthplan
medication.
Our plans to launch an upgraded Click and Collect service are
also at an advanced stage and will include utilising a new Order
Management System to provide real-time intelligence on optimal
order management and routing across our nationwide store estate.
This will help not only to improve our fulfilment capacity and
customer proposition, but also to generate cost efficiencies
relative to our existing, centrally fulfilled model.
Progressing longer-term investment
We are confident that accelerated growth in our omni-channel
business will continue. As part of a clear ambition to transform
our omni-channel capabilities, we are pleased to have signed a
conditional lease agreement with Stoford Development Ltd, a
specialist developer of occupier led pre-let commercial property in
the UK, pursuant to the construction of a single site storage and
distribution facility that will support both our current position
as the UK's leading pet care business as well as our future growth
trajectory.
Under the terms of the agreement, Stoford will finance and
construct a purpose-built circa 670,000 sq.ft. (including office
and parking spaces) cross-docked facility in Stafford, offering
good connectivity to major road networks and international
airports, as well as our legacy facility in nearby Stoke-on-Trent.
An additional 100,000 sq.ft. of expansion land will be available,
if required.
Pets at Home will enter into a 20-year FRI lease with Stoford
from mid-2022, with a subsequent 12-month fit out programme
allowing access to be broadly aligned with lease expiration at our
Stoke facility. Our total planned gross capital investment relating
to site fit-out is estimated at GBP48m between FY21 to FY26, and it
is our intention to execute a funding arrangement that retains our
balance sheet flexibility.
Consolidating our legacy infrastructure into a single, modern,
well-located and future focused platform that serves both our
stores and online orders, on attractive commercials with low net
capital commitment, will allow us not only to better serve our
customers through maximum flexibility in stock holding and order
fulfilment capacity, but also to deliver operating cost and working
capital benefits to the Group, an appropriate return on investment
for our shareholders, and long-term employment opportunities for
both existing and prospective colleagues.
Optimising our portfolio of products and services
We have a unique suite of assets, allowing us to offer an
unrivalled ecosystem of products and services covering all key
aspects of pet ownership. Our aim is combine these capabilities in
a way that makes pet care easy, convenient, rewarding and
supportive, creating value for both our customers and our
shareholders.
Empowering our customers to be able to shop in a way that best
meets their needs requires a true omni-channel approach, using data
to integrate a well-invested store estate, a fast-growing online
business and an efficient, modern and responsive supply chain into
a single customer-centric platform which delivers a seamless pet
care experience.
The process of migrating in-house our customer data from our
Retail, Vets and loyalty programmes is largely complete. This,
together with the support of a number of experienced new recruits
into our IT infrastructure and e-commerce teams, is enabling us to
develop new insights through customer segmentation, giving us a
degree of predictability over shopper behaviour, spending patterns
and preferences, as well as the ability to generate a single view
of our customers across all areas of our business. This will be
used in future to drive targeted promotions, personalised solutions
across products and services and a greater number of annuity-based
subscriptions and plans.
Peter Pritchard, Group Chief Executive Officer, commented:
"The effects of COVID-19 continue to have an unprecedented
impact on all of our lives. Our first priority remains the health,
safety and wellbeing of all our colleagues and customers, and, on
behalf of our stakeholders, I would like to express sincere thanks
to all of our colleagues across the Group for their tireless work
and dedication in adapting our proposition and serving our
customers' needs during such challenging times.
To express our gratitude to frontline colleagues, since the
start of the pandemic we paid a one-off bonus of GBP1.9m, in
addition to our normal annual bonus, and created a GBP1.0m
Colleague Hardship Fund for colleagues, our vet Partners and their
teams should their families experience financial difficulties. We
also allocated GBP1.1m to specific charities, many of which have
seen their fundraising diminish during the pandemic, GBP100,000 to
the Retail Trust, in support of workers across the wider retail
sector, and have extended our 10% discount scheme to NHS workers
until September.
In spite of the rapid, wide-ranging and devastating effects of
the pandemic, we have remained open for our customers throughout
the period and we are emerging as a stronger business. The inherent
resilience in our pet care model and the underlying pet care
market, as well as encouraging signs of increased pet ownership,
all underpin our confidence in seizing the future and progressing
specific, strategic priorities. The significant investment in our
omni-channel business is a good example of this, representing an
important milestone, not just for our business and customers, but
also as part of our commitment to longer term regional job creation
and retention.
While much has changed, and continues to do so, we remain
confident in the long-term sustainability of our pet care business,
where the love of pets and the role that they play in our lives is
only increasing."
Outlook
We have responded quickly and adapted well to changes in
customer behaviour, and this has been reflected in momentum
returning across all areas of the business ahead of our previous
expectations.
It remains difficult, however, to make a clear assessment of the
near-term outlook and could be misleading, at this stage, to
extrapolate our recent exceptional momentum across the rest of the
year.
Increasing pet ownership helps drive the growth of our business
and the market overall, but the uncertainties over the duration and
ongoing impact of social distancing restrictions in the UK, risk of
a second lockdown, as well as macro headwinds are all factors that
mean we need to remain focused and agile over the coming months. We
also recognise that costs relating directly to the impact of the
pandemic will remain elevated, and that the current year's business
rates relief will not mitigate the estimated financial impact of
COVID-19.
Longer term, we remain as confident as ever. We have a large and
growing loyal customer base, growing annuity income streams,
scalable omni-channel and veterinary businesses, and offer a unique
combination of products and services, all of which provide
considerable opportunities for sustainable growth. In Retail, the
majority of our inventory is small-ticket, non-seasonal and
non-discretionary, and the combination of our wide range of
products and price points positions us well across all demand
cycles and against all manner of competition.
Conference call
A conference call for analysts and investors will be held at
9.00am today. To join the call, please dial +44 (0) 33 0606 1122
and enter the room number 436934, followed by the PIN 0966. A
recording will be available at http://investors.petsathome.com
Strategic Key Performance Indicators
Q1 FY21 Q1 FY20 YoY change
Number of customer transactions (m) 15.2 18.0 (15.5)%
----------------------------------------- -----------
Customer sales(6) from services(7) 31.8% 35.5% (373) bps
----------------------------------------- -----------
VIP customer sales(6, 8) (GBPm) 798.5 646.6 23.5%
----------------------------------------- -------- -------- -----------
Customer sales(6) per colleague (GBPk) 48.9 54.2 (9.8)%
----------------------------------------- -------- -------- -----------
Number of stores 453 452 1
-----------
Number of grooming salons 316 312 4
-----------
Number of Joint Venture First Opinion
vet practices 394 401 (7)
----------------------------------------- -------- -------- -----------
Number of company managed First Opinion
vet practices 47 43 4
----------------------------------------- -------- -------- -----------
1. Like-for-like growth comprises total revenue in a financial
period compared to revenue achieved in a prior period, for stores,
omnichannel operations, grooming salons, vet practices and referral
centres that have been trading for 52 weeks or more
2. Store sales includes grooming and live pet sales
3. Defined as orders placed online at petsathome.com and
in-store using our order-in-store service for both delivery to home
and collection in-store, plus subscriptions to monthly flea &
worm treatments via our 'Subscribe & Save' platform
4. Includes the gross customer sales made by Joint Venture vet
practices, company managed vet practices and Specialist Referral
centres only ( and not the Joint Venture fee income derived by Pets
at Home from those customer sales made by Joint Venture vet
practices)
5. Defined as customers signed up to a Vet Group health plan or
omnichannel subscription platforms Easy Repeat and Subscribe &
Save
6. Defined as statutory Group revenue, but excluding Joint
Venture fee income recognised within Vet Group revenue and
including the gross customer sales made by these Joint Venture
practices instead
7. Defined as gross customer sales made by Joint Venture vet
practices, revenue from our Specialist Referral centres and company
managed vet practices, grooming services, omnichannel subscription
platforms, pet sales and pet insurance commissions
8. VIP customer sales are shown on a rolling 12 month basis rather than a year-to-date basis
Investor Relations Enquiries
Pets at Home Group Plc:
Roger Tejwani, Director of Investor Relations & External
Communications
+44 (0)1279 927022
Jonny Armstrong, Head of Investor Relations
+44 (0)797 5593237
Media Enquiries
Pets at Home Group Plc:
Gillian Hammond, Head of Media & Corporate Affairs
+44 (0)7442 500138
Maitland/AMO:
Clinton Manning
+44 (0)7711 972662
Frederica Bendit
+44 (0)7557 833442
About Pets at Home
Pets at Home Group Plc is the UK's leading pet care business;
our commitment is to make sure pets and their owners get the very
best advice, products and care. Pet products are available online
or from our 453 stores, many of which also have vet practices and
grooming salons. Pets at Home also operates a UK leading small
animal veterinary business, with 441 First Opinion practices
located both in our stores and in standalone locations, as well as
four Specialist Referral centres. For more information visit:
http://investors.petsathome.com/
Disclaimer
This trading statement does not constitute an invitation to
underwrite, subscribe for, or otherwise acquire or dispose of any
Pets at Home Group Plc shares or other securities nor should it
form the basis of or be relied on in connection with any contract
or commitment whatsoever. It does not constitute a recommendation
regarding any securities. Past performance, including the price at
which the Company's securities have been bought or sold in the
past, is no guide to future performance and persons needing advice
should consult an independent financial adviser. Certain statements
in this statement of preliminary results constitute forward-looking
statements. Any statement in this document that is not a statement
of historical fact including, without limitation, those regarding
the Company's future plans and expectations, operations, financial
performance, financial condition and business is a forward-looking
statement. Such forward-looking statements are subject to risks and
uncertainties that may cause actual results to differ materially.
These risks and uncertainties include, among other factors,
changing economic, financial, business or other market conditions.
These and other factors could adversely affect the outcome and
financial effects of the plans and events described in this
statement. As a result you are cautioned not to place reliance on
such forward-looking statements. Nothing in this statement should
be construed as a profit forecast.
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END
TSTDGGDRUBXDGGG
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