Pets at Home hikes dividend after strong year for luxury sales
Pets at Home boosted its dividend today after posting strong sales growth in its full-year results, thanks, in part, to the continuing craze for luxury "advanced nutrition" products.
The figures
The pets retailer posted like-for-like sales growth of 2.1 per cent in the 53 weeks to 31 March. Food revenue growth grew at a healthy 6.4 per cent, though the firm's advanced nutrition range grew by a more robust 12.3 per cent. Accessories revenue growth rose by 2.4 per cent.
Group revenue nudged up marginally from £729.1m in 2015 to £793.1m in 2016, while pre-exceptional profit before tax rose from £87m last year to £97.3m in 2016.
Pets at Home also opened 20 new superstores over the year, six Barkers stores, one Whiskers 'n Paws trial outfit, 50 veterinary practices and a whopping 60 grooming salons.
The company's total dividend was payable at 7.5 pence per share, up 39 per cent.
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Why it's interesting
Luxury branded pet items have been driving growth at the retailer for the last several quarters. The company said its VIP club has reached 4.5m members by the end of the financial year, and its card swipe rate at store tills represented 64 per cent of revenues in the fourth quarter.
However, the company is also keen to extend its veterinary offering (it acquired two specialist veterinary referral centres in 2016 and a further two after the financial year had finished). It has said it is aiming to open between 45 and 55 vet practices in 2017, in addition to 50-60 further grooming salons and up to 20 new Pets at Home superstores.
In mid-April, the company's incoming chief financial officer, Graeme Jenkins, was forced to abandon taking up his role after his former employer Wesfarmers admitted to accounting errors at its Target Australia subsidiary where Jenkins was previously finance chief.
Current chief executive, Ian Kellett, took over from former head Nick Wood on 4 April.
What Pets at Home said
Chief executive Ian Kellett said:
Despite some seasonal challenges to our health and hygiene sales, we have seen excellent performance in our strategic growth drivers of advanced nutrition, VIP, vet and grooming services. Together with refinancing benefits, this contributed to pre-exceptional earnings per share growth of 11.2 per cent.
We have enjoyed 25 very successful years as a business and enter our 26th year confident in the future. The per market has proved over time to be more resilient than general retail, so whilst consumer confidence may be more fragile, we believe our drive to become more specialist and most loved by customers will deliver further progress.
What others said
Steve Clayton, head of equity research at Hargreaves Lansdown, said: "The numbers were bang in line but the dividend increase was well ahead of expectations, with Pets moving to a 50 per cent pay-out ratio in a single jump, pushing the full-year dividend up 39 per cent.
"The real attraction of Pets at Home though is its ability to open new stores, both out of town and now, with its newer, high street formats, closer to its customers' homes too. Adding services to existing stores has the added benefit of increasing the frequency of customer visits and the revenues per store — contributing some impressive margins," Clayton added.
"The VIP loyalty card has been the group’s secret weapon, allowing it to better understand what individual customers are buying and allowing personalised marketing offers to be created. Almost two thirds of till sales are now covered by VIP cards, giving a vast wealth of data to exploit."