Has An Increase In Pet Ownership Impacted PAH?
While many companies suffered a downturn during the Covid-19 pandemic, pet-related businesses saw a boom in trade. The UK pet supplies retailer, Pets at Home, saw its shares’ value soar to dizzying heights during the three successive lockdowns.
As people flocked to buy pets as companions while trapped at home in 2019 and 2020, shares in PAH offered unprecedented 400% returns. After share prices reached an all-time high of 518p in August 2021, the bubble began to burst later in the year.
In 2022, the retailer’s share price has been stuttering. The current price of 265p is only around 50% of its all-time high during the pandemic.
However, some analysts believe the relatively cheap shares could still be a useful addition to any portfolio. They take the view the shares were overvalued when at their peak, due to the sudden boom in pet ownership, claiming the lower prices now could be a good bet in the longer term.
How has pet ownership impacted share prices?
The number of households in the UK who owned a pet had remained at a steady 45% to 47% for years before Covid struck. Then, with the population spending much more time at home, pet ownership reached a record high, rising to an unprecedented 62% in 2021.
The percentage of households with pets has remained at this peak during 2022. Spending on pets’ products and services has rocketed from £4 billion a year in 2005 to £8 billion a year since 2020.
Almost £4 billion of this sum is made up of veterinary care and other pet health and well-being services. These are a key part of PAH’s business, with the retail element – including online and in-store purchases – making up the remainder.
Is Pets at Home’s revenue still growing?
When PAH released its interim results on 23rd November, this revealed revenue had grown 7.3% year on year to £723 million. Despite the pre-tax profit having dipped by 9.3% to £59 million – probably one reason for the cheaper share prices – some investors feel it remains a good bet.
Its subscription services are performing well, with the number of total subscription plans up 11% to 1.6 million. This generates more than £135 million in recurring annual customer revenue.
In addition, there has been an increase in dividend yield, which has grown by 4.7% year on year to 4.5 pence. This is an annual return of 4.3% for shareholders. This amount is covered easily by the business’s earnings and is expected to grow further.
Consequently, Pets at Home has been mentioned in several online investment blogs as being at least worth a look.