Pets at Home Group PLC (LSE:PETS) could be set to miss full-year profit guidance after it suffered operational issues at its distribution centre, adding to fears surrounding the stock.
During the second quarter, the FTSE 250 company suffered “operational hiccups related to the implementation of its new distribution centre.”
Analysts said this led to reduced product availability in stores in the six weeks to mid-September, with noticeable gaps on shelves apparent in sites across the country.
This hurdle meant sales in the second quarter were volatile and although revenue growth was dented, the group was able to fix and improve the situation, with products filling up shelves once again.
However, this issue, while not anticipated to have a material impact on underlying earnings, is expected to add pressure to the fact it must garner more than 55% of its profits in the second half, with costs being incurred to rectify the situation.
Shore Capital Group (LSE:SGR) analysts said: “In response to the operational challenges encountered in Q2, we have made adjustments to our financial estimates for FY24F. Specifically, we have trimmed our forecasted revenues for 2024 by £14 million to £ 1,476 million and revised our projected profit before tax (PBT) to £1,36 million, which remains roughly flat year-on-year.”
Vetting the bad from the good
When the CMA launched a probe into the vet sector back at the start of September, shares in the pet retailer, which owns veterinary groups Vets for Pets and Companion Care Vets, slumped by close to 10%, and has continued a downward trajectory since.
Considered a disruptor to the industry, already offering transparent and competitive prices, analysts at Shore Capital think it’s unlikely the London-listed group will face a negative outcome from the investigation, but they are aware of the “extra layer of uncertainty” it places on the stock.
Despite this, Pets at Home is feeling confident ahead of an update from the CMA - scheduled for the first quarter of 2024 – and is optimistic that future changes could improve its standing in the market.
Pets at Home, which has been downgraded to a ‘hold’ by the broker, fell more than 2% on Tuesday, having opened at around 302p.