Pets at Home Group PLC's (LSE:PETS) half-year results on Tuesday offer the chance for the retailer and pet services group to put its side of the story across after analysts warned that its profits are likely to be dogged by problems at its distribution centre in the past few months.
Investors had already been jittery about the shares after the competition regulator launched a probe into the veterinary sector back at the start of September.
Having hit an all-time high towards the start of the year, topping £80, the FTSE 250 company, which owns veterinary businesses Vets for Pets and Companion Care Vets, has scampered back and forth between £73 and £77 since.
With Pets considered a disruptor to the industry offering competitive prices, analysts at Shore Capital think it’s unlikely it will be seen as the bad dog in the investigation, though the Competition and Markets Authority (CMA) probe adds extra an layer of uncertainty for the stock.
More internal issues have been hounding the second quarter, ShoreCap said, with operational hiccups related to the implementation of its new distribution centre leading to reduced product availability in stores, with noticeable gaps on shelves apparent in sites across the country.
ShoreCap trimmed its forecast revenues for the full year by £14 million to £1,476 million and revised its projected profit before tax to £1.36 million, roughly flat year-on-year.
Sophie Lund-Yates, equity analyst at Hargreaves Lansdown, said the company is "one of the most resilient retailers around", due to Britain's obsession with pampering their furry companions, but she also expects the first half to be muzzled by higher costs, as margins are "already under some pressure as customers focus on the essentials like food, rather than more lucrative things for their pets".
"The market has come to expect impressive like-for-like sales growth and will react negatively to any deviation from that."