A surge in demand for its veterinary service kept Pets at Home’s (LON:PETS) profits moving ahead, but growing competition and price cuts prompted a hefty downgrade from one broker.
Turnover at the vet business jumped by 25% to £47mln over the year with a like-for-like increase of 1.5%.
Pets now has 438 vet practices in-store and externally, an increase of 50 over the previous year.
Elsewhere, Pets had to cut prices to compete with an impact on margins, which dropped by 0.35%.
Profit rose 6% to £95.4mln with sales 7.2% better at £834mln.
Broker Liberum was not impressed and stuck with its sell resting.
“The outlook remains challenging and we expect material downgrades to consensus.”
“Heavy promoting in Merchandise comes with a significant negative gross margin impact with costs rising.”
The broker expects to see consensus profits estimates for the current year come down by 10% to about £85mln, though LIberum is even more bearish with a forecast of £78mln.
“We don't see anything in today's statement to change our [sell] view on PETS, where we see significant structural pressures persisting.”
Shares rose 2.5% to 164.6p.