Pets At Home shares soar after sales rise to £256.5m in 'positive' start to year

Shares in Pets At Home rose sharply on Tuesday after the company saw revenues pick up in its first quarter.

The FTSE-250 firm said sales were up 5% to £256.5 million in the 16 weeks to July 20, underpinned by solid growth in both its merchandise and veterinary services divisions.

Merchandise sales increased by 2.8%, while in its smaller services division, which includes its vet practices, revenue rocketed by 18.8% to £40.1 million.

On a like-for-like basis, total sales rose 2.7%, with merchandise increasing 1.5% and services chalking up 10.5% growth.

The pet shop chain, which operates from 439 stores across the UK, said its financial outlook for the year was "in line" with expectations.

It opened five new superstores, two vet practices and six grooming salons in the period, and said it was on track to open a total of 10 superstores, 40-50 vet practices and 40-50 grooming salons during the current financial year.

Investors welcomed the news, with the stock rising almost 8% to 185.7p in morning trading.

Boss Ian Kellett said it had been a "positive" start to 2017.

"Whilst it is still early in the year, the financial outlook is in line with our expectations," he added.

The company cut prices for some of its products earlier this year in an attempt to shore up top-line growth, a move which it said is proving successful.

Mr Kellett said: "We have continued our everyday lower price repositioning and reduced the reliance on short-term promotional discounts.

"We remain encouraged by the overall response to our pricing changes and by the number of both new customers and those we have welcomed back."

However, analysts at Liberum sounded a cautious note, warning that the continued price reductions could put pressure on margins.

"The key for us will be to asses any further top-line momentum in the context of gross margin performance, where we read today's update as implying that there has been no change to management's guidance of a decline in FY18E of minus 100 to minus 200bps, reflecting its ongoing price investment initiatives.

"We believe the interims in late November will provide a better opportunity to assess whether this improved momentum can be sustained."