Shore Capital cuts Pets at Home to 'hold'

Pets at Home's share price is now up with events after a solid trading update, Shore Capital said as the broker cut its rating on the company to 'hold'.

The pet supplies retailer's performance swung wildly in the 16 weeks to 16 July, dropping 13.5% at established stores in the first eight weeks and rising 12% in the following eight weeks as lockdown measures were relaxed. Online sales rose 71% during the period.

Shore analyst Greg Lawless said the shares' positive reaction to the trading statement had left the company fairly valued with short-term pressures such as rising costs and a potential second UK lockdown also priced in.

Cutting his rating on the FTSE 250 group to 'hold' from 'buy', Lawless said Pets at Home was financially strong and would be a long-term success but that the shares had outperformed the wider market and there was no apparent trigger for further increases.

"Given the uncertain outlook we do not think there will be material upgrades to forecasts, nor do we believe that there is a short-term catalyst and therefore believe that the shares now look up with events," Lawless wrote in a note to clients. "Whilst the short-term outlook remains uncertain, we highlight that the longer term remains more favourable with increased demand for pet ownership in the UK."