Jefferies starts Pets at Home at 'buy'

"Pets at Home, the dominant player in the UK pet care market, has been leveraging its scale advantage to drive meaningful market share gains, from 18% in FY17 to 24% in FY22," the bank said.

Jefferies said that having implemented an impressive recovery in both its retail (2017/8) and vet (2018/9) operations, Pets entered the pandemic on the front foot and has capitalised on the opportunity since then: accelerating customer acquisition, growing share of wallet, and using its data even better.

"Yes, changes in pet-owning behaviour have expanded the market, but Pets has made considerable share gains, building from 18% to 24% in five years and delivering a 20% return on invested capital.

"Looking ahead, we see the pet care market as fundamentally attractive, largely immune to the consumer cycle and, supported by humanisation and premiumisation, set to grow at 4-5% in the medium term."

Jefferies said it sees Pets' retail business as having significant enduring advantages, including a nationwide omni-capable 457-store estate, 7m data-rich VIP customers, a gulf in brand awareness versus competitors, a pet care ecosystem that meets all pet owners' needs, and the scale to invest in growth.

"Supported by tangible growth drivers - data usage and cross-selling, a new Store Transformation programme, and proven customer acquisition through Puppy/Kitten clubs - we expect continued share gains, premium revenue growth (circa +6%), and medium-term retail profit growth of more than 10%."

At 1040 BST, the shares were up 2.6% at 349.83p.