11 December 2020

Pets at Home

Terry Smith, founder and CEO of Fundsmith wrote in 2010 about the rationale for investing in Del Monte, which most people associated as a canned fruit producer.

by James Ayling

Research Analyst

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Price
£3.94
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52 Week High-Low
£4.75—£1.75
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Net Yield
1.87%
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Hist / Pros Per
29.2—31.05
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Equity Market Cap
£2,003

In fact, the majority of its profitability came from pet food. When I read Pets at Home’s recent trading update – a remark from Terry’s investment rationale resonated: “research shows that consumers will cut down their expenditure on feeding their children before they will cut down on feeding their pets.” 

Throughout the pandemic, anecdotal evidence of consumers rushing out to purchase new pets saw veterinary practices coin the phrase ‘the pandemic puppy boom’. But let’s remember a dog is for life, not just for lockdown implying higher income expenditure on pets over the next decade. Resilience in pet food demand during the COVID-19 downturn, alongside a growing pet population drove strong retail sales growth for Pets at Home recently. Moreover, their grooming and veterinary services push makes physical stores more of a one-stop-shop destination driving more frequent visitation. Despite a pet population tailwind for the business, a risk ahead could come from Sterling weakness, given a reliance on imports. 

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