Why Pets at Home Stocks Rose After Pet Supplies Crunch in UK

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Summary

  • The rise in pet ownership during the lockdown has led to a wet food pouch crunch at supermarkets like Sainsbury’s and Morrison.
  • The ongoing shortage drove pet supplies retailer Pets at Home’s shares to surge.

UK-based supermarket giants Sainsbury’s (LON: SBRY), Morrison (LON: MRW), and others reported a shortage of pet food supplies due to a rise in pet ownership during the lockdown, which led to a rise in stock prices of British pet supplies retailer Pets at Home (LON: PETS).

The FTSE 250-listed pet supplies company Pets at Home’s (LON: PETS) shares were trading at GBX 396.60, up by 0.81 per cent as of 10 March at 12:41 PM GMT+1, while the FTSE 250 stood at 21,326.22, down by 0.26 per cent in the same period.

Sainsbury’s had notified its customers on 9 March of an ongoing shortage of wet food pouches this year as the pandemic-induced boom in pet ownership led the demand to shoot.

UK supermarket giant J Sainsbury’s (LON: SBRY) stock prices were trading at GBX 234.38, up by 1.55 per cent, while Morrison’s (LON: MRW) shares stood at GBX 175.95, up by 0.49 per cent for the same period.

Upgraded profit outlook 

Pets at Home’s FY 2020 profits were upgraded to £85 million in its latest guidance update. Up by almost 10 per cent from the earlier announced expectations of £77 million in January, due to strong growth across its business segments. Last month, CEO Peter Pritchard said the company wanted to add another 20 new sites in London to address the increased demand.

Analysts have said that the shortage announcement by Sainbsury’s could drive customers to the pet supplies chain. Besides, the chain’s subscription model could attract new customers on a longer-term basis to not face similar shortage issues.           

Want to know more? Do read: Pets At Home Group Plc reports a modest rise in revenue for the 16-week period to 16 July 2020 

Red tape

Despite the boom in the pet food industry, ongoing red tape at the UK-EU border post the UK’s official exit on 1 January has affected revenues for exporters.

Only 33 per cent of exporters could successfully trade with the EU, as found last month in mid-February, according to a Pet Food Manufacturers’ Association (PFMA) survey. PFMA CEO Michael Bellingham said the bottlenecks caused up to £285 million of annual lost revenues.

Demand for pet ownership rose during the lockdown to help overcome the lack of human contact, causing shortages in the UK and other geographies. US-based non-profit firm The Animal Medical Center said several factors such as rise in pet ownership, pandemic, and extreme weather events had caused pet food shortages.

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