Pets at Home reported encouraging full-year results this week, with the specialist retailer posting a 2.1% increase in like-for-like sales for the 53 weeks to 31 March 2016.
Sales of advanced nutrition ranges grew at a faster pace than the general pet food and accessories categories, with group revenue creeping up from £778 million in 2015 to £793 million in 2016. Its vets and grooming services are also a key revenue driver, with this division of the business up 10% LFL and 29.2% in total thanks to recent acquisitions.
Off the back of this performance, statutory profit before tax rose from £87 million to £97.3 million over the 12-month period.
The company highlighted a number of areas of success, much of it related to its multichannel strategy which it describes as its "seamless shopping investment". Key challenges for the businesses in the year ahead revolve around adding to its store portfolio, which at year-end stood at 427, opening up veterinary services in more of its stores and balancing out the cost impact of introducing the National Living Wage (NLW) via its increasingly sought after services and advanced nutrition products.
Essential Retail has picked out some key stats that help paint a picture of the progress being made by Pets at Home, as it looks to avoid operational silos between its veterinary businesses, stores and online proposition, and maintain its joined-up approach to swrving UK pet owners.
Pets at Home launched its VIP [Very Important Pets] club loyalty programme at the back-end of 2012, and has continually spoken of the prominent role the scheme has played in the company's growth.
In the last year the number of VIP members who actively used their card totalled 3.3 million. There are over 4.5 million members of the programme, accounting for more than 13.5 million pets overall.
The retailer says that active member participation rises for the customers who are multi-brand users, for example those who interact with Pets at Home stores, the company website and the grooming or vet services. With that in mind, the grooming and vet facilities offered by the group will continue to be pushed to members through an active marketing campaign, as the company has identified it can boost loyalty by providing multiple services to its customers.
The recent investment in SAP's Promotion Management for Retail tool will aid this process, allowing Pets at Home to control its group marketing from one single platform.
In addition, the VIP mobile app is soon to launch among Pets at Home staff, before it is introduced to customers. The technology will allow shoppers to pay and collect loyalty points via their smartphones.
One sign of a retailer that is comfortable with its multichannel approach is the number of its click & collect users. The take-up of this particular fulfilment method does not define the overall success of a retailer, but it does show evidence of joined-up channels.
Pets at Home said that circa 50% of online revenues were from online orders collected in a store, compared to just over 40% one year before. Getting web shoppers into the store environment clearly gives the business ample opportunity to upsell or push its other services to customers when they arrive to collect their pre-purchased items.
The Pets at Home board's target for UK superstore numbers is 500, and at year-end the figure stood at 419. Much of the coming year will be spent looking at how the group's vet practices can be added to new and existing stores.
At present circa 60% of the Pets at Home store estate has a vet practice, but the goal is for 90% of its shops to have one. It is all part of the company target to be a one-stop shop for pets, pet supplies and pet services, whether customers reach them in-store or online.
The above figure of £7.20 is top of mind in many retail boardrooms. Introduced last month, the NLW entitles anyone over the age of 25 to be paid at least £7.20 an hour, and the retail industry as a whole has not been quiet in expressing the impact it will have on operational costs.
For Pets at Home, the implementation of NLW is expected – alongside the company's "seamless shopping" investments – to cause some EBITDA margin erosion. The business said, however, that this will be balanced by margin expansion in the medium to long term from the maturity of its vet and grooming businesses.
Andrew Hall, analyst at Verdict Retail, commented: "In spite of it holding a thoroughly strong grip atop of the pet care market, Pets At Home has been anything but complacent."
He said the recent launch of a Brandmatch scheme is an example of the retailer's proactive approach. It gives consumers money back if their shop would have been cheaper at Tesco or rival Jollyes, and the facility is expected to come more into play as competition grows at the value end of the market with the impact of the grocers and discounters such as Pet Hut.
"Elsewhere, its services proposition has helped to make Pets at Home stores a hub for pet owners, where they can receive expertise and services, as well as purchasing the basics," Hall added.
"The success of its multiple store formats, meanwhile – with the retailer opening six further Barkers stores and a Whiskers 'n Paws trial outlet – indicates its attempt to broaden its appeal and tap into the growing spend at the premium end of the market."