Why is the Pets at Home share price up 4% today?

With yet another raise in its profit guidance, the Pets at Home share price once again sees the benefit of lockdown.

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Cute dog in funny colourful jester cap.

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Unlike most companies, Pets at Home (LSE: PETS) has generally been benefiting from the lockdown. Having already upgraded its profit guidance once this year, today the company said trading during this latest lockdown has been even better than expected. The Pets at Home share price has been bolstered on the back of the news.

A dog is for life…

Today’s news makes the fourth revision higher for the firm since September. In January it raised its full-year profit expectations to £77m. Today it raised them again to £88m.

Though I am reminded of the old adage that “a dog is for life, not just for Christmas”, pet ownership in the UK has increased massively since Covid-19 first struck.

This makes sense, of course. Aside to the obvious benefits to mental health, those who previously worked in offices may not have had the time to take care of a pet. Working from home they now do. 

Naturally in the long run, this would seemingly benefit Pets at Home and its share price. Simply put the more people who have pets, the more people will need to buy pet supplies. It is no surprise that the Pets at Home share price is now double what it was in March last year.

Pets at Home share price long term

Of course, we hope, that eventually lockdown will end and the world will return back to normal. As I said, the Pets at Home client base will have already increased by this point.

The main risk I see with the Pets at Home share price is that it may be too high to be a good investment right now. Obviously we would always prefer to buy on a dip, and Pets at Home is at its peak right now.

That said, I do think the company has a lot of fundamental strengths. Its combination of shop, pet, and grooming service, for example, bring about a lot of cross selling. You go in the shop to get your dog a check up, and walk out with two new toys and a grooming appointment.

This kind of in-shop strength was reflected in its numbers earlier this year, which showed both online and in-store retail sales increasing. In this time of the trend towards digital shopping, such numbers in bricks and mortar stores are good to see.

Unlike many large companies, Pets at Home has good customer loyalty. It has a VIP (Very Import Pet) loyalty programme with vouchers and deals. Your pet even gets a birthday card each year. These aspects seem silly perhaps, but we Brits love our pets. For a company to convey this same love of animals will keep customers loyal.

Again from an investment perspective, there are some potential downsides. Personally I am quite bullish on Pets at Home, but its share price does not seem cheap at the moment.

Naturally the benefits it is seeing from lockdown will fade when that (hopefully) finally comes to an end. Though I suspect the new customers gained will remain, the ever-increasing profit guidance probably will not.

For now though, this latest update has been good for the Pets at Home share price. Lets see what the future holds.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be considered so you should consider taking independent financial advice.

Karl has no position in any of the shares mentioned  The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

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