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On Thursday, Barclays (LON:BARC) initiated coverage on Pets at Home Group Plc (PETS:LN) (OTC: PAHGF), starting with an Equal Weight rating and setting a price target of £2.60. The new rating arrives amid a period characterized by a challenging market environment, with overall demand remaining broadly flat.
Pets at Home, recognized for its robust market presence in both retail and veterinary services, benefits from a high number of co-located sites, which Barclays views as a competitive edge. Despite the current market conditions, Barclays sees potential in the company’s veterinary services, projecting a 12% growth in profit before tax (PBT) for the Vet Group by FY26. This forecast suggests a significant outperformance compared to the broader market.
However, the retail segment of Pets at Home is expected to face a modest decline in PBT of 3%, influenced by the weaker end market and rising costs. This projection is more conservative than the company’s medium-term growth algorithm, which anticipates a 7% revenue growth leading to approximately 10% PBT growth, based on 4% industry top line growth and 3% outperformance.
The company has not provided guidance for FY26, but it acknowledged in the first half of FY25 that the industry’s growth was substantially below the long-term average. Barclays’ forecasts fall short of Pets at Home’s growth expectations, primarily due to the slower industry growth which is a significant factor in their analysis.
Investors and stakeholders in Pets at Home may consider Barclays’ initiation as a balanced perspective on the company’s prospects, recognizing its strong positions while also accounting for the current economic pressures. The price target of £2.60 reflects Barclays’ assessment of these various factors influencing Pets at Home’s future performance.
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