| Pets At Home - Yes Or No?

7th Mar '14 by Lykewake

10 comments 5014 reads

I'm interested in peoples thoughts on whether the up coming IPO of Pets at Home is something for the private investor? I have been reading various articles that suggest the bulk of the shares will be offered to institutions which makes me wonder whether small investors like me would be shut out. I like the look of the company and it seems a good fit to bolster the retail part of my portfolio but I'm not sure how much of my feeling for it is gut reaction. All comments welcome.

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About the Author

Lykewake

Premium Member

10 comments

Ramridge

7th Mar '14

Hi Lykewake
I have put my name down with Hargreaves Lansdown for a small allocation. The general view as far as I can make out is that the sp will go up on admission. So I am joining the lemmings with the intention to take a profit and exit as fast as possible. The IPO market is more of a casino at the moment. So mine is a small punt. But please DYOR.

Lykewake

7th Mar '14

Thanks Ramridge,
So your view is to take a quick profit rather than a medium long term view? Wondering if anyone got views on the latter.

rbf

7th Mar '14

Investors Chronicle moderately positive...and on this occasion i concur....so will probably apply, especially if market stays strong

kenobi

7th Mar '14

Is this a profitable company ? what pe are they asking ? and what's the forcast growth ?

I notice idealing have this on their front page, this puts me off a little, would they be offering to the public if the institutions wanted it ?

K

rbf

7th Mar '14

interesting point kenobi, but this is a no win situation....we / retail complain (rightfully) when excluded, so i am not sure what the answer is. I have done pretty well on IPOs over the years so whilst there are cases where the retail offereing is a "last resort" I am not sure this is so generally.

kenobi

7th Mar '14

yes agreed, however with a retailer, what pe are you happy to pay ?

certainly less than say tesco, what moat does this company have ? I have difficulty getting excited about a pet shop retailer, if their margins are great, won't competitors come into the market ?

No problem with stagging it, if you think it will go up, but I've no idea what the attractions of this are, it's not one of these tech stocks that could fly, might be a quick small profit ? without looking at the figures, I'm not tempted ! will take a look if I get a chance,

emptyend

7th Mar '14

I'm not tempted. There are a couple of newish PetsAtHome stores near me - and close to established competitors. I could find nothing interesting in their retail offering and continue to give my business to their competitor.
Stores look nice, shelves looked stacked - but not necessarily with stuff people want to buy. I don't like the feel of the stores either.

marben100

7th Mar '14

The other question to ask, is how much debt they've been saddled with by their private equity backers. Need to look at EV, not just PE.

REO100

8th Mar '14

I'm definitely not tempted I had been in this sector for just over 20 years until approx. 6 months ago. The historical story with Pets At Home is of great success I believe Anthony Preston running a small family pet wholesale business 30 odd years ago saw a retail opportunity originally in the North West and established Pets At Home. It can be difficult when working fairly closely to have an objective view, but their model looks like it is at saturation point. When smaller, Pets At Home staff for instance were knowledgeable and objective with large product range available but naturally as the growth story took place staff whilst trained became more robotic pushing the latest promotion and that individuality and real enthusiasm is lost and naturally continuity of staff.
Like most product areas most consumers have little idea that many of the brands are controlled by a few multinationals, also Pets At Home have a number of brands that consumers are not always aware that it is theirs ,this does impact on variety and the more specialised products.
Supplier goodwill in the long term could be interesting, some suppliers had arrangements changed overnight via KKR. For instance from settlement within 14 days with 2% discount to 120 days and by the way they will still take the 2% as well. Also the joys of a rebate scheme 7% reimbursed by suppliers ( % may vary for suppliers) based on their turnover, the 7% justified by Pets At Home as marketing support, administration, damages allowance etc. Not forgetting if the supplier does a promotion ( not much choice normally in the matter) there is a fee and the joys of reinstatement by the supplier to Pets At Home as if the product had been sold at full RRP. In many circumstances the promotion period is loss making for the supplier.
There are always two sides to a story but I believe Pets At Home have had it their own way for the last few years, Im not so sure it will continue.
Reo

Lykewake

8th Mar '14

Thanks Reo, I think one of the interesting aspects of of the retail sector is that the private investor has greater visibility (and thus a more assertive view ) into the way business is perceived by its customer base. This, naturally, translates into a perception of the business's performance. As a pet owner myself I regularly visit the 3 Pets at Home stores in striking distance of me but a) I buy my dog food on-line from a supplier 200 miles away and b) I support my local veterinary practice. Hence why I posed this question. I see Pets at Home as a high profile business in the out of town strip mall sites that are today's high streets and I buy something every time I go into one. However the bulk of the money I spend on my pets is spent on-line and while Pets at Home do have an on-line business, it doesn't feature in the on-line stores I use. In summary, I'm not sure Pets at Home is as dominant in the market sector as its high street/strip mall presence suggests.

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Pets at Home - yes or no?

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About the Author

Lykewake

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