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Dog parties and Operation Kylie: How Pets at Home plans to defeat the short-sellers and Amazon

Have you got two pounds? Peter Pritchard, the Liverpudlian boss of Pets at Home, asks his PR minder.
The share price is nudging on two pounds now, he explains laughing, as we sit down next to the reptile isle at the retailers shiny new store in Stockport, near Manchester.
I know I shouldnt be obsessed about it but if it is, weve become a billion pound company. This would be a beautiful moment
Unsurprisingly this preoccupies him. We meet the day before Pets annual meeting with investors.
The stock has been ticking up recently as early signs of Pritchards plan to shake up the business begin to crystallise, thoughit is still 20pc off the 245pprice it floated at five years ago.
When I took over everyone said, the internet is going to kill you. We had so many critics. [But] while the past year has been the most horrifically painful, difficult, challenging, you name it, Ive loved every second of it, says the 49-year-old, who has two nearly three-year old cats, Leo and Oscar.
In October, six months into his tenure, the shares sank to an almost record-low asshort sellers piled in, betting they wouldprofit when the pricedroppedfurther. Around the same time Amazon began selling its own pet food in Europe, undercutting Pets on price, along with Germanys Zooplus, another online seller of pet paraphernalia.
Pritchard, a life-long retailer who had been with the business since 2011, acted quickly. He axed some of its vet practices to preserve cash, ploughed in ?30million to lower the prices and negotiated better terms with suppliers, who werent caught in the crossfire of his price-cutting drive, he insists.
Sales grew 7pc to ?961m last year, but pre-tax profits dropped 38pc to ?49.6m mostly because of thehefty charge from the restructuring its vet practices, which it runs as joint ventures with independent owners. It bought around 50 of its 470 practices back with a view to running them separatelyor closingthem.
The reason why it costso much money was to make sure we wrote off all their debt so they were no worse off than when they started out. If I hadnt done that I think I would have lost the faith of every other vet in the business. That was the hardest thing I had to do. The livelihoods of our partners who chose to invest in us was at stake.
Prichard, who worked for the likes of grocers Asda, Sainsburys, Iceland and discount chain Wilko, is now banking on a dog-walking app, in-store self-wash booths for ?10, puppy training sessions and dog breedworkshops to boost its coffers.
Pets started life in 1991, when Anthony Preston opened the first branch in Chester, in the northwest of England. It is now headquartered in Wilmslow, 30 miles to the east.
Its affable chief executive reckons Pets two new so-called stores of the future, in Stockport and Chesterfield, will be his not-so-secret weapon against rivals.
Everything Amazon cant do, I do. I can match them on speed, on delivery, on convenience. I can beat them on grooming, I can beat them on vets, I can beat them on pet care and, most importantly, I can beat them on fun and experience. As a modern retailer, youve got to stop bleating on and start reinventing and thats what weve tried to do.
While vet clinics and grooming areas have pretty much always been a staple of Pets stores, Pritchard wants services to account for 50pc of its total revenues in five years from 30pc today. It all sounds a bit gimmicky, but he insiststhat dog birthday parties in-store are all the rage and Brits are more prepared than ever to part with cash.
Typically, if a pet owner only buys food and other essentials from Pets, they tendto spend ?140 a year. Those who engage with the other parts of the business, such as dog agility classes, end up spending ?1,200 a year on average. It also has 700,000 customers who pay ?4 a month for repeat treatments for their pets, such as fleas.
Thats the magic formula. I think of us like a cake, when you put the ingredients together you get something bigger.
The plan to spruce up all 450 shops, called project Kylie (after the singer Kylie Minogue), doesnt lack ambition.
We chose Kylie because shes reinvented herself throughout the years, which is what were trying to do, and everybody loves a bit of Kylie, wed like people to love us.
Pets will open five new stores and refurbish 15, mirroring Stockport, this year. It will inject ?40 million to modernise up to 40 stores a year from 2020. Pets strategy is sensible, achievable and no, not fanciful Prichard says, with help from its 15,000-strong team.
Dog parties and Operation Kylie: How Pets at Home plans to defeat the short-sellers and Amazon

We chose Kylie because shes reinvented herself throughout the years, which is what were trying to do, and everybody loves a bit of Kylie, wed like people to love us.
Other retailers such as Boots and Debenhamshave trumpeted about their store of the future recently drawing some criticism that they aren't robust enough financially to roll out that vision, with the latter eventually falling into the hands of its lenders.
Pritchard is a bit aggrieved that in some retail parks we are the only people paying rent after a string of retailers have gone bust or they trade rent-free to stay afloat.
It is dreadfully unfair but that allows us to have really sensible conversations with landlords.
He thinks he has the right number of stores and immediately shuts down the suggestion that it may have expanded too aggressively under its former private equity owners.
KKR, the US fund, had owned Pets for fouryears before it listed the business in 2014. It gobbled the chainup from Bridgepoint for ?955m. The retailer paid out hundreds of millions of pounds in dividends to both PE houses, including a ?135m dividend to KKR in 2013.
In March 2016, chief executive Nick Wood quit from the FTSE 250 company, and Ian Kellet was appointed to run the business. Two years later Pritchard took over after he had a quick conversation with Tony [DeNunzio], the chairman.
CV | Peter Pritchard
The youngest of four siblings, Pritchard was born and raised in Liverpool. His father was a postman and his mother worked in a factory. He went to St. Wilfrids, a catholic secondary school nearby, which has been knocked down since. Aged 16, he got a job as a checkout operator for Marks & Spencer in Bootle, marking the beginning of his career in retail.
My parents gave me a strong work ethic so starting work young was great. It helped me grow up fast and it genuinely gave me a head start. It helped fund me through college, he says.
After his A-levels he got a place on Sainsburys trainee scheme and then went to Iceland, where I found commercial.He was at the frozen food seller for seven years before he went to Asda where he started life as a frozen chip buyer. He climbed the ranks and ended up running the grocers ?4bn fresh food business and then went to build superstores and do property acquisitions for three years. He then had a short stint at Wilko before he got a phone call from Matt Davies, then the boss of Pets, asking Pritchard to join as commercial director. He jumped at the opportunity.
A new career sometimes feels like youve come home somewhere. Pets felt like my home.
So what does he make of the Mike Coupe, his old boss, failed attempt to buy his old shop Asda for ?7.3bn?
It was brave and really smart. In 10 years time we may well look back and say, did it improve or reduce customer choice?' I would worry the decision the CMA came to, for all the reasons it did, will ultimately reduce customer choice anyway.
He thinks, however, that supermarket chains havent been terribly ambitious about repurposing some of the extra space in superstores as customers increasingly shun their weekly shop. He explains that although he has been taking away retail space to make room for grooming areas and event spaces, retail sales go up.
As a retailer our job is to do what weve always known we have to do: provide reasons why people want to come to our stores, he says.
The share price at the end of the interview? 198.6p.
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