Vets boosts Pets, but cost headwinds to hit retail arm
Leading retailer Pets At Home expects to make £133m in pre-tax profits for the year to 27 March 2025, in line with previous market guidance, but has warned of a likely drop next year.
The Cheshire-headquartered stock market listed group is understood to be in the crosshairs of private equity investors, but no mention of any pending offer was made in this morning’s trading update.
Instead the company said it has successfully completed the transition of online sales their Stafford distribution centre, which means will serve a new digital platform and “setting our retail business up to return to sales growth and market outperformance in FY26.”
However, with a note of caution, the statement said cost increases including the Living Wage and National Insurance payments will have a £18m impact and that new packaging regulations (£2m), the rebuild of variable pay (c£10m) and £3m investment in marketing costs will all contribute to a hit on profits on the retail side.
Taking all this into account, this would lead to underlying a fall in profits before tax year on year, within a range of £115m-£125m.
Lyssa McGowan, Pets at Home CEO, said: “We are making good progress in delivering our strategy of building the world’s best pet care platform, although the market remains challenging with subdued consumer confidence and the business facing significant external cost headwinds in 2025.
“Our Vets business is delivering very strong growth and continuing to outperform the market, with a robust pipeline of new openings in place for the coming year leveraging our unique practice owner model. In Retail, we’re confident that with our major infrastructure investments behind us, we are well placed for future growth as the short-term pressures ease and the consumer environment improves.”
10:42 UPDATE: Shares in Pets at Home plunged from a closing price of 235p on Friday to 201p, recovering slightly to 211p.
Russ Mould, investment director at AJ Bell investors were “sick as the proverbial parrot” with the company’s latest update, which included a damaging downgrade to profit guidance for the current financial year.
“While Britons are famously devoted to their furry friends, consumers have less disposable cash to spend on toys and treats, and are focusing more on the essentials which is making life difficult for a specialist like Pets at Home. There is also competition from larger, non-specialist rivals like the supermarkets who have more capacity to compete on price,” he said.
“Pets at Home still hopes to take market share thanks to investment in its digital platform and continued progress in getting customers to sign up to its loyalty scheme.
“It needs to generate some momentum with sales to mitigate the impact of rising costs associated with changes in last year’s Budget.
“The struggles on the retail side mean the company is increasingly leaning on its vet operation, which is performing strongly but is operating under somewhat of a cloud given an ongoing CMA probe into the sector.”
