Pets at Home cuts full-year profit outlook

Pets at Home cut its full-year profit outlook on Wednesday as it highlighted a "subdued" market.

In results for the 28 weeks to 10 October, the company said underlying pre-tax profit was up 14.1% on the same period a year earlier to £54.5m, underpinned by strong growth in its Vet Group, with Retail impacted by slower sales growth.

Total group revenue rose 1.9% to £789.1m, with group like-for-like revenue up1.6%.

Revenue from Vet Group grew 18.6%, with LFL growth of 18.2%, and with practices delivering double-digit revenue growth. Pets said this was supported by growth in subscriptions, visits and average transaction values.

Retail revenue was up just 0.1%, however, with LFL sales flat. Pets said the business was "resilient" in a declining retail market, and with the previously flagged impact of its new digital platform transition.

The group declared an interim dividend of 4.7p per share, up 4.4% on the previous year.

Pets said retail market growth has been subdued for longer than it expected as consumers have remained cautious in recent months. It’s now planning for current rates of market growth to persist for the rest of the year, lower than initially planned.

"As such, we now expected underlying profit before tax for FY25 to grow modestly from last year," it said.

It added that the lower profit outlook is mitigated at free cash flow level as it continues "to look for ways to make our investment plans more efficient".

Pets also said on Wednesday that changes to National Insurance contributions and minimum wage announced in last month’s Budget are expected to increase costs by £18m in FY26.

Chief executive Lyssa McGowan said: "The first half of FY25 was characterised by a subdued market, against which we outperformed. In Vets, our differentiated joint venture model continues to drive material outperformance over peers. In Retail, our customer satisfaction is excellent, our price position is strong, and we have tight control of our cost base.

"However, we are operating in an unusually subdued pet retail market which we now expect to continue through H2. We are confident this will be temporary, and growth will return to historical norms with the longer-term attractive outlook for the UK pet care market unchanged.

"The bulk of our investments and peak operational risk are behind us and our market leadership and well invested platform underpin our confidence in continued outperformance."

At 0950 GMT, the shares were down 10% at 249p.

Derren Nathan, head of equity research at Hargreaves Lansdown, said: "Pets at Home has put in a decent first half against an ‘unusually subdued’ pet market. The cumulative effect of cost-of-living increases, plus a sense check on commitments in terms of both time and money, could be making consumers think twice before adding more furry or scaled dependents to their household. However, the group’s integrated model is standing it in good stead. It’s winning market share, reaping the benefits of investment in its digital platform, and seeing a strong uplift in performance of it Vets business 18.6% as it serves more of the relatively stable pet population. That’s more than offset a flat outcome in Retail.

"Strong veterinary margins are also countering keen pricing in retail. For now, it’s the Vets business that’s propping up the group. With that in mind the outcome of the Competition & Markets Authority’s investigation into the industry, expected next year, will be watched particularly closely. The group, however, doesn’t see this as a threat to the growth strategy for this division.

"Cost control has impressed and that’s just as well. There’s an £18mn hit this year from increases in the National Minimum Wage and removal of business rates relief, and a similar amount to swallow next year following the October budget. The valuation has been under pressure of late and that’s unlikely to reverse after today’s weakened guidance. But Pets at Home is navigating the tough market admirably and the long-term outlook for the industry is still positive. It looks well placed to benefit when demand normalises but just when that happens is difficult to call."