Pets at Home shares plunge as retail sales remain subdued 

Pets at Home Group shares nosedived on Wednesday after the retailer warned of an ‘unusually subdued’ pet retail market.

Britain’s largest pet supplies company said the pet retail industry’s slowing growth rates will likely ‘persist through the remainder of this year’ due to cautious consumer behaviour.

As a result, the Cheshire-based business, which runs around 457 pet care centres and 444 veterinary practices, anticipates its underlying pre-tax profits increasing ‘modestly’ this fiscal year.

Pets at Home shares slumped by 14.2 per cent to 237.8p by early afternoon, making them the FTSE 250 Index’s biggest faller. 

Total revenue increased by just 1.9 per cent to £789.1million in the 28 weeks ending 10 October, as retail sales flatlined at £696.3million.

However, its vet arm saw sales soar by 18.6 per cent to £92.8million thanks to a healthy rise in subscriptions, visits, and average transaction values.

The number of active Pets Club members tipped up by 3 per cent to 8.1 million, while new Vets Group pet registrations averaged 18,000 weekly sign-ups.

Combined with lower operating costs, this helped boost Pets at Home’s underlying pre-tax profits by 14.1 per cent to £54.5million.

Lyssa McGowan, chief executive of Pets at Home, said: ‘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.’

Yet Pets at Home warned that Chancellor Rachel Reeves’s recent Budget announcements on the National Living Wage and National Insurance would add £18million to its costs from the next financial year.

From April 2025, minimum hourly pay for workers aged over 21 will go up by 6.7 per cent to £12.21. The minimum wage for 18 to 20-year-olds is also increasing by 16.3 per cent to £10 per hour.

Concurrently, employers’ NI contributions will rise by 1.2 percentage points to 15 per cent, while the threshold at which NI applies to employee earnings is declining from £9,100 to £5,000.

‘We will continue to proactively mitigate these impacts where possible, maintaining a tight grip on costs as we have done for many years,’ Pets at Home told investors.

The company’s trading update comes as the Competition and Markets Authority conducts a wide-ranging investigation into the veterinary services industry.

It began the probe following concerns that consumers could be overpaying for medicines or prescriptions and lacked sufficient information to help them choose the best vet practice or the right treatment for their needs.

In addition, the CMA said there could be too much market concentration, partly owing to sector consolidation over the past decade.

Six businesses – CVS, IVC, Linnaeus, Medivet, Pets at Home and VetPartners – have bought about 1,500 of Britain’s 5,000 vet practices, according to the CMA.

Dan Coatsworth, investment analyst at AJ Bell, said: ‘Pets at Home has expressed confidence its growth strategy in the veterinary space won’t be affected, but there is a risk that, like a postie who’s turned his back on an aggressive pooch, the company faces an unexpected bite from the competition authorities.’

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