Pets at Home’s struggling retail arm proved a major drag last year as the business relied on its much smaller yet thriving veterinary operation to drive growth.
Total revenue was up 2.7% to £1.96bn in the year to 27 March, driven primarily by record sales up 13% in its vet group.
By contrast, its retail arm – which makes up two-thirds of the business – saw sales slump 1.8% and pre-tax profits fall 16.6% to £72.9m.
The business said it was impacted by subdued growth in the whole pet sector, as well as deflation and normalising levels of new pet ownership.
“In addition, we saw some transitionary impacts from our digital platform launch,” it added. “However, the fundamentals of the business remain healthy with consumer satisfaction improving through the year.”
This year, Pets at Home expects the current market conditions and subdued consumer backdrop to remain. It therefore forecasts group underlying pre-tax profit to fall between £115m and £125m.
“The past two years have seen a profound transformation at Pets at Home,” said CEO Lyssa McGowan. “We have moved from a business with a strong presence in pet retail and vets, to a true petcare platform.
“We have completely replatformed our digital infrastructure, built new capabilities around our data, brand & marketing, and simplified our distribution network to a single distribution centre fulfilling stores, online and subscriptions,” she added.
In a boost for shareholders, Pets at Home said free cashflow was up 21.5% to £83.8m, reflecting a small rise in the group’s pre-tax profits and lower non-underlying costs.
As a result, it is launching another £25m share buyback, having already completed £125m in buybacks in the past three years.
Jonathan Pritchard, an analyst at Peel Hunt, said the results were a “solid enough update given that FY25 was a poor year, and recent form looks to have improved slightly”.
“The shares aren’t stand-out cheap, in our view, but they are definitely worth owning.”
The group’s share price is up 4% this morning since it announced the the results.
While Pets at Home’s vet business appears to be on the up, there is still a looming cloud of an investigation by the Competition & Markets Authority yet to report.
The review began over concerns that vets in big businesses were incentivised to act in a way that minimised choice for pet owners and reduce outcomes for animals.
AJ Bell investment director Russ Mould said the probe “will continue to cast a pall until it is fully resolved,” although if Pets at Home came out relatively unscathed, it “may be able to recover its pep”.
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