Shares of Pets at Home are plummeting as retail sales remain subdued

Pets at Home Group shares fell on Wednesday after the retailer warned of an “unusually subdued” pet retail market.

Britain’s largest pet supplies company said slowing growth in pet retail is likely to “continue for the rest of this year” due to cautious consumer behaviour.

As a result, the Cheshire-based company, which runs around 457 animal care centers and 444 veterinary practices, expects underlying pre-tax profits to rise ‘modestly’ this financial year.

Shares in Pets at Home fell 14.2 per cent to 237.8p in early afternoon, making them the biggest fallers on the FTSE 250 Index.

Total sales rose just 1.9 percent to £789.1 million in the 28 weeks ending October 10, while retail sales leveled off at £696.3 million.

However, the veterinary division saw turnover increase by 18.6 per cent to £92.8 million thanks to a healthy increase in subscriptions, visits and average transaction values.

The number of active Pets Club members rose 3 percent to 8.1 million, while Vets Group’s new pet registrations averaged 18,000 weekly registrations.

Combined with lower operating costs, this saw Pets at Home’s underlying pre-tax profit increase by 14.1 percent to £54.5 million.

Lyssa McGowan, CEO of Pets at Home, said: ‘We are operating in an unusually subdued pet retail market, and we now expect this to continue into the second half of the year.

‘We are confident that this will be temporary and that growth will return to historical norms, while the attractive longer-term prospects for the UK pet care market remain unchanged.’

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

From April 2025, the minimum hourly wage for workers over the age of 21 will increase by 6.7 percent to £12.21. The minimum wage for 18 to 20 year olds will also rise by 16.3 per cent to £10 per hour.

At the same time, employers’ NI contributions will rise by 1.2 percentage points to 15 per cent, while the threshold at which NI applies to employees’ earnings falls from £9,100 to £5,000.

“We will continue to proactively mitigate these impacts where possible, keeping a tight rein on costs, as we have done for years,” Pets at Home told investors.

The company’s trading update comes as the Competition and Markets Authority conducts a comprehensive investigation into the veterinary services sector.

The investigation began in response to concerns that consumers may be paying too much for medications or prescriptions, and that they did not have enough information to help them choose the best veterinary practice or treatment for their needs.

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

According to the CMA, six companies – CVS, IVC, Linnaeus, Medivet, Pets at Home and VetPartners – have bought around 1,500 of the UK’s 5,000 veterinary practices.

Dan Coatsworth, investment analyst at AJ Bell, said: ‘Pets at Home has expressed confidence that its growth strategy in the veterinary sector will not be affected, but there is a risk that, like a postman who has turned his back on an aggressive dog, the company is facing an unexpected bite from the competition authorities.”