Pets at Home boss says ‘urgent and necessary’ action needed as profits dive
The boss of Pets at Home has said “urgent and necessary” action needs to be taken as the ailing retailer reported that its half-year profits slumped by more than a third.The group is still looking for a chief executive after the abrupt departure of Lyssa McGowan in September.The interim executive chair, Ian Burke, said the chain, which sells pet products, animals, veterinary care and grooming services, had to “return to our retaining roots” to revitalise the 34-year-old business.On Wednesday the group reported underlying profit before tax had slumped 33.5% to £36.
2m in the 28 weeks to 9 October.This was driven by an 84% fall in profits to £3.5m at its retail business, which also experienced a 2.3% fall in revenues to £679.9m.
The group’s veterinary services business, Vets for Pets, performed strongly, reporting a 6.7% increase in revenues to £376m and an 8.3% increase in profits to £45m.The company enjoyed a boom during Covid lockdowns when owners splashing spare cash on animals and pet treats helped it hit an annual sales record of £1.1bn.
Its share price has since plunged to pre-pandemic levels,“Stepping into the role as interim CEO 10 weeks ago, I set out with a clear agenda – to establish a firm grip on the issues facing our retail business, while maintaining the positive results we’re seeing in areas such as vets,” Burke said,“For over 30 years, Pets at Home has been a business with a clear purpose, an established market and loyal customer base, but it’s clear that urgent and necessary action is needed to return the retail business to growth to meet both our own expectations and those of our investors,”The company said it had identified two key causes that have affected its retail business, and is implementing a £20m cost-cutting programme,The first is sales of advanced nutrition products as the market has shifted rapidly to new premium entrants selling directly to consumers, which has affected sales of traditional brands where Pets at Home said it is “overexposed”.
The company also said that it sales of accessories have shown declines over the last three years, including a 5.9% year-on-year fall in its most recent results.It said: “While there are undoubtedly headwinds from cyclicality and channel shift, a large part of this has been self-inflicted, by not having the right products at the right price points, with the right execution.”McGowan resigned in September after the company issued its second profit warning in two months.The company expects to report full-year underlying profit before tax of between £90m and £100m, with Vets for Pets making more than £80m of that profit.
Sign up to Business TodayGet set for the working day – we'll point you to all the business news and analysis you need every morningafter newsletter promotionThe veterinary sector is facing pressure over claims pet owners may be overpaying for treatments and medicines.In October the UK competition watchdog proposed 21 measures, including making vet businesses cap the cost of providing prescriptions, after an investigation it launched last year found that prices for services had increased by 63% between 2016 and 2023.A spokesperson said Vets for Pets said at the time that rules underpinning the sector needed to be updated, arguing had been “calling on government to make progress on this for over two years”.
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