Britain's leading pet care retailer Pets at Home has sounded an alarm after revealing a dramatic slump in profits, prompting what bosses describe as 'urgent and necessary' action to rescue the struggling retail business.
Sharp Decline in Half-Year Performance
The company reported that its underlying pre-tax profit fell by 33.5% to £36.2 million during the 28 weeks to October 9. This significant drop was primarily driven by an 84% collapse in retail profits, which plummeted to just £3.5 million while retail revenues declined by 2.3% to £679.9 million.
Interim executive chair Ian Burke, who stepped into the role ten weeks ago following former CEO Lyssa McGowen's departure in September, acknowledged the severity of the situation. '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,' Burke stated.
Vet Services Shine Amid Retail Struggles
While the retail arm faced substantial challenges, the company's veterinary services division demonstrated strong performance with revenues increasing by 6.7% to £376 million and profits rising by 8.3% to £45 million.
This contrasting performance between retail and veterinary services highlights the complex challenges facing the 34-year-old business. The company's share price, which had been trading at its lowest level since March 2020, saw a nearly 5% increase on Wednesday morning as investors reacted positively to results that exceeded initial expectations.
Root Causes and Recovery Strategy
Pets at Home identified two key factors behind the retail division's poor performance. The first involves significant changes in the advanced nutrition products market, where competitors are increasingly selling directly to consumers, leaving Pets at Home 'overexposed' to traditional brands.
The second issue concerns a 5.9% year-on-year decline in accessory purchases, which has been developing over the past three years. Company leadership admitted that much of this problem was 'self-inflicted, by not having the right products at the right price points, with the right execution.'
In response to these challenges, Pets at Home has implemented a £20 million cost-cutting programme and emphasised the need to 'return to its retailing roots' to ensure future growth. Burke emphasised that the business must meet both internal expectations and those of investors.
Looking ahead, the company forecasts full-year underlying pre-tax profit between £90 million and £100 million, with the veterinary arm expected to contribute approximately £80 million of that total.
