Wilmslow-based pet and vet retailer Pets at Home Group reported higher profit for the first half of the year but lowered its outlook for the full year as it warned of continued weakness in spending on pets.
“We now plan for current rates of market growth to persist through the remainder of this year, lower than initially planned. As such, we now expect underlying PBT# for FY25 to grow modestly from last year,” the company said. “The lower profit outlook for FY25 is mitigated at free cash flow# level as we continue to look for ways to make our investment plans more efficient and we now expect capex of c£55m for FY25”
For the first six months of the financial year, the company said statutory revenue grew 1.9% to £789.1 million, as growth in its vet business helped overcome almost retail sales. Group statutory profit before tax rose to £51.1 million, up from £34.7 million in the year ago period, as it cut costs.
Lyssa McGowan, Pets at Home CEO, said: “The first half of FY25 was characterised by a subdued market, against which we outperformed. In Vets, our differentiated joint venture model continues to drive material outperformance over peers. In Retail, our customer satisfaction is excellent, our price position is strong, and we have tight control of our cost base.”
“However, 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.”
Looking forward, it said the weakness in pet spending may not last long. “Periods of slower pet market growth are not unprecedented but are historically short-lived and we are confident that market growth will improve in future, supported by long established and unchanged structural growth trends and a stable but higher pet population.”
Derren Nathan, head of equity research at Hargreaves Lansdown, said: “The cumulative effect of cost-of-living increases, plus a sense check on commitments in terms of both time and money, could be making consumers think twice before adding more furry or scaled dependents to their household.”
“However, the group’s integrated model is standing it in good stead. It’s winning market share, reaping the benefits of investment in its digital platform, and seeing a strong uplift in performance of it Vets business 18.6% as it serves more of the relatively stable pet population. That’s more than offset a flat outcome in Retail.”
“Strong veterinary margins are also countering keen pricing in retail. For now, it’s the Vets business that’s propping up the group. With that in mind the outcome of the Competition & Markets Authority’s investigation into the industry, expected next year, will be watched particularly closely. The group, however, doesn’t see this as a threat to the growth strategy for this division.”