Waning Pet Pandemic: Pets at Home Reduces Profit Prediction as Post-pandemic Pet Boom Subsides
Pets at Home Trims Profit Forecast Amidst Subdued Demand and Cost Pressures
Pets at Home, the UK's leading pet supplies retailer, has announced a trimmed annual profit forecast due to a decline in demand for pet accessories and escalating cost pressures. The company's shares fell 4.53% or 11.0p to 232.38p on Thursday, reflecting a nearly 25% drop in the last year [1].
The group's chief executive, Lyssa McGowan, flagged 'normalizing levels of new pet ownership' as a key factor contributing to the weaker retail sales. This comes as consumers face higher living costs, leading to a reduction in discretionary spending on pet products [2].
As a result, Pets at Home has lowered its underlying pre-tax profit forecast to between £110 million and £120 million for the year ending March 2026. This is down from the prior range of £115 million to £125 million [3]. The forecast is also around 17% lower than previously expected [4].
Retail sales fell 3% despite a marginal overall consumer revenue increase, indicating a continued weak demand across the sector. However, the company's vet business showed growth, with consumer revenue up 7.1% [5]. The Vet Group offering of Pets at Home showed a 7.8% increase in like-for-like revenues [6].
Pets Club membership, a key revenue stream for Pets at Home, grew by 1.8% to 8.1 million customers. The proportion of revenues from Pets Club subscriptions is now at 14.5% [7].
Despite the challenges, McGowan stated that the company has seen momentum in its business. However, she cautioned that if the gloomy market conditions continue, it would likely deliver a result at the bottom end of the pared-back guidance [8].
Rising labor costs, including increased social security contributions and minimum wages, are another concern for the company. These cost pressures could potentially lead to price increases and job cuts within the company [9].
Alex Doran, an analyst at Third Bridge, mentioned that the growth in pet ownership during Covid has slowed, further exacerbating the challenges faced by Pets at Home [10]. The company reported a slight rise in overall consumer revenue, but shopper revenue increased only 0.4% [11]. Statutory revenue fell 1.9% to £435 million [12].
In conclusion, Pets at Home is navigating a challenging environment, with subdued demand for pet accessories and escalating cost pressures. The company is focusing on its vet business to drive growth and is cautiously optimistic about its future prospects.
- The reduction in discretionary spending on pet products by consumers, due to higher living costs, has significantly impacted the pet supplies industry, as evident in Pets at Home's trimmed annual profit forecast.
- As Pets at Home is grappling with a decline in demand for pet accessories, the company is exploring other avenues for growth, such as its vet business, which has shown growth with a 7.1% increase in consumer revenue.
- The finance sector, including mortgages and investments, could potentially benefit from the current challenging conditions in the retail pet supplies industry, as consumers might seek other ways to allocate their reduced discretionary income.
- In the pet industry, businesses are facing not only subdued demand but also cost pressures, such as rising labor costs and increased social security contributions, which could lead to price increases and potential job cuts.
