- Retail like-for-likes down 2.8%
- Jollyes taking market share
- Veterinary business growth is strong
Pets at Home’s (PETS) shares pawed their way 4.5% higher to 220.6p after the UK pet care leader maintained full-year profit guidance despite suffering a retail sales slowdown in a tough third quarter, which management blamed on the ‘more challenging’ UK consumer backdrop.
Despite disappointing retail sales in the Christmas quarter, the pet specialist reiterated its year-to-March 2025 guidance for ‘modest growth’ in underlying pre-tax profits over the £132 million achieved in full-year 2024, drawing confidence from margin management, cost savings and another strong showing from its veterinary business.
SOGGY CHRISTMAS QUARTER
Group like-for-like sales softened 1% in the 12 weeks to 2 January 2025, dragged back by a 2.8% drop in retail like-for-likes which represented a slowdown from the 1.1% retail growth seen in Q2.
Pets at Home pinned the blame on ‘particularly weak footfall from October’, and also had to contend with hot competition from smaller rival Jollyes.
Against a still subdued consumer backdrop, Pets at Home maintained a disciplined gross margin performance, supported by strong sell through of seasonal Christmas stock, whilst keeping a lid on costs.
VETS ARM IMPRESSES, AGAIN
In contrast to the soggy retail sales performance, growth in Pets at Home’s veterinary business remained strong with like-for-like sales up an impressive 19.9% in the quarter.
‘High quality growth continued with Practices seeing double digit revenue growth supported by growth in subscriptions, visits, and average transaction values,’ said the FTSE 250-listed firm.
EXPERT VIEWS
Jefferies, which has a ‘buy’ rating and 375p price target on Pets at Home, commented: ‘While Pets at Home continues to face into headwinds in retail, we have to take positives from the outstanding vet result, and the endorsement of full-year 2025 guidance. The big question remains the potential for full-year 2026 retail like-for-likes to reaccelerate, the key factor in determining if the business will, belatedly, return to profit growth.’
Russ Mould, investment director at AJ Bell, said Britons love their pets ‘but that doesn’t mean they aren’t prepared to economise on behalf of their furry and feathered friends. It’s clear Pets at Home is finding it tricky to get customers through the doors.
‘Non-specialist retailers, including the supermarkets, will often be able to outcompete Pets at Home on price and people are also less likely at the moment to splash out on anything other than the essentials for their animal companions.’
Mould added: ‘The veterinary side of the business is coming to the rescue to some extent - with an increase in subscriptions providing the company with a steady stream of income.
‘However, Pets at Home and others are nervously awaiting the outcome of a probe by the competition authorities into practices in the vet industry. This investigation could drag on until November, meaning Pets at Home may not get much credit for how the best performing part of its business is doing until after that deadline.’
DISCLAIMER: Financial services company AJ Bell referenced in this article owns Shares magazine. The author of this article (James Crux) and the editor (Martin Gamble) own shares in AJ Bell.
