Pets at Home hails ‘better momentum’ despite profit slip
Pets at Home has hailed “better momentum” in its bit to return to growth, as profit and revenue fell again while its turnaround remains in its early stages.
The FTSE 250 pet supplies retailer and veterinary group saw profit before tax dip by 28 per cent to £86.5m, while group revenue fell by one per cent to £1.47bn in the year to March.
Investors had been hoping for signs of a turnaround under new chief executive James Bailey, after the retailer’s previous boss quit amid falling sales.
A large part of Bailey’s turnaround plan focuses on Pets at Homes’ retail arm, where consumer revenue fell by one per cent to £1.3bn due to a “subdued market backdrop”.
The firm said its plan to overhaul its retail business is beginning to pay off, as sales and volume growth sped up towards the end of last year.
Bailey said: “Material progress has been made over the past 6 months stabilising the Retail business, delivering improved satisfaction and better availability.
“We have the opportunity now to build momentum through profitable volume led growth in Retail while continuing to execute the proven growth levers of our Vet business and launch our Insurance offering.”
Pets at Home underwent a tumultuous period last year when a flurry of profit warnings preceded the departure of former chief executive Lyssa McGowan.
Ex-Waitrose boss takes the reins
Bailey, a former boss of Waitrose, took the reins in March after interim head Ian Burke had unveiled an ambitious turnaround plan which included cuts to back office jobs, heavy discounting and product revamps.
The firm cut prices on around 1,000 products in a bid to defy a slump in demand caused by falling consumer confidence.
The retailer said on Wednesday that it has seen consumers respond positively to these price cuts.
Dan Lane, lead analyst at Robinhood UK, said the firm “needed to show a credible route to recovery” and will likely have calmed investors by retaining its profit guidance.
“The question now is whether this will stem the tide or we’re looking at a temporary reprieve from heavy price investment and cost cutting,” he said.
Pets at Home said it has seen consumer satisfaction jump by four per cent in its retail branches and 1.5 per cent in its veterinary arm.
‘Disruptive’ move into pet insurance
The retailer saw pre-tax profit jump by 10 per cent to £83m in its vet group, as it accelerated expansion with eight new practice openings in the year to March.
Ramping up its vet arm is part of Pets at Home’s strategy to lean in on its “unique strengths” during the turnaround, the firm said.
“As the only UK pet care specialist with highly complementary exposure across omnichannel retail, vets and soon insurance, we have considerable advantages which are difficult for our competitors to replicate,” it said.
The company is set to open its “disruptive” insurance arm later this year, with the firm hoping that entering this £2bn market will complement its retail and vet arms.
The firm’s share price broke into the red on Wednesday morning before recovering to a seven per cent gain as investors warmed to the update.