Pets at Home shakes off current market woes but warns of struggles ahead
Pets at Home announced its profit had fallen in line with expectations in its performance update, but warned of struggles ahead.
Its share price fell more than 10 per cent in early trades.
The group predicted profit before tax for the year at £133m, in line with previous guidance.
It said trends in the final quarter of the year had developed broadly as expected across its retail and vets arms, despite a “challenging and volatile UK consumer backdrop”.
The firm reported record Pets Club members and continued growth of its vets business.
It expects to finish the full 2025 financial year in a net cash position, following the return of around £85m to investors throughout the year.
In the last year, Pets at Home completed its new digital platform and network optimisation.
Following the introduction of the new platform, the company said it now has two “major strategic programs” designed to help the business to return to growth in the next year.
Market conditions and consumer backdrop to stay weak
Looking forward, the group said it expected the current market conditions and consumer backdrop to continue into the new financial year, although it did predict further growth in profit.
The group expects to outperform the market in its retail aim as its investments in digital bear fruit.
However, the company said it will take a hit of £18m from increased employers’ national insurance contributions, reducing profit for the 2026 financial year from £115m to £125m.
David Hughes, analyst at Shore Capital, said: “The continued decline in the retail arm is likely a cause for concern for investors, however the ongoing growth in the higher margin Vet business is encouraging and if the business does gain market share, it does have the potential to emerge stronger as and when the consumer does recover.”
Hughes described the guidance for 2026 as “weak”.
Pets at Home’s next scheduled update is pencilled in for May 28, where it will post its full results for the 2025 financial year.
‘We wait for demand to improve’
While applauding growth in the company’s veterinary service, analysts across the board voiced concern about retail sales.
Panmure Liberum analysts rated the stock a ‘Buy’, explaining that the business was in good shape.
“We wait for demand to improve,” analysts said. “Downgrades are always unfortunate, but the group remains exceptionally well positioned for any change in demand factors and while we wait for that we would expect dividends and more buybacks to reward investors.”
Peel Hunt analysts also rated the stock a ‘Buy’.
“In retail… there are material cost headwinds, only so much of which can be mitigated, and underlying demand is weak,” Peel Hunt said.
The broker downgraded its profit-before-tax forecast for 2026 from £139m to £120m, and reduced its target price from 325p to 300p.
“It’s not news to talk about a low-confidence consumer, but management thinks that it will remain under a cloud for some time,” analysts said.
“With strong headwinds from wage increases (£21m) and ‘plastic tax’ (£2m), we anticipate profit progress will be tough, even if [the company] can mitigate £13m of the headwind.”