Pets At Home (PETS) reported a sharp fall in annual profits after a difficult year for its retail division, although investors appeared encouraged by signs that the company’s turnaround efforts are beginning to gain traction under new chief executive James Bailey.
Shares in Pets At Home Group rose 5.5% to 195.40p by late Wednesday morning, even though the stock remains around 25% lower over the past year and more than 60% below its 2022 peak.
Pre-tax profit for the 52 weeks to 26 March dropped 28.3% to £86.5 million, down from £120.6 million a year earlier, while revenue slipped 0.8% to £1.47 billion. Basic earnings per share also fell 28% to 13.8p.
Underlying pre-tax profit declined 30.2% to £92.8 million, matching guidance issued earlier this year. The steepest deterioration came from the retail arm, where underlying profit collapsed 57.8% to £30.8 million as the company absorbed weaker demand and aggressive pricing measures designed to win back customers.
Retail sales fell 1% during the year against what the company described as a subdued market backdrop, with supermarkets and general retailers continuing to pile pressure on pet food pricing. In November, Pets At Home cut prices on more than 1,000 food products by an average of 12%, sacrificing margin in an attempt to restore volumes.
That strategy appears to have started feeding through into trading momentum towards the end of the financial year, with food volumes rising 3.7% in the fourth quarter and retail sales growth now running at a mid-single-digit percentage rate since the start of the new financial year.
Bailey, who joined from Waitrose Ltd in March after the departure of former chief executive Lyssa McGowan, said progress had been made stabilising the business.
“Material progress has been made over the past six months stabilising the Retail business, delivering improved satisfaction and better availability,” he said, adding that the company now has an opportunity to rebuild momentum through “profitable volume-led growth”.
The retailer’s veterinary business once again provided the strongest support for the wider group. Consumer revenue in the Vet Group rose 5% to £688.1 million, while underlying profit increased 10.4% to £83.8 million, helped by higher transaction values and strong uptake of care plans.
Even so, the company noted softer demand trends within parts of the vet division linked to the ageing of large cohorts of pets acquired during the pandemic period.
The weaker earnings performance prompted a sharp reduction in shareholder payouts. Pets At Home cut its annual dividend by 43% to 7.4p per share from 13p, aligning distributions with its revised capital allocation policy targeting a 50% payout ratio over the medium term.
Despite the lower dividend, the company announced plans for a further £50 million share buyback programme during financial 2027. Management said £150 million worth of shares have been repurchased over the past four years, reducing the company’s equity base by roughly 10%.
Bailey’s appointment followed a turbulent period for the FTSE 250 group, which endured several profit warnings last year as its retail operation lost momentum. The company has since launched a turnaround plan focused on product ranges, pricing, store execution and cost control.
Alongside the retail overhaul, Pets At Home is also preparing to launch its insurance business later this year as it looks to expand beyond traditional retail and veterinary services.
The company said it remains comfortable with market expectations for underlying pre-tax profit of around £98 million for the current financial year, which would represent growth of roughly 5.6%.