The interim boss of Pets at Home has declared that urgent and necessary action is required to revitalise the struggling retail chain after it revealed that half-year profits had plunged by more than a third.
Leadership Changes and Financial Performance
Ian Burke, the interim executive chair of the pet care group, stated the 34-year-old business must return to our retailing roots to address its challenges. The company has been without a permanent chief executive since Lyssa McGowan's sudden departure in September.
The group reported that underlying profit before tax collapsed by 33.5% to £36.2 million during the 28 weeks ending 9 October. This dramatic decline was primarily driven by an 84% profit fall in its retail division, which saw profits shrink to just £3.5 million alongside a 2.3% revenue decrease to £679.9 million.
Veterinary Business Shines Amid Retail Woes
While the retail arm struggled, the company's veterinary services business demonstrated strong performance, with revenues increasing by 6.7% to £376 million and profits rising 8.3% to £45 million. This contrasting performance highlights the diverging fortunes within the pet care group.
Despite the overall profit decline, the company's share price responded positively to the results, climbing nearly 5% on Wednesday morning as the figures exceeded market expectations, though they remained at levels not seen since March 2020.
Strategic Response and Cost-Cutting Measures
Burke, who stepped into the interim CEO role ten weeks ago, explained his approach: I set out with a clear agenda – to establish a firm grip on the issues facing our retail business, while maintaining the positive results we're seeing in areas such as vets.
The company has identified two key issues affecting its retail performance and is implementing a £20 million cost-cutting programme to address them. Firstly, the market for advanced nutrition products has shifted rapidly toward new premium brands selling directly to consumers, leaving Pets at Home overexposed to traditional brands.
Secondly, accessory sales have shown consistent declines over the past three years, including a 5.9% year-on-year drop in the most recent results. The company acknowledged that while market headwinds exist, a large part of this has been self-inflicted, by not having the right products at the right price points, with the right execution.
The company maintains its full-year guidance, expecting to report underlying profit before tax between £90 million and £100 million, with the veterinary group contributing more than £80 million of that total.
This profit warning represents the company's second in two months, following McGowan's resignation in September. The news comes as the UK competition watchdog proposes measures to increase transparency in veterinary pricing after finding service costs had increased by 63% across the market between 2016 and 2023.
