Pets at Home reveals Budget costs hit and lowers profit guidance in ‘unusually subdued’ market

Pets at Home reported a rise in interim sales and earnings but said an “unusually subdued pet retail market” was expected to continue in the second half. However, it expected conditions to improve in the longer term.

The retailer said changes to the minimum wage and national insurance announced in the Budget last month would cost it £18m in the next financial year. Pets at Home aims to “proactively mitigate these cost increases where possible, including through our ongoing productivity programmes and investments in automation”.

Pets at Home posted a 47.3% increase in statutory pre-tax profits in the six months October 10, ”mainly driven by a significant reduction in non-underlying costs”. Underlying profits of £54.5m were ahead 14.1%.

Total group revenue was up 1.9% to £789.1m and group like-for-likes advanced 1.6%, driven by the veterinary division while retail was flat.

The retailer anticipates that the market will develop at a similar rate for the rest of the year − “lower than initially planned” − and now expects underlying full-year profits to grow “modestly”.

The business maintained: “Periods of slower pet market growth are not unprecedented but are historically short-lived and we are confident that market growth will improve in future, supported by long-established and unchanged structural growth trends and a stable but higher pet population. As growth returns to historical long-term averages, in future we would expect to deliver revenue and profit growth in line with our medium-term ambition.”

Chief executive Lyssa McGowan said: “The first half was characterised by a subdued market, against which we outperformed. In vets, our differentiated joint venture model continues to drive material outperformance over peers. In retail, our customer satisfaction is excellent, our price position is strong and we have tight control of our cost base.”