The boss of Pets at Home has said “urgent and necessary” action must be taken as the ailing retailer revealed its half-year profits have fallen by more than a third.
The group is still searching for a chief executive following the sudden departure of Lisa McGowan in September. Ian Burke, interim executive chairman, said the chain, which sells pet products, animals, veterinary care and grooming services, had to “return to its intact roots” to revive the 34-year-old business.
On Wednesday the group reported that pre-tax profit fell 33.5% to £36.2m in the 28 weeks to October 9. This was due to an 84% decline in profits in its retail business to £3.5 million, which also experienced a 2.3% decline in revenue to £679.9 million.
The group’s vet services business performed strongly, with revenues up 6.7% to £376 million and profits up 8.3% to £45 million.
The company’s share price was trading at its lowest level since March 2020, but it rose nearly 5% on Wednesday morning after reporting better-than-expected results.
Burke said, “Stepping into the role as interim CEO 10 weeks ago, I set out a clear agenda – establishing a strong grasp on the issues facing our retail business, while maintaining the positive results we are seeing in areas such as veterinarians.”
“For over 30 years, Pets at Home has been a business with a clear purpose, an established market and a loyal customer base, but it is clear that urgent and urgent action is required to return the retail business to growth to meet both our own and our investors’ expectations.”
The company said it has identified two key factors that have impacted its retail business, and is implementing a £20m cost-cutting programme. The first is sales of advanced nutrition products as the market has increasingly shifted towards new premium entrants selling directly to consumers, which has impacted sales of traditional brands where Pets at Home said it is “overexposed”.
The company also said that sales of accessories have seen a decline over the past three years, including a 5.9% year-on-year decline in its most recent results. It added: “While there are undoubtedly headwinds from cyclicality and channel shifts, a large part of it is self-generated by not having the right product at the right price point and the right execution.”
After newsletter promotion
McGowan resigned in September after the company issued a profit warning for the second time in two months. The company expects to report a pre-tax underlying profit of between £90m and £100m for the full year, and its veterinary group will make more than £80m of that profit.
In October the UK competition watchdog proposed 21 measures, including capping the costs of providing prescriptions to veterinary businesses, after an investigation found that market prices for services were set to increase by 63% between 2016 and 2023.
<a href