Pets at Home shares drop as rising costs to eat away at profits

Shares in Pets at Home have tumbled by more than a 10th after it warned over declining profitability this year thanks to subdued consumer confidence and a raft of higher business costs.

The company said it had seen challenging and volatile conditions for UK consumers in recent months.

It nonetheless expects to report an underlying pre-tax profit of £133 million for the year to March 27, which is what analysts had forecast.

Pet owners signing up to the brand’s loyalty scheme have reached record numbers amid more available vets and nurses, it said.

Pets at Home sells small animals like rabbits and hamsters and products for pets including dogs and cats through its retail division, and also provides veterinary healthcare and grooming services at centres across the country.

It makes more than half of its underlying profits through the vet arm, which has grown to more than 440 general practices in shops and as standalone centres.

But the business warned its retail arm will come under pressure from weakness in the UK pet market, with consumers continuing to tighten their belts amid wider economic uncertainty.

Pets at Home said it is focusing on things it can control like keeping a tight control of costs, with plans to make significant savings through cost-cutting and productivity initiatives.

It is preparing for costs to lurch upwards this year, expecting a roughly £18 million impact from higher national insurance contributions and the increased national minimum wage.

Taking into account expectations for consumer demand and costs, Pets at Home said it expects underlying profits for its retail division to decline year-on-year.

It is forecasting group underlying pre-tax profit to decline to between £115 million to £125 million for the year to the end of March 2026.

Lyssa McGowan, Pets at Home’s chief executive, said: “We are making good progress in delivering our strategy of building the world’s best pet care platform, although the market remains challenging with subdued consumer confidence and the business facing significant external cost headwinds in 2025.”

She said the vets business continues to “outperform the market” with new openings planned this year, while the retail side is “well placed for future growth as the short-term pressures ease the and the consumer environment improves”.

Russ Mould, investment director for AJ Bell said: “While Britons are famously devoted to their furry friends, consumers have less disposable cash to spend on toys and treats, and are focusing more on the essentials which is making life difficult for a specialist like Pets at Home.

“There is also competition from larger, non-specialist rivals like the supermarkets who have more capacity to compete on price.

“Pets at Home still hopes to take market share thanks to investment in its digital platform and continued progress in getting customers to sign up to its loyalty scheme.

“It needs to generate some momentum with sales to mitigate the impact of rising costs associated with changes in last year’s Budget.”