Pets at Home has warned profit growth will be lower than expected amid weak consumer sentiment and the easing of the pandemic-boosted pet ownership boom.
The UK retail firm said it expects “unusually subdued” conditions in the pet market to continue over the coming months and also cautioned over a future cost hit from Budget tax increases.
We are confident this will be temporary and growth will return to historical norms with the longer-term attractive outlook for the UK pet care market unchanged
Shares tumbled by more than 10% in early trading on Wednesday after the group told shareholders that total revenues grew by 1.9% to £789.1 million for the 28 weeks to October 10, compared with a same period a year earlier.
Strong growth in its vet business was offset by 0.1% growth in retail revenues, which were effected by the “declining retail market” and the impact of transitioning onto a new digital platform.
Lyssa McGowan, Pets at Home chief executive, said: “We are operating in an unusually subdued pet retail market which we now expect to continue through the second half.
“We are confident this will be temporary and growth will return to historical norms with the longer-term attractive outlook for the UK pet care market unchanged.”
She highlighted that pet numbers are continuing to grow but the rapid acceleration in new puppies and kittens witnessed in recent years has “now stabilised”.
Pets at Home reported on Wednesday that pre-tax profits were up 47.3% to £51.1 million for the half-year.
It added that profits for the current financial year are due to “grow modestly” from around £132 million last year, indicating this will be below its previous guidance of £144 million.
Pets at Home has been reducing costs to support its profitability and reported that group net operating profits were down 3.5% for the half-year.
It also cautioned that its costs will face an £18 million hit in its next financial year due to changes to employers National Insurance contributions and the increase in the living wage announced by the Government last month.
Shares in the business were 13.9% lower on Wednesday morning.
