Pets at Home shrugs off difficult economic backdrop to report record revenues

Pets at Home Group defied increasing economic uncertainty and tough lockdown comparisons to achieve record turnover in its last financial year. 

The Cheshire-based retailer’s revenue grew by 6.6 per cent to £1.4billion for the 12 months ending March, thanks to better food sales and a stronger performance from its veterinary services division.

Pet ownership in the UK boomed in the wake of the pandemic, as Britons rushed to buy animals during the lockdown periods.

Demand for pet services has remained robust even though coronavirus-related restrictions have subsequently ended and people are spending more time in the office and travelling.

Many consumers are also prioritising spending on their pets and cutting back on other goods and services, including their weekly food shop, against a backdrop of high inflation.

Membership of the firm’s VIP loyalty club rose to 7.7 million last year, while the number of new subscribers to its Puppy & Kitten Club averaged more than 24,000 per week.

This helped boost the company’s underlying pre-tax profit by 4.8 per cent to £136.4million, despite soaring energy bills and investment in its digital platform pushing up operating costs.

However, statutory pre-tax earnings slumped by 17.7 per cent to £122.5million due to the absence of any benefit from the disposal of its specialist veterinary business to rival Linnaeus Group and the cost of completing its new distribution centre.

Lyssa McGowan, chief executive of Pets at Home, said: ‘Our record performance over the past year demonstrates that our compelling pet care offer continues to resonate strongly with consumers.

‘Through our unique blend of products, services and expert advice, we were able to serve pet owners better, grow our consumer base, and win more market share, building on our leading position in the UK pet care market.’

Popularity: Membership of Pets at Home’s VIP loyalty club rose to 7.7 million last year, while the number of new subscribers to its Puppy & Kitten Club averaged more than 24,000 per week

McGowan joined the company from Sky UK last year following the departure of Paul Pritchard, whose tenure coincided with the firm’s emergence as a retail giant.

Amid stiff competition from rivals like Amazon, Pritchard set about reducing prices and enhancing the group’s focus on more profitable services, such as dog grooming and veterinary care.

Before leaving Pets at Home, he predicted to the Mail on Sunday that few Britons would give up their pets due to cost-of-living problems but instead cut back on eating out and purchasing a new vehicle. 

His successor has now unveiled plans to develop a unified pet care app, where customers can book a whole host of services, such as surgical appointments and repeat prescription deliveries.

McGowan is also targeting growth of 7 per cent in sales and 10 per cent in pre-tax earnings over the medium term.

To try and attract greater market share and maintain profitability, the company said it has kept prices as ‘affordable as possible’.

Sophie Lund-Yates, lead equity analyst at Hargreaves Lansdown, said: ‘The joy of operating a business in this space is that a certain level of demand is guaranteed, no matter what the economic climate, our dogs and cats still need food, and this is one of the last areas people will skimp on when times get tough.’

But she warned: ‘Consumers are tightening their belts, which means they’re more interested in buying the basics than they are more lucrative accessories. 

‘As Pets at Home continues to invest in keeping prices low, it means margins are taking a hit. Spending money to protect existing market share rather than grow it is never ideal, and it’s possible the group’s close to bumping up against the side of the tank.’ 

Pets at Home Group shares were 2.3 per cent down at 358.6p on Thursday morning.