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Pets at Home begins £20m cost-cutting drive as interim profits sink
(Sharecast News) - Pets at Home has announced it is taking "action at pace" to address its disappointing retail performance after interim profits at the pet shop and veterinary chain slumped by a third. The company said it has kickstarted a restructuring program to reduce group overheads by £20m, which will incur non-underlying costs of £6-8m this financial year.
Group underlying profit before tax totalled £36.2m over the six months to 9 October, down 33.5% on last year, with earnings in the retail division sinking 84.1% to £3.5m due to lower sales and weaker margins, partially offset by an 8.3% improvement in vets profits to £44.9m.
Group consumer revenues rose just 0.7% to £1.06bn, as a 6.7% improvement in vet sales to £375.9m was met with a 2.3% slip in turnover at the larger retail arm to £679.9m. In retail, momentum was said to improved over the second quarter as a strong online performance partially offset weaker in-store sales.
As part of a "Retail Turnaround Plan", Pets at Home said it is planning to "reset and revitalise" its Advanced Nutrition ranges and improve its Accessories product range - two areas that have been identified as the root causes of its retail sales shortfall.
The company, which is still without a permanent chief executive after Lyssa McGowan stepped down in September following two profit warnings in as many months, said it is also taking action to stay competitive on price, improve the execution of its price and promotional changes in store, and cut costs.
"While product issues will take time to fully enact and impact our business, it is clear what is required to improve the immediate financial performance of the business," the company said.
Commenting on the turnaround plan, interim executive chair Ian Burke said: "We are returning to our retailing roots to stabilise and rebuild momentum in our Retail business, and to lay the foundations for a new CEO in due course."
The dividend was held steady at 4.7 pence per share.
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