Pets at Home shares jump on FY outlook despite lower sales

(Sharecast News) - Pets at Home on Wednesday said it expected full-year underlying earnings to be in line with expectations despite a fall in third quarter revenues after it cut prices as part of a plan to revive its fortunes, with shares in the company jumping 6% on the news. The ailing retailer, currently still waiting for a chief executive and financial boss to arrive in the spring, said retail consumer revenue fell 1.1% in the three months to January 1, while its veterinary services business, Vets for Pets, performed strongly with a 5% rise. Group revenue was down 1% to £358m.

Current consensus forecasts are for underlying pre-tax profit of £93m with a range of £90m-97m. Interim earnings slumped more than a third after retail profits plunged 84%, forcing the company to implement a £20m cost-cutting programme.

"One of our key early actions as part of this plan included investing in our customer offer, reducing the price of over 1,000 products by an average of 12%, ensuring our customers know they can trust us to provide great value for them and their pets," said interim chair Ian Burke.

AJ Bell head of markets Dan Coatsworth said: "Just as a dog gets excited at the prospect of 'walkies', the tail is finally wagging on Pets at Home's shares. On the face it, a 0.7% decline in third quarter like-for-like sales is hardly cause for celebration. The market likes the result because trading hasn't dramatically worsened."

"Expectations for Pets at Home have been rock-bottom since a series of profit warnings over the past year. The company has been left behind after failing to fight off competition, and it's now in turnaround mode. Pets at Home appears to be steadying the ship, and that's fantastic news for investors."

GOVT OUTLINES PLANS FOR VETS FEES

The update comes as the UK government on Wednesday launched a consultation on plans to make veterinary prices clearer in response to widespread concerns about soaring costs.

Under proposals put forward by the Department for Environment, Food and Rural Affairs, vets will be required to publish price lists for common treatments and be transparent about the various options available.

Vets will also have to disclose who owns them, helping owners know if their local practice is an independent business or part of a larger chain. Defra said 60% of practices are now owned by non-vets, "with many operating unclear ownership structures". It is also proposing introducing an official operating licence and improving improved complaint procedures.

The sector is under pressure over claims pet owners are paying too much for treatments and drugs. In October the UK competition watchdog put forward 21 proposed measures, including a £16 cap on the cost of providing prescriptions, after an investigation it began last year found prices for services had increased by 63% between 2016 and 2023.

The Competition and Markets Authority estimated that around 17m households have a pet in the UK, spending around £6.3bn on veterinary and other services in the 2024 alone.

Reporting by Frank Prenesti for Sharecast.com