Pets at Home Group H2 Earnings Call Highlights

Key Points

• FY 2026 profit fell sharply as weak retail performance offset growth in the veterinary arm. Underlying profit before tax dropped about one-third to GBP 93 million, while retail profit plunged around 60%.
• The vet business remains the main growth engine, with consumer revenue up 6% to GBP 688 million and management saying the joint-venture model still has significant room to expand through new openings, maturity and care-plan growth.
• Retail turnaround is showing early traction after price cuts, new own-label products and broader product changes. Management said fourth-quarter volume growth topped 5%, online sales continued to grow at double digits, and FY 2027 is expected to bring profit growth.

Pets at Home Group LON: PETS reported a weaker full-year profit performance for FY 2026 as underperformance in its retail division outweighed continued growth in its veterinary business, but management said early signs from its retail turnaround plan are encouraging.

In the company’s full-year results presentation, Chief Executive James, who joined the business around eight weeks ago, said Pets at Home remains “the clear market leader” in an attractive U.K. pet care market and has “meaningful headroom to do better.”

Group consumer revenue grew 1% to close to GBP 2 billion, according to Chief Financial Officer Sarah Pollard, who joined the company in March. Underlying profit before tax fell by about one-third to GBP 93 million, while free cash flow totaled GBP 62 million.

Pollard said the underlying financial position of the business remains strong, but acknowledged that retail performance was “neither good enough nor sustainable.” Retail revenue declined 1% to GBP 1.3 billion, and retail profit fell about 60% to GBP 31 million, generating GBP 3 million in cash.

Veterinary business remains a key growth driver

Management emphasized the resilience of the company’s veterinary operations, which James described as a “unique business” in the U.K. market because of its joint venture model with practice owners. He said the model aligns incentives with clinical entrepreneurs while allowing practices to operate with clinical autonomy.

Vet consumer revenue reached GBP 688 million, up 6%, while vet fee income to the group rose 5%. Pollard said revenues in company-managed vet practices were 3% lower as Pets at Home continued its strategy of transitioning them to the joint venture model.

James said average practice revenue reached GBP 1.5 million in FY 2026, up from GBP 1.1 million three years earlier. He said the company sees further headroom through practice maturity, operational improvements, care plan growth, new openings and practice extensions.

The vet business generated GBP 83 million in profit and GBP 74 million in cash, Pollard said. James added that practice revenues have compounded at 13% over five years, while profits have compounded at 18% and free cash flow at 28%.

Retail turnaround shows early momentum

Pets at Home said its retail turnaround plan is focused on four priorities: product, price, cost and execution. James said the company’s ranges had not kept pace with shifts in consumer preferences, but that the business has added new food brands, introduced new own-label offerings and plans further innovation in accessories.

The company executed nearly 1,000 targeted price cuts late last year, with an average reduction of 12% across affected lines. James said the move has produced an “encouraging volume response.”

Pollard said retail sales improved through FY 2026 and exited the fourth quarter at a 2% growth rate. Volumes grew ahead of sales after price investment began in the second half. James said fourth-quarter volume growth was above 5%, with broad-based growth across food, consumables and accessories.

Retail food sales were flat, with volume growth offsetting about 1% deflation. Own-label food sales rose 3%, helped by new Pets brands Ruff’s Recipes for dogs and Willow’s for cats, while branded food sales declined 2%. Discretionary accessories remained a challenge, with sales down around 3.5%.

Store sales declined by a low single-digit rate for the year, though the pace of decline slowed to about 2% exiting the fourth quarter. Online sales again delivered double-digit growth.

Cost savings and margin pressure

Pollard said the decline in group profit was driven primarily by the retail sales decline and a 175-basis-point reduction in gross margin, with about half of the margin reduction explained by targeted price investment. She said the company has plans to improve retail gross margins and that they “can’t continue to be eroded.”

The company completed a program to remove GBP 20 million from group overhead, which James said had grown too large. Pollard said the savings are expected to flow to the bottom line in FY 2027.

Other factors affecting profit included insurance start-up costs and the reinstatement of an employee bonus, both of which Pollard said were in line with expectations. Cost control remained strong, with productivity largely offsetting cost headwinds and inflation.

Cash returns and investment plans

Pets at Home invested GBP 42 million in capital expenditure during the year, including just over GBP 30 million in Pet Care Centres. The company opened three new stores, relocated three stores and completed 23 store refits. Pollard said capital expenditure has normalized after prior investments in technology and the distribution center.

The company ended the year with net debt of GBP 19 million after returning GBP 84 million to shareholders through ordinary dividends and share buybacks. Leverage was 0.1 times, and Pollard said the company has significant headroom on its borrowing facilities.

Pets at Home plans to rebase its dividend to a sustainable 50% payout ratio in FY 2027 while increasing the amount returned through share buybacks to GBP 50 million. Pollard said the company is not changing the overall amount it plans to return to shareholders in FY 2027.

Outlook and insurance launch

Management said the company is “comfortable with current consensus expectations” for FY 2027, which Pollard said would represent a year of profit growth supported by another strong contribution from vets and an increase in retail profitability.

James also highlighted pet insurance as a future growth opportunity. Pets at Home plans to launch a branded insurance offer in 2026, targeting what he described as a GBP 2 billion U.K. pet insurance market. He said the company has FCA approval in place, a team with insurance experience and a newly built technology platform.

James said he will continue spending much of his near-term time in the business, meeting colleagues, customers and suppliers. He said investors should expect “a relentless focus on customers” as well as discipline on costs, capital allocation and execution.

About Pets at Home Group LON: PETS

We are the UK's leading pet care business, providing pet owners with everything they need to be able to look after their pet – from food, toys and bedding, and grooming services, right the way through to first opinion veterinary care. Our stores represent a unique environment and provide a practical, fun and unique experience for pet owners. We'll help owners select the right food for their pet with nutrition consultations, help test the water is safe for their fish tank before new fish are introduced, and help socialise a new puppy with socilaisation and training classes - and much more.

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