Pets at Home boss eyes recovery as lower prices reel in shoppers despite profits slump
The new boss of Pets at Home yesterday insisted it has ‘great potential’ as it showed signs that lower prices are reeling in shoppers – despite a slump in annual profits.
The FTSE 250 group said its shops have struggled against a ‘subdued market backdrop’, as it revealed a 28 per cent fall in profits to £86.5million in the year to March 26.
But chief executive James Bailey, who started in the role in March after more than five years running supermarket Waitrose, said it had ‘many strengths’ as he looks to turn around its fortunes.
Pets at Home profits took a hit after it made an average 12 per cent price cut on more than 1,000 pet food products in November last year – a move that it hoped would help win back customers.
The chain, which sells everything from small animals such as rabbits and hamsters to pet food, beds and toys for cats and dogs, said annual sales fell 0.8 per cent to £1.47billion.
This was driven by a 1 per cent fall at its shops arm, while revenue rose 5 per cent at its veterinary arm.
Recovery hopes: Pets at Home said its shops have struggled against a ‘subdued market backdrop’, as it revealed a 28% fall in profits to £86.5m in the year to 26 March
A slump in consumer confidence has taken its toll and last year a flurry of profit warnings triggered the abrupt departure of former chief executive Lyssa McGowan.
But Bailey said that ‘material progress has been made over the past six months, stabilising the retail business, delivering improved satisfaction and better availability’.
And investors were cheered by news that sales at its retail division rose 0.4 per cent in the second half of the year in a sign of green shoots of recovery coming through.
This compared to a 2.3 per cent decline in the first half. Shares climbed 6.5 per cent, or 12p, to 197.2p yesterday.
But they have lost nearly a quarter of their value over the past 12 months and analysts said Bailey still faces an uphill battle to revive the business.
AJ Bell investment director Russ Mould said it was ‘badly in need of some renewed pep’ as its retail arm is ‘really suffering from competition from non-specialist rivals like supermarkets’.
He said it has also been hurt by ‘consumers dialling back their spending on toys and treats for their feathered and furry friends’.
The group has launched two own-label pet food brands – Ruff’s Recipes and Willow’s – to appeal to hard-pressed consumers and is also pinning its hopes on upcoming launches of new accessories.
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