Pets at Home was founded in 1991, opened its first shop in Chester and grew into Britain's best-known specialist pet-care retailer. It floated in London in 2014 after years under private-equity ownership, including KKR, and is now a FTSE-listed business built around three activities: shops, vets and, soon, insurance.
The latest figures are mixed. Group revenue slipped by 0.8% to £1.47bn. Consumer revenue, a broader measure that includes sales made through joint-venture vet practices, rose by 1.0% to £1.98bn. Yet profit fell sharply: pre-tax profit dropped 28.3% to £86.5m, while underlying pre-tax profit fell 30.2% to £92.8m.
The damage came mainly from retail. Retail revenue fell 1.0% to £1.29bn, but retail underlying pre-tax profit slumped 57.8% to £30.8m. This shows that the shops did not merely sell a little less, they made much less money from what they sold. Retail gross margin fell by about 180 basis points, partly because the company cut prices on more than 1,000 food products by an average of 12% to regain competitiveness.
While price cuts helped food volumes grow in the fourth quarter, and management says retail sales have improved since the turnaround plan began, the year's accounts show how fragile retail profit can be when sales are soft and fixed costs remain heavy.
Where the real profit lives
The more attractive part of Pets at Home is not the pet-food aisle but the consulting room. Vet Group consumer revenue rose 5.0% to £688m, and Vet Group underlying pre-tax profit rose 10.4% to £83.8m. Its underlying margin reached 47.4%, far above the 2.4% margin in retail. The company opened eight new vet practices and extended 17 more, while clinical headcount rose 3.5%.
On paper, Pets at Home is still a retailer, but in profit terms, it increasingly looks like a veterinary-services business with a retail chain attached. The vet arm benefits from a joint-venture model in which practice owners run local businesses while Pets at Home earns fees and provides support. That model is capital-light: Vet Group free cash flow rose 9.9% to £74.2m, while Retail free cash flow collapsed to just £2.7m.
The regulatory cloud over the veterinary market also seems less dark than feared. The company says the Competition and Markets Authority's final decision recognised that its practices offer competitive prices and strong customer outcomes. Still, regulation remains a risk for the whole sector, particularly if politicians and consumers keep focusing on the rising cost of pet care.
Pets at Home is also preparing to launch pet insurance in 2026. The logic is clear: customers who buy food, visit vets and join care plans are natural targets for insurance. But new ventures cost money before they make it. Insurance start-up costs were £5.2m in the year and are expected to be slightly higher in FY27.
Cheap, or merely cheaper?
For investors, the valuation is no longer heroic. Based on a recent share price of about 193p and market capitalisation of roughly £820m, Pets at Home trades at about 13 times its earnings. The market is not pricing Pets at Home like a growth darling, nor is it treating the company as broken.
However, the company's news CEO James Bailey reassured investors after the earnings report, with Pets At Home shares rising 4.7% today. He joined the company at the end of March after former CEO Lyssa McGowan departed in September following a profit warning. A former managing director of Waitrose, Bailey also previously worked at J Sainsbury, bringing seasoned UK retail experience to the role.
The company also plans another £50m share buyback, which may flatter earnings per share if profits stabilise. Management expects FY27 underlying pre-tax profit to be around consensus of £98m, above this year’s £92.8m. Investors must weigh the strength of the vets business and the value of the customer base against a retail operation that has just shown how quickly margins can vanish.
