Pets and Homes cut its revenue forecast as consumers bought fewer accessories

• Pet and Home shares fell amid annual revenue cuts
• Pet owners are spending less on accessories for their pets, the group says

Pets and Home shares fell on Tuesday after the group cut its annual profit forecast, as a consumer squeeze dampens demand for pet accessories.

The FTSE 250 group said it expected annual underlying pre-tax profit to come in at around £132million, against previous forecasts of around £136million.

The group, which operates around 450 retail stores and 440 veterinary practices, told shareholders that growth across its retail arm was ‘not at the levels we expected’ in the latest quarter.

Revenue grew 4.3 per cent year-on-year to £362.4million in the 12 weeks to 4 January, with 4.4 per cent like-for-like growth. This represents a slowdown from the 6.5 percent revenue growth seen in the previous six months.

Pets and Home said this was largely due to its retail arm, which reported sales growth of 3.5 percent for the quarter.

Pet and Home shares fell 1.98 per cent or 5.8p to 287.20p on Tuesday, having fallen more than 13 per cent over the past year.

The group said there was ‘soft’ demand for accessories during the period, while price inflation also slowed.

Inflation across the group’s retail arm slowed to 3.2 percent in the period, down from 5.6 percent in the previous quarter and helping offset weaker-than-expected sales.

Pet ownership, which has increased during pandemic lockdowns when people work from home, has boosted demand for the company’s veterinary services and food products.

But, customers are more cautious about discretionary spending for their furry companions, amid an uncertain economic environment.

Recent findings have shown that ‘dogflation’ has risen at more than double the rate of inflation in the UK, with landlords struggling to keep up with rising costs.

Victoria Scholar, head of investment at Interactive Investor, said: ‘The cost of living crisis, high inflation and higher interest rates have squeezed household budgets, reducing discretionary spending in the economy in unimportant things.

‘Individuals and families are making cutbacks with spending on their furry friends, with Pets at Home facing a drop in demand for its pet supplies, toys and accessories as a result.’

Weaker retail performance was partially offset by continued strong growth in its veterinary business, which saw revenues rise 13.4 per cent in the quarter.

Chief Executive Lyssa McGowan said: ‘While the slower market over the peak means our sales growth has not quite hit the levels we had hoped for, the business remains well positioned to benefit from the long-term growth in the sector.’

In an upbeat note, the group added: ‘Our balance sheet remains strong and we expect to end the year in a net cash position, having returned more than £100 million to shareholders through ordinary dividends and our continued which is buying the share.’