Profits have fallen at Pets at Home despite a growth in revenues. However, shareholders were buoyed this week by the petcare retailer holding its forecast for the new financial year, even in the face of a CMA investigation into the vet industry.

Total revenues at the group increased 5.2% to £1.5bn in the year to 28 March 2024, with the retail side up 4% to £1.3bn and the vet operation rising 16.8% to £146.5m. Volumes continued to grow for the retail arm but the business experienced a softer performance within accessories.

Underlying pre-tax profits fell 3.2% year on year to £132m. This was the result of issues with short-term availability as the group moved to a new distribution centre, which also held back sales in Q2.

Pre-tax profits sank 13.7% to £105.7m due to a £26.3m hit to costs. However, Pets at Home held profits guidance steady for 2024/25 at £144m.

While the external trading environment had been subdued, it said overall petcare spend had proven resilient.

In the first six weeks of the new year, the vet division recorded low double-digit growth and retail declined 2% as expected.

CEO Lyssa McGowan described 2023/24 as “a pivotal year” that put in place some “key building blocks” for long-term growth.

The group’s shares are down by almost 23% year on year after the Competition & Markets Authority launched an inquiry into the veterinary sector over concerns pet owners were overpaying for medicine. The CMA announced it would push ahead with a full investigation last week.

However, Pets at Home shares bounced back 4.3% to 291p on Thursday following further falls on last week’s CMA decision.

Peel Hunt said the retailer’s results were “far from a disaster against tough comps but food inflation continues to cool and accessories are clearly a tough market”.

It added: “With LFL uninspiring in retail, there is not really anything in the prelims to make the marginal buyer dive in… [But] the cohort of pets that were acquired during the pandemic will become more profitable as time passes, and when LFL and forecast momentum look likely to re-emerge, we believe the shares will be even more attractive.”

Liberum said that, despite wider focus on the CMA’s impact on its vet business, it had particular concerns around the outlook of its retail division. “The group’s Trustpilot reviews may indicate that something is not quite right with customer service and retail standards… this is a concern and could stymie progress on revenues and profits.”

Pets at Home shares are down by 6% year to date, but have already recovered 6% since last week’s CMA announcement.

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