Pets at Home has cautioned that “urgent and necessary” measures are needed to turn around the firm’s retail arm as the group revealed half-year profits tumbled by more than a third.
Ian Burke, who took over as interim executive chairman after chief executive Lyssa McGowan quit abruptly in September, said the group was “returning to our retailing roots” as he looks to revive the chain’s fortunes.
Pets at Home’s retail business saw underlying profits plummet by 84.1% to £3.5 million in the six months to October 9, offsetting a resilient performance from the vet business and leaving overall group profits down 33.5% to £36.2 million.
Mr Burke said: “For over 30 years, Pets at Home has been a business with a clear purpose, an established market and loyal customer base, but it’s clear that urgent and necessary action is needed to return the retail business to growth to meet both our own expectations and those of our investors.
“I’ve spent time visiting over 100 pet care centres and engaging with colleagues at all levels of the business to establish where the challenges are isolated, resulting in the implementation of a retail turnaround plan with four clear priorities of product, price, execution and cost.
“We are returning to our retailing roots to stabilise and rebuild momentum in our retail business, and to lay the foundations for a new chief executive in due course.”
The group said cost-cutting would be a key part of its retail revival plan, with aims to reduce overheads by around £20 million.
It said it had already begun putting in place a “leaner store operating model” earlier in the year, but is also looking to take action across buying operations, store leases and distribution automation.
“We will continue to look for ways to optimise our cost base either through reducing costs or redirecting them to areas that benefit customers,” the firm said.
Its half-year results showed that retail consumer sales fell 2.3% in the first half, with accessories dropping 5.9% and food off 0.3%.
But sales in the vet business lifted 6.7%, with underlying profits in the division up by 8.3% to £44.9 million.
The firm stuck by recently lowered annual profit expectations for underlying pre-tax profits of £90 million to £100 million, down sharply from the £133 million posted the previous year.
It said the hunt for a new chief executive was continuing to “progress”.
Shares in the firm edged 2% higher despite the half-year performance woes.
Former boss Ms McGowan left in September as the company warned over profits, ending a three-year tenure at the helm.
Russ Mould, investment director at AJ Bell, said: “Britons may love their pets but times are hard and they’re also going to try and seek out the best deals and cut back on nice-to-haves like treats and toys.
“That’s hurting Pets at Home’s retail business, which faces strong competition from non-specialist retailers like supermarkets.
“The one positive area for Pets at Home has been its veterinary arm, which has grown rapidly in recent years, but this is not enough to make up for the failings in the core retail business,” he added.
