Pets at Home Group PLC (LSE:PETS) shares fell 8.7% on Monday after the retailer lowered its profit forecast for the year ahead, blaming rising costs and continued consumer caution.
The group now expects underlying pre-tax profit for the next financial year to fall to between £115 million and £125 million, down from this year’s expected £133 million. Analysts had been pencilling in growth to around £142 million.
The downgrade reflects a sharp increase in operating costs, including a £30 million hit from changes to National Insurance, new packaging regulations, and the rebuild of its performance-related pay scheme.
The company warned that its ability to absorb these pressures would depend heavily on how demand and inflation evolve over the coming year.
While Pets said trading in its final quarter was in line with expectations and reiterated full-year guidance for 2025, the outlook for the following year unsettled investors.
Peel Hunt, which has a buy rating on the stock, said the guidance cut was “likely a downgrade for us”, but added that the value of the company’s fast-growing vets division remains underappreciated.
Shore Capital echoed that view, noting that while the retail arm is facing headwinds, the higher-margin veterinary business continues to perform strongly and expand. Management said it had a “robust pipeline” of new vet practices planned for 2025.
Chief executive Lyssa McGowan said the company had completed major infrastructure investments, including a new digital platform and distribution centre, positioning the retail business for recovery in 2026.
In afternoon trading, the stock was off 20.59p at 215.81p.