Pets at Home Shares Dip 3% Despite Solid Full-Year Profit Beat as Vet Services Growth Moderates

London, October 10, 2025 – The London stock market fell 3 per cent in afternoon trading on Friday on shares of the Pets at Home Group PLC, the biggest pet care retailer in the UK, as it announced the results of its full-year activities that were above expectations but showed that the high-margin veterinary services unit was not performing very well.

The FTSE 250-quoted company that has more than 450 stores and a network of veterinary practices also pointed to robust retail sales but volatile growth in the professional services because of inflationary consumer expenditure pressures.

The Handforth-based company posted pre-tax underlying profit of PS136.6 million in the 52 weeks ended July 13, 2025, which is higher than the analyst expectations of PS132 million. The group revenue increased to PS1.45 billion by 4.6%, and the like-for-like sales grew 2.8% following a growth of 6% in its retailing side.

Vets4Pets and Companion Care divisions, however, experienced a growth in revenue of 7.5 per cent against 12 per cent last year, raising some investor worries that the company may struggle to maintain its margin in a cost-conscious setting.

The shares of Pets at Home dropped to 268 pence per share and wiped out PS50 million of its PS1.2 billion market cap and trailed the FTSE 250 by 0.1%. To date, the company has declined by 8 per cent on a year-to-year basis, representing the retail industry issues more broadly, but the profit’s better-than-expected performance first created optimism of a recovery.

Resilient Profitability in the Pet Boom Challenges

The annual report of Pets at Home referred to a solid performance in a year of economic volatility, with pet parenting, which currently influences 62% of UK households, holding the high-end food, accessories and grooming markets.

Its retail business, which includes its Vets4Pets, made PS1.1billion sales, up 3.8%, driven by own-label, which took 45 per cent market share, and e-commerce increased 15 per cent through its app and its site.

The CEO, Peter Singleton, focused on strategic investments: “We have strengthened our omnichannel environment, combining brick-and-mortar shops with digital convenience to support the changing needs of pet owners.

Highlights were that there was an increase in subscription services such as the Complete Care plan (bundled vet visits and insurance) by 20 per cent, and it brought PS80 million in recurring revenue. Gross margins were maintained at 38.5 per cent, which was supported by supply chain efficiencies that counter a 5 per cent increase in freight costs.

The veterinary division, which brings 25 per cent of profits, is also a driver of growth, with 530 practices currently being managed. However, the number of appointments increased by only 4% due to clients delaying non-urgent procedures under the cost-of-living pressure. Singleton said, “Inflation at 2.1 is easing, though discretionary spending on pet health is breathing less easily; we are making a cut on value-added packages.”

Market Reaction Signals Caution on Services Slowdown

The share slide reflects investor caution in the PS8 billion UK pet industry, where pet expenditure had stalled at PS1,200 per head a year following the pandemic influx. The reduction in the growth of the vets was a warning sign to traders, and one of the City analysts noted, “The Pets at Home retail stronghold was good, but services were the profit booster; any outlet was exposed to several forms of compression.

The stock trades at 11 times forward earnings, a discount compared to peers like CVS Group at 14 times. However, the drop has caused the yield of the stock to fall to a seductive 3.9%.

This is after a transformative year: In June, Pets at Home bought a 50.1% majority stake in its vet joint venture, PS250 million, and acquired full ownership, along with the potential to accrue 10% EPS each year.

The transaction, which was financed through a PS200 million rights issue, leaves the group in a position to combine its services in a more seamless manner in an attempt to achieve PS50 million synergies by 2027. Interim dividend was held at 6.7 pence, which was proposed to be final at 10.1, and is equivalent to 16.8, 5 per cent up, and 1.6 times covered.

The outlook to the new fiscal year is 3-5% revenue increase and PS140 million underlying profit, with no significant inflation fluctuations and no significant supply shocks. The analysts are celebrating the prospects in which the mean price forecast stands at 320 pence, which means a 19 per cent growth.

Expansion and Innovation to Drive Future Gains

Pets at Home is also speeding up the expansion of its stores with an expansion of 30 stores and 50 vet clinic remodels in 2026, with further expansion to the less served suburbs. A PS100M internal investment initiative will improve in-store technology, such as AI-based health scanners to identify early signs of disease, which will increase the use of the vets by 15%.

Sustainability is in the limelight, and 70% of the packaging is currently recyclable, and they have decided to attain 100% sustainable fish food by 2028. Such attempts are heard: 75% of customers mention eco-factors in their choice, according to the internal surveys.

On an international level, there is potential expansion in terms of franchise models through which the company can expand by adding PS100 million in sales by the end of the decade through exploratory talks of European entry.

Singleton reinforced the element of community affiliation: “Pets are family- we are dedicated to affordable care. This will involve free microchipping and collaborating with the RSPCA, boosting brand loyalty in a market where 80 per cent of owners remain loyal to familiar ones.

Economic Forces and Segment Forces

Headwinds persist. An increase in the veteran wage, which increased by 7 per cent following an increase in the national living wage and an increase in medicine costs, which increased by 6 per cent, pressured the operating margins to 9.4 per cent.

Wider retail footfalls, which are decreasing by 1 per cent in the industry, are putting pressure, but Pets at Home has 95 per cent store occupancy against the trend. Regulatory risks loom, as the government conducts a review of the prices of the pet insurance, which may limit the premiums to an 8 per cent growth rate.

The industry has a balanced future: 4 per cent CAGR to PS10 billion in 2028 forecasted, with the trend of wellness, such as preventive nutrition. The main competitors, like Jardine Pet Services, are trailing behind with 2% growth, highlighting the dominance of 25% market share by Pets at Home.

Economic Pressures and Sector Dynamics

The value hunters can be attracted to Friday because the forward P/E of the stock of 10.5x does not reflect its ecosystem moat. Analysts such as Shore Capital have been pinned to the ground with the full control of vets and anticipate a 12% growth in the EPS. With the outcome in the future pulling further than the November capital markets day, the emphasis narrows in on services rebound.

This is not just selling to a nation where pets have more than children- Pets at Home is cultivating a PS100 billion lifetime value per customer. Unconditioned pet love tailwind, though shaky, ensures this profit win, and positions shares in the prospect of another wag of market approval.