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Pets at Home Warns on Profit as Covid-Era Boom Eases Off

A Pets at Home Ltd. store in London. Photographer: Jason Alden/Bloomberg (Jason Alden/Bloomberg)

(Bloomberg) -- Pets at Home Group Plc dropped after warning that weak consumer confidence and the slowing of a pandemic boom in pet ownership will result in lower than expected profits.

The stock slumped 14% in London, taking it down almost a quarter since the start of the year. The company now expects underlying profit before tax for fiscal 2025 to grow modestly from last year’s £132 million ($166.5 million), according to a statement. That’s compared with previous guidance of about £144 million.

Consumer weakness, smaller price increases and a stabilization of pet ownership following Covid-era highs are key factors, Chief Executive Officer Lyssa McGowan said in an interview. “We expect two of those, inflation and normalization, to unwind. But it’s a bit harder to call how long the consumer weakness will last,” she added.

Growth in the pet market is down from the pandemic when Britons flocked to buy dogs and cats to keep them company while they worked from home. Pets at Home averaged over 24,000 puppy and kitten signs-up a week in fiscal 2023. Now, it is about 15,000, McGowan said.

Budget Hit

Consumer confidence has been low in recent months, partly due to fears of tax hikes in the Labour government’s October budget. However, Chancellor of the Exchequer Rachel Reeves targeted businesses instead of voters for her more than £40 billion in revenue-raising measures.

Increases to Britain’s minimum wage and a payroll tax called employers’ national insurance contributions will cost Pets at Home an extra £18 million in fiscal 2026.

“We’ll be looking at consumer pricing, we’ll be looking at our efficiency initiatives, at automation,” McGowan said, explaining how her business would cope with higher costs. The company is not planning job cuts, she added.

(Adds detail on pet ownership and updates share price, from second paragraph.)

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