While the retail sector faces widespread growth stagnation, pet healthcare services are experiencing remarkable vitality. The latest Q3 FY2025 financial report from UK pet retail giant Pets at Home paints a clear picture of this contrasting landscape. Covering the 14 weeks ending January 2, 2025, the report highlights challenges in retail operations while underscoring veterinary services as the company's primary growth driver.
Performance Overview: Retail Under Pressure, Veterinary Services Shine
Pets at Home Group reported total Q3 revenue of £361.6 million (approximately $449.5 million/€431.1 million), representing a 0.2% year-over-year decline, with like-for-like (LFL) revenue down 1%. Retail revenue fell 2.4%, with LFL retail sales declining 2.8%, indicating significant pressure on this segment. However, the veterinary division's strong performance offset retail weaknesses, posting 21.3% revenue growth and 19.9% LFL growth. Combined consumer revenue, including joint venture veterinary clinic sales, grew 2.3% to £468 million.
Retail Challenges: Declining Footfall and Rising Costs
The company attributed retail difficulties to Britain's challenging market conditions, particularly noting decreased customer traffic after October. Additionally, relocation of the Northampton distribution center incurred £11 million in non-underlying costs, exceeding the initial £7 million estimate. These factors collectively impacted retail profitability.
Veterinary Services Emerge as Growth Catalyst
In stark contrast to retail struggles, veterinary services demonstrated robust expansion. The 21.3% revenue increase and 19.9% LFL growth underscore growing consumer demand for pet healthcare. With clinical full-time employees increasing 7% to 3,500, Pets at Home continues investing in this strategic growth area.
Key Metrics: Membership Loyalty and Subscription Growth
Active Pet Club members grew 5% to 8.2 million, demonstrating customer retention success. However, average spending per user declined 1% to £175, potentially reflecting economic pressures. Notably, subscription-based revenue grew 27% year-over-year, now representing 12.7% of consumer income, indicating this model's growing importance for revenue stability.
Outlook: Maintaining Profit Guidance Through Cost Management
Despite retail headwinds, Pets at Home maintains its Q2 profit guidance, anticipating modest underlying pretax profit growth for the year. This outlook reflects strong holiday season sales and ongoing gross margin/cost control measures. The company expects to complete its Northampton facility exit by FY2025 year-end, projecting reduced financial burdens in FY2026.
Strategic Recommendations: Service Diversification and Digital Transformation
Facing retail sector challenges and veterinary opportunities, Pets at Home could optimize its business mix by increasing veterinary investments and expanding ancillary services like grooming and boarding. Accelerating digital transformation to enhance online sales capabilities may help address shifting consumer behaviors, while continued cost control could improve competitive positioning.
The Q3 results demonstrate Pets at Home's dual reality of retail sector pressures and veterinary growth potential. Strategic adjustments focusing on service diversification, digital capabilities, and operational efficiency may position the company to maintain leadership in Britain's evolving pet care market.