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Pets at Home is in the doghouse. And not the padded fabric kind found on the retailer’s own shelves. The UK purveyor of pet food, supplies and medicine is getting mauled: in the past six months, pre-tax profit at its retail business, which makes up around two-thirds of revenue, the rest coming from sales to vets, fell by over 80 per cent.
Dog demographics are not on Pets At Home’s side. The great pandemic pet boom created a surge in demand for beds, collars, crates and treats as new owners kitted out a new generation of companions. Those mollycoddled pups have aged into a cohort of adults requiring less in the way of maintenance. The overall dog market is about flat in sales terms, the company posits, accessories suffering more than food.
The decline in Pets At Home’s revenue suggests it is faring worse than the average, and gross profitability has been dented by competition. The problem, it would appear, is that canines have fashion trends too, which Pets At Home has misjudged.
In accessories — theoretically the business with the highest gross margins — online rivals such as Amazon and Temu are tough to beat on price, analysts at RBC note. Both, along with online pet platforms like Pets Corner and the US’s Chewy, are nimbler in spotting the next big thing, be it GPS-enabled collars or smart feeders.
Meanwhile, dog food is no longer just dried pellets. It can be raw, freeze-dried, insect-based or probiotic. Startups like Butternut Box and The Farmer’s Dog, which offer a subscription-based experience, and Tuggs, which produces insect-based food, have turned pet food into a lifestyle choice. Online platforms are aggressively staking a claim on that market too.
Pets At Home is partly to blame for its woes. Investing in food and accessory innovation might get sales growing again. As the pandemic pet generation ages, demographics should become more favourable: more supplements and orthopaedic dog beds.
The challenges Pets At Home faces are not dissimilar to those of High Street fashion retailers, struggling to compete with cheaper and quicker internet giants. The group’s valuation, at less than one times this year’s forecast revenue according to S&P Capital IQ, reflects that.
Across the Atlantic, shares in US petcare chain Petco have slumped nearly 90 per cent in five years. Pets are easy to love; listed pet stores, it turns out, not so much.
gaia.freydefont@ft.com