Pets at Home share price plunges amid end of pandemic pet boom and rising costs

Britain’s leading pet retailer, Pets at Home, has witnessed a dramatic fall in its share price as the surge in cat and dog ownership seen during the pandemic comes to an abrupt end. The company’s shares plummeted by as much as 23 per cent on Thursday, erasing over £160 million in value and making it the steepest one-day decline in the firm’s history on the FTSE 250.

This sharp slump follows Pets at Home’s decision to significantly lower its profit expectations for the year to March. Management now forecasts profit before tax to reach between £90 million and £100 million, a second downward revision in recent months after July’s guidance of £110 million to £120 million. The profit warning prompted the sudden resignation of chief executive Lyssa McGowan, leaving the company in search of new leadership amid a period of pronounced turbulence.

Weakening demand for pets is partly to blame, correlating with a rise in employees returning to office work across the UK. Recent data from pet charity PDSA revealed that just 51 per cent of UK adults owned a pet last year, compared with 53 per cent in 2022. This shift reverses a boom which saw an estimated 3.2 million households acquiring new pets during the first year of the pandemic.

Dan Coatsworth, investment analyst at AJ Bell, commented that the earlier tailwind provided by increased pet ownership during lockdown has now faded. With companies recalling staff to on-site work, with almost 50 per cent of British businesses now expecting employees to be present every working day, the previous spike in pet demand has normalised and sales have suffered as a consequence.

Pets at Home also faces mounting operating costs, partially due to measures introduced in Rachel Reeves’s recent tax changes. Higher employer National Insurance contributions, introduced this spring, are forecast to add £18 million in additional costs for the company over the course of the year.

Store sales have declined by around 5 per cent so far this year, and the business noted that the overall retail environment remains subdued. The search for a successor to Ms McGowan coincides with these operational headwinds, underscoring the tough path ahead as Pets at Home seeks to stabilise performance and restore investor confidence.