FY26 Interims: Retail stumbles, Vets deliver, guidance held
Pets at Home’s half-year numbers show a tale of two businesses. Retail is weak, vets are strong, and management has launched a turnaround plan focused on product, price, execution and cost. Despite the wobble in Retail, full-year guidance is unchanged.
Key numbers investors need to know
| Metric (28 weeks to 9 Oct 2025) | FY26 H1 | YoY |
|---|---|---|
| Group statutory revenue | £778.3m | -1.3% |
| Group like-for-like (LFL) revenue | -1.3% | – |
| Underlying PBT | £36.2m | -33.5% |
| Underlying PBT margin | 4.7% | -c220bps |
| Retail underlying PBT | £3.5m | -84.1% |
| Vet Group underlying PBT | £44.9m | +8.3% |
| Underlying basic EPS | 5.7p | -32.1% |
| Interim dividend | 4.7p | Flat |
| Free cash flow | £34.0m | +2.6% |
| Adjusted net debt (pre-lease) | £12.0m | vs £8.3m |
| Pets Club members | 7.9m | -2.4% |
| Subscriptions as % of consumer revenue | 14.6% | up from 11.4% |
Note: “Underlying” strips out non-underlying items; “LFL” compares sites open more than 52 weeks; “consumer revenue” includes the gross sales of joint-venture vet practices to show market share more clearly.
What drove the result: retail in the doghouse
Retail consumer revenue fell 2.3% to £679.9m against a flat market with “no inflation of note”. Food was resilient at -0.3%, but accessories slumped 5.9%. Retail gross margin was 44.1%, down 105bps, with the hit coming from targeted price investment (c40bps), adverse mix (c30bps) and lower supplier income (c20bps). Retail underlying PBT collapsed to £3.5m and margin to 0.5%.
Management calls out three main issues:
- Advanced Nutrition exposure to legacy brands while growth shifted to premium direct-to-consumer entrants.
- Accessories weakness for more than three years, with gaps in product, price points and execution.
- Disruption from the new Stafford distribution centre and the replatformed digital setup, which created execution issues and dissatisfied customers.
Actions are underway. Prices on over 1,000 food products were cut by an average 12% (c£4m invested), “Pets Club Prices” launched, and Q2 saw double‑digit online growth after the platform bedded in – although stores remained soft. The turnaround plan is pragmatic and back-to-retail-basics: fix product ranging, stay sharp on price, execute better, and strip out cost.
Vets purring: high-margin growth and cash
The Vet Group continues to be the engine. Consumer revenue rose 6.7% to £375.9m, with like-for-like up 6.7%. Underlying PBT came in at £44.9m, up 8.3%, and margin expanded to 45.7% (+c90bps), helped by operational gearing from higher joint-venture (JV) practice revenues and improved profitability in managed practices.
Growth was driven by higher average transaction values and the continued build of Care Plan subscriptions – now with over 50% of clients on a plan. Visits were “more subdued” as more pets move into healthy mid-life, but the longer-term cohort dynamics and planned practice openings/extensions look supportive. H1 saw 5 new practices and 3 extensions; management still sees scope for 100 new practices and 100 extensions over the medium term.
Subscriptions, digital and customer metrics
- Subscriptions now 14.6% of Group consumer revenue, up from 11.4% a year ago, driven by Easy Repeat and Care Plans.
- Pets Club members fell 2.4% to 7.9m, reflecting a weaker retail active customer base.
- Average consumer value per member rose to £185, helped by vet spend.
- Puppy & Kitten sign-ups averaged c17k per week, up 13% YoY – a decent pipeline for future vet demand.
Costs, cash and the balance sheet
Operating costs were tightly managed – broadly flat excluding insurance start-up costs, and up 1.2% including them – well within guidance for no more than 5% growth this year. A restructuring is underway to remove £20m of overhead, with non-underlying costs of £6-8m in FY26 and full run-rate benefits from FY27.
Free cash flow edged up to £34.0m, but it was almost entirely driven by Vets (£53.6m) and a working capital timing benefit that unwinds in H2. Retail free cash flow was -£11.1m. Cash stood at £49.0m; adjusted net debt was £12.0m (before £338.0m of lease liabilities). The £25m buyback is 50% complete and the interim dividend is held at 4.7p.
Outlook: guidance held, H2 hinges on Retail improvement
Pets at Home keeps FY26 underlying PBT guidance at £90-100m. Within that, management expects Vet Group PBT of more than £80m. Retail is “improving sequentially” but still behind a flat market; slight positive Retail LFL is expected in H2 as the business laps soft comparatives. Insurance remains on track to launch in 2026, with FY26 losses now expected to be around £5m (from £3m). Year-end net debt is guided to c£25m and the full-year tax rate to 27-28%.
Turnaround plan: what matters and why
1) Product reset
The core issue is ranging – especially in Advanced Nutrition and accessories. Expect a shift toward faster‑growing premium propositions, more own-label innovation, and new third‑party brand partnerships. This will take time but is the biggest lever to recapture share.
2) Price discipline
Price investment is already visible and is improving value perception. It pressures margin near term but is necessary if the business is to compete with DTC brands and grocers. The key is marrying stronger value with differentiated product.
3) Execution in stores and promotions
The business has launched many initiatives; execution lagged. Management is simplifying plans, tightening promo and price change processes, and fixing the in‑store rollout of Easy Repeat.
4) Cost simplification
Overheads fall by £20m as the organisation is streamlined. That should protect profit while product changes bed in and, sensibly, is expected to have less than 12 months’ payback.
Positives vs negatives in today’s print
- Positives: Vet growth, margin and cash remain sector-leading; subscriptions are growing; digital platform now performing; dividend maintained; buyback ongoing; cost actions at pace; FY guidance unchanged.
- Negatives: Retail has lost share in a flat market, with margins squeezed; Pets Club membership down; H1 cash benefited from timing that unwinds in H2; restructuring costs of £6-8m to come; insurance start-up losses increased; CMA review still ongoing (provisional findings acknowledged).
What I’m watching into Q3
- Retail LFL trend – does Q2’s sequential improvement continue and do stores start to stabilise alongside strong online?
- Advanced Nutrition range resets – evidence of premium mix shift and own-label traction.
- Accessories – early signs that new buying and merchandising capability is landing with better sell-through.
- Vet execution – practice openings/expansions on track to underpin “>£80m” PBT.
- Cash conversion – how much of the H1 working capital inflow unwinds, and progress toward c£25m year-end net debt.
- Cost-out delivery – clarity on timing of the £20m overhead reduction and FY27 run-rate.
My take
The investment case is increasingly about whether Retail can stop the slide while the Vet engine hums along. Management is being honest about the root causes and is acting on the controllables. The price cuts, product reset and cost simplification should help, but the full effect will take time, and near-term margin pressure is the trade-off.
On the other side, Vets continue to justify a premium multiple – high margins, capital-light cash generation and clear levers for growth. With guidance intact and cash returns ongoing, the downside looks cushioned, but H2 depends on Retail’s stabilisation. If the turnaround gains traction, Pets at Home still has the assets – scale, brand, subscriptions and a first-class Vet business – to get back on the front foot.
