Pets at Home has seen its share price collapse by 59% over five years, raising the obvious question of whether the battered FTSE 250 stock now represents value.
The company operates two distinct divisions: a retail consumer arm spanning 460 stores and a veterinary business covering approximately 440 practices across the UK.
Both divisions have faced serious pressure, with consumer belt-tightening reducing discretionary spending on higher-margin pet accessories and the Competition and Markets Authority investigating pricing in the UK veterinary sector.
In FY26, which ended 26 March, the retail division’s underlying pre-tax profit slumped 58% to £30.8m, a dramatic deterioration that underscores just how difficult conditions have been on the consumer side of the business.
The veterinary division offered a counterbalance, with profit rising 10% to £83.8m, though that wasn’t enough to prevent group pre-tax profit from falling 30% to £92.8m.
CEO James Bailey is now overseeing a turnaround effort in its early stages, which has included cutting prices on over 1,000 food lines to better compete with supermarkets and online rivals.
Early signs from Q1 FY27 suggest the strategy may be starting to work, with retail consumer revenue climbing 4.9% to £399m, which Bailey described as evidence that the turnaround plan was “gaining traction”.
The company’s Pets Club loyalty programme currently counts 7 million active members, providing a substantial and engaged customer base that management can market directly to.
The veterinary division continued growing ahead of the broader market in Q1 FY27, with more than 50% of clients now enrolled in a recurring Care Plan, supporting more predictable revenue streams.
The outcome of the CMA investigation proved less damaging than many had anticipated, removing one significant overhang that had weighed on investor sentiment for some time.
On valuation, Pets at Home trades at roughly 12.5 times FY27 forecast earnings, which is broadly in line with the FTSE 250 average rather than the deep discount some bargain hunters might hope for.
The dividend was slashed by almost 50% last year, falling from 13p to 7.4p per share, producing a yield of approximately 3.5% that sits close to the FTSE 250 average.
Any meaningful recovery in the share price will likely depend on the retail division returning to sustained growth, which faces headwinds from expected rises in fuel and food prices in the months ahead.
With the stock appearing fairly valued rather than obviously cheap, and execution needing to be near-flawless against a tough consumer backdrop, the case for buying at current levels remains far from straightforward.
