Pets at Home shares surged more than 14 per cent this morning as evidence grows that the UK’s competition watchdog is moving toward a positive conclusion for the industry.
The animal care retailer’s share price has been under pressure recently due to a Competition and Markets Authority probe into the veterinary sector.
Investors are concerned the body will impose stricter regulations on the sector.
However, Jeffries analysts have suggested that changes are “likely to be largely limited to improved transparency and regulation”, and reported increased confidence price controls will not be implemented.
The CMA’s probe, which prompted over 56,000 responses from the public and vet industry, has been looking into the UK’s vet industry following concerns pet owners are not getting value for money.
The investigation is key for Pets at Home, as its growth has been driven by revenue in its veterinary arm recently, with like-for-like growth of 19.9 per cent in the 12 weeks to January 2. Retail revenue fell 2.8 per cent in the same period.
The most recent published papers on the probe, released by the CMA on February 6, noted concerns that customers had a limited choice of services and said that the price of vet services has risen faster than inflation.
However, Jefferies analysts noted that profit margins in the sector are “largely unchanged,” adding that the CMA is unlikely to implement broad pricing control measures.
“Our expert is optimistic about the outlook for the sector, believing that the trading headwinds are ‘transient’ and that, once the overhang of the CMA investigation is cleared, the industry will have much greater clarity on how it can progress and be profitable,” Jefferies said.
Animal care is a large and growing market – in 2022, consumers in the UK spent nearly £10bn on pet-related products, up nearly 100 per cent in a decade.
Pets at Home has more than 400 surgeries across the UK.
City AM has contacted Pets at Home for comment.