(Reuters) -Britain's Pets at Home Group on Monday said it expects its fiscal 2026 underlying pretax profit to plunge due to rising costs and subdued demand for pet accessories, sending shares down by as much as about 15% in early trading.

The rising cost of living and an uncertain economic environment have prompted UK consumers to not only cut back on discretionary purchases but also reconsider adding pets to their households.

Given the tough conditions, the company said it expects underlying profit in its retail business to fall year-on-year in 2026.

Pets at Home is also facing additional costs increases from investments in marketing and variable pay, on top of the expected impact of about 18 million pounds ($23.34 million) from higher social security contributions and minimum wages.

The retailer said it plans to curb the increase in its operating costs to no more than 5%, through cost-saving actions and productivity initiatives.

Jefferies analysts said that while the retailer's 2026 outlook is disappointing, it will be a "limited surprise" to the market.

"The combination of slower retail LFLs (like-for-likes) and external cost headwinds was increasingly looking a heavy burden for the business to carry into FY26 while still delivering growth," they added in a note.

Underlying pretax profit for fiscal 2026 is expected to drop between 6% and 13.5% from 2025 levels, reaching 115 million pounds to 125 million pounds.

For the fiscal year ended March 27, the retailer expects to report an underlying pre-tax profit of 133 million pounds, in line with analysts' consensus, which ranges between 132 million and 137 million pounds, according to a company-compiled poll.

($1 = 0.7711 pounds)

(Reporting by Raechel Thankam Job in Bengaluru; Editing by Sherry Jacob-Phillips and Louise Heavens)