Rising Cost of Living Pops the COVID Pet Bubble
Pet parents have learned a new trick: Fetch — but don’t bring the ball back. The cost of pet ownership has soared, and some pet owners are giving up the responsibility. Animal shelters have been filling up across the US, with some at 170-180% capacity — and 9.5% of people cite finances for giving up their furry friends.
- In August, the cost of pet products rose 5.1% while pet services jumped 8.5% from a year ago — both higher than the broader 3.7% CPI growth.
- Last year, pet industry sales grew 10.8% to $136.8B, with inflation making up a large portion of that growth.
But even before COVID, consumers were already splurging more. Between 1990-2021, pet item spending grew 6.5% annually — higher than the 4.6% personal expenditure growth — while pet spending as a percentage of total spending has nearly doubled.
Throw a (cheaper) bone: In recent months, pet supply companies have warned that consumers are pulling back on pet expenses or trading down to more affordable products.
- Sales growth of pet toys and supplies have slowed in recent quarters — sending Chewy (NYSE:CHWY) and Petco (NADSAQ:WOOF) down over 80% from their 2021 peaks.
- Others are taking the opportunity to expand, with competitor Lowe’s (NYSE:LOW) announcing plans in July to expand its Petco partnership to bring its pet section from 15 to 300 stores.
Your pet isn’t going to like this part…
One area of the industry that has been more resilient to the downturn? Vet services — known to be a recession-proof industry, leading private equity firms to ramp up their vet clinic investments in recent years. Per Morgan Stanley, pet services are expected to be the fastest-growing part of the sector — with vet care and products making up 26.2% of the industry’s sales.
Yesterday, Walmart (NYSE:WMT) announced plans for a new dedicated pet services center in Dallas, Georgia — with plans to open more. The facility will be operated by pet veterinary company PetIQ (NADSAQ:PETQ) — which already has 65+ vet clinics inside Walmart stores.