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Friday, August 26, 2016
Pet-care stocks rises because of devotion of pet-owners.
Americans' attachment to their pets has fostered a $60 billion industry that is producing best-in-breed stock performance. Shares of a clutch of companies that sell pet food, develop diagnostic tests for animals and offer veterinary care have far outrun the wider market this year, delivering an average total return of nearly 35 percent versus around 8.3 percent for the Standard & Poor's 500 (SPX).
Shares of animal health testing company Idexx Laboratories Inc (O:IDXX), for example, have skyrocketed more than 50 percent this year, while vet clinic operator VCA Inc (O:WOOF) is up 31 percent and pet food maker Blue Buffalo Pet Products Inc (O:BUFF) is up 40 percent.
"What you see driving that growth is the humanization of pets and consumers' willingness to spend on their pets very heavily," said Joe Edelstein, an analyst at Stephens Inc. "Part of that is because pets are part of the family."
Last year, U.S. pet-related spending totaled a record $60.3 billion, a 3.9 percent increase over the previous year, according to the American Pet Products Association.
According to the U.S. Bureau of Economic Analysis, U.S. consumers' spending on their pets rose 5 percent in inflation-adjusted terms last year while overall consumer spending rose 3.2 percent. It was the fourth straight year that growth in spending on pet services and products exceeded growth of consumer spending overall.
Blue Buffalo and Freshpet are representative of the success of pet food, the industry's leading source of revenue, and are making the most of the trend toward natural, locally sourced ingredients.
"We see continued growth of 'better-for-them' pet food products in both cat and dog," said Phil Terpolilli, a Wedbush Securities analyst. "Adoptions in U.S. dogs continue to grow meaningfully."
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