Pet ownership falls in hard times

Even though fewer people have pets, owners are still willing to spend plenty on them. PetSmart's earnings Wednesday prove this trend continues.

By Jonathan Berr Nov 14, 2012 3:11PM
Shares of PetSmart (PETM), the largest pet supplies retailer, have gained more than 150% over the past five years, outperforming larger big-box chains such as Wal-Mart (WMT), Target (TGT) and Macy's (M). This proves that even during tough economic times, people will continue to lavish attention on their pets. 

The trend of humans spoiling their pets is evident in PetSmart's earnings reports this afternoon. Not only did the retailer post better-than-expected results, but it also raised its earnings guidance for the year.
Shares of the Phoenix, Ariz., company are surging in after-hours trading as investors bet that pet owners will not only buy their furry friends holiday presents but wrap them too.

Wall Street anticipates the good times will continue for PetSmart. The average 52-week price target on the stock is $73.63, more than 12% above where it currently trades. Not surprisingly, its shares are trading at a multiple of 22.1, its highest point in five years, according to Reuters. The stock, though, may have more room to run.

While data from the American Veterinary Medicine Association (AVMA) shows a 2.4% drop in pet ownership between 2006 and 2011, people appear willing to spend more on the animal companions that they do keep. The American Pet Products Association estimates that owners will spend $52.87 billion on their pets this year, up from $38.5 billion in 2007, a gain of nearly 40%. This track record has got to be the envy of many industries that have struggled through the worst economic slowdown since the Great Depression. And it shows a few things about the human/pet relationship.Credit: Trilogy Antiques & Design

One is that pet owners are more willing to spend money on advanced treatments from specialists than they were a few years ago. There are also more high-end products for "pet parents" to buy. One pet supply e-tailer advertises a "royal ruby detachable skirt" for $330. Cat owners with money burning a hole in their pockets can do even better. A Michigan antique and design shop is listing a cat play house (pictured) designed by Frank Lloyd Wright for $14,500, according to Brandon Nelson, owner of Trilogy Antiques & Design.

There are some interesting differences between the spending habits of dog and cat owners.

According to the AVMA, there were 130.4 million veterinary visits for dogs in 2011, a 9.2% increase from 2006. Cat visits, however, fell 4.4% during that same time, a trend that is worrisome to vets, according to Tom McPheron, a spokesman for the organization. One problem may be that cat owners believe the myth that their animals have nine lives. "There is a perception that cats don't need to receive as much health care as dogs," he said.
But both dog and cat people agree that nothing is too good for their furry companions.

Jonathan Berr is long Target. He is the proud owner of Sadie, Mel and Tanner, three of the most spoiled cats in existence. Story has been updated to include PetSmart's earnings.  Follow him on Twitter@jdberr.

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