Pet industry stocks lag S&P 500 in 2021, but grew revenue

Adjusted earnings for an index of publicly traded pet companies grew 67.7% in the first half of 2021, up from 36.8% in the prior-year period.

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(Kovbasniuk | BigStock.com)
(Kovbasniuk | BigStock.com)

A stock market index of pet food and service industries fluctuated dramatically between December 2020 and September 2021. Investment bank Cascadia Capital monitors this selection of publicly traded equities and reported its performance in “Pet Industry Overview Fall 2021.”

Nevertheless, adjusted earnings for publicly traded pet companies in Cascadia’s index grew 67.7% in the first half of 2021, up from 36.8% in the prior-year period. For the eighth consecutive half-year period, companies in the pet industry index produced record earnings. Publicly traded pet companies’ revenues grew 20.5% in the first half of 2021, compared to 9.5% in the prior-year period.

Overall, the group of pet food producers, suppliers and retailers in the index underperformed the S&P 500, but individual company performance varied. So far in 2021, the stocks have trailed the S&P by 17.2%. However, considering the 12-month period ended in September, the difference shrank to 2.1%. The pet industry index outpaced the S&P early in the year, but then rapidly dropped below it in the early spring and summer. Cascadia analysts believe the slide in pet equity values may have been caused by the end of some federal benefits coupled with the rise of the delta variant of the SARS-CoV-2, the virus that causes COVID-19. After recovering to nearly equal the S&P’s growth, the pet industry index slid again in late summer and early fall.

Over- and under-performing pet industry stocks

The overall performance of the industry index included both rising and falling stocks. Virbac (59%), Central Garden (26%), DEXX (25%) and Zoetis (19%) gained the most, driven by earnings growth ranging from 82% to 114%. Rover Group outperformed the index by 19.7% since its public listing. On the other hand, The Original Bark Company has underperformed by 68.5%.

As the pandemic continues, public equity markets may be concerned about pet owners’ ability to maintain high levels of spending on pet food, treats and other products, as pet product price inflation increases, according to Cascadia analysts. Although pet industry inflation has trailed overall consumer product inflation, supply chain, labor and other systemic issues seem likely to cause pet companies to pass on increased prices to consumers.

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