Pet merchandise sales may not be recession-proof this time around
Coronavirus (COVID-19) is taking a toll on the famously recession-resistant pet segment.
That is the message from Packaged Facts, which reported that total U.S. retail sales of pet products and services will decline by 17% in 2020, compared with the 5% growth anticipated prior to the coronavirus pandemic. This equates to a drop from $95.0 billion in 2019 sales to $78.5 billion in 2020, according to Packaged Facts.
“Historically the pet care business has been quite been an impressive and consistent grower, growing twice the rate of GDP and even growing in the great recession,” Simeon Hyman, global investment strategist at financial services firm ProShares, told Chain Store Age. (The firm runs the ProShares Pet Care exchange-traded fund [ETF] [PAWZ]). “It does appear that this time is a little different.”
For example, based on the market peak on February 19 through April 16, “our pet care ETF PAWZ has declined 9.7%. There has been a 17% decline in the S&P 500,” Hyman reported.
However, there is a glimmer of hope for retailers carrying non-discretionary pet products, primarily pet food and cat litter. Pet food, the largest pet industry category, is forecast to grow 4% in 2020, compared with a 6% growth forecast before the COVID-19 pandemic impact, according to Packaged Facts.
While pet food remains an essential item on consumers’ weekly shopping lists, sales will reflect that shoppers will begin trading down to value and store brands to stretch their household budgets, the firm reported.
During the pandemic, more shoppers are also relying on e-commerce when procuring this merchandise. “Online retailers are currently outperforming omnichannel retailers when it comes to where consumers are spending,” said ProShares’ Hyman.
However, over the next 12 to 18 months, Hyman expects continued strong performance across both online retail and the consumer staples conglomerates, as consumers continue “taking the best care of their pets in their homes to the greatest extent possible."