Pet care ETF may hold up better than other retail categories

Investors should take a look at a themed play on pet care exchange-traded funds, as spending on pets is expected to remain stable in a post-pandemic world.

More specifically, the ProShares Pet Care ETF (CBOE:PAWZ) is the first and only ETF dedicated to pet care and retail, which attempts to mirror the performance of the FactSet Pet Care Index. The fund seeks to invest substantially all of its assets in the securities included in the index. Under normal circumstances, the fund will invest at least 80% of its total assets in the securities comprising the index. The index consists of US and non-US companies that stand to benefit from the interest and resources spent on pet ownership.

While Americans have changed their spending habits as economies reopened and many are continuing with their normal lives, some pandemic-related patterns are harder to shake off.

According to the American Pet Products Association survey in February, about 14% of respondents said the pandemic had caused them to buy a new pet, and unlike other spontaneous lockdown purchases, a puppy or a kitten yields much clingier spending behaviors, the Wall Street Journal reported.

Some may even see a pet as committing to a new fixed spending plan for a decade or even two. Also, while human spending habits may change, spending on pets hasn’t changed much.

Spending on pets even continued to rise after an initial jump. In April 2022, inflation-adjusted spending on pets and related products jumped 28% from January 2019. In a recent earnings call, JM Smucker, which owns brands like Meow Mix and Kibbles ‘n Bits, found comparable pet food sales increased. 10% in the quarter ended April 30 year-on-year. In comparison, the company’s consumer food sales increased by a more moderate 3%.

However, pet adoptions have slowed recently. About 415,000 cats and dogs were adopted from shelters in the first four months of 2022, about a fifth less than the same time last year and a third less than the adoptions seen during the same period in 2020, according to Shelter Animals Count. Overall, the pandemic has likely added millions to America’s total pet population. For example, there were 6.9 million more dogs in the United States in 2020 than there were companion dogs in 2016, according to the American Veterinary Medical Association.

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About Timothy Cheatham

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