Pet product retail is expected to maintain consistent traffic during the currently slow economic growth environment, with pet food and other consumables resilient to trade-downs because of pet-owner attachment to their animal companions, says Daniel Hofkin, an Analyst at William Blair & Company, L.L.C.
“People tend to spoil and dote on their pets. They will sometimes sacrifice their own eating or spending, but especially among older families or empty nesters, pets are often considered children. And people like to treat their pets as such, not just in terms of continuing to buy them the food that they are used to, but also in terms of other products,” Hofkin said.
Hofkin says PetSmart, Inc. (PETM) is well positioned in the retail sector from a long-term standpoint as a specialty retailer, because pet food is roughly half of the company’s inventory, while the rest consists of other pet products, such as cat litter.
“We don’t currently have an ‘outperform’ rating on PetSmart, primarily because we are watching the impact high gas prices and input-cost inflation will have on the traffic, particularly in hard goods. But I would say that’s more of a temporary concern, and it doesn’t appear to have materially impacted PetSmart’s results so far,” Hofkin said.
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