From Christmas Treats To GPS Collars: How Americans Are Still Spending On Pets And What It Means For Pet Care Stocks In 2026

Core Insights - U.S. pet spending demonstrated resilience in 2025, maintaining its defensive appeal amid affordability pressures faced by households [1] - The pet economy is experiencing a bifurcation, with high-income earners maintaining premium spending while the majority shift towards value options [7] Economic Trends - Pet and pet product inflation decreased to 0.3% year-over-year in November, down from 1% in September, providing some relief amidst ongoing cost-of-living pressures [2] - Emotional attachment to pets remains a strong driver of spending, with 97% of U.S. dog and cat owners considering their pets as family [3] Consumer Behavior - During the 2025 holiday season, about half of dog owners and 40% of cat owners planned to purchase Christmas gifts, averaging $30 per gift [4] - Demand has shifted from novelty items to technology and health-oriented products, indicating a focus on practical investments [5][6] Market Dynamics - A two-speed pet economy has emerged, with the upper quartile of earners continuing to purchase super-premium products, while the remaining 75% are opting for value and store brands [7] - This divergence is influencing operating performance and capital deployment across the sector [8] Investment Outlook - Pet care remains structurally strong within consumer discretionary, benefiting from resilient demand and lower exposure to tariffs compared to other categories [9] - IDEXX Laboratories Inc. is highlighted as a high-quality stock with recurring revenue characteristics, despite softer growth expectations in 2025 [10] Future Projections - The muted M&A activity over the past three years is attributed to valuation gridlock rather than deteriorating fundamentals, with a backlog of potential sellers building up [12] - Expectations for increased transaction activity in 2026 and 2027 are noted, contingent on resetting pricing expectations [13] Category-Specific Risks - Accessories, particularly those sourced from China, face tariff risks and competition from overseas manufacturers, which may pressure margins and valuations [14]