Rising veterinary costs are putting a leash on American pet ownership, according to a new analysis from Bank of America. The bank reports that pet ownership in the US has declined by 2.6% over the past two years, a shift that is reshaping the landscape for companies that cater to pet owners.
The trend is not just about fewer furry friends. It is also weighing on the valuations of pet-focused businesses, particularly in e-commerce, where lower stock prices could open the door to a wave of mergers and acquisitions.
What's behind the decline?
Bank of America points to higher vet bills as the primary driver. As the cost of routine checkups, vaccinations, and emergency care rises, some households are deciding that pet ownership is no longer affordable. This is especially true for lower- and middle-income families, who may be feeling the pinch from broader inflationary pressures across the economy.
The 2.6% drop may sound modest, but it represents a meaningful shift in a market that had been growing steadily for years. During the pandemic, pet adoptions surged as people spent more time at home. Now, with many returning to the office and costs climbing, that trend is reversing.
Impact on pet companies
Fewer pets means less demand for pet food, toys, bedding, and other supplies. That is hitting the revenues of companies in the pet sector, from large retailers to niche online sellers. Lower earnings expectations have dragged down stock prices, making valuations more attractive for potential acquirers.
Bank of America suggests that this environment could spark a new round of dealmaking in pet e-commerce. Private equity firms and larger players may see an opportunity to buy struggling or undervalued companies at a discount, consolidating the market and positioning for a rebound when ownership rates eventually stabilize.
This is not the first time the sector has seen consolidation. In recent years, major pet retailers have acquired online platforms to expand their digital footprint. But with valuations now lower, the pace of deals could accelerate.
What it means for investors
For everyday investors, the key takeaway is that the pet industry is facing headwinds that could persist for a while. Companies that rely heavily on new pet owners for growth may struggle until affordability improves. On the other hand, firms with strong brands, loyal customer bases, and diversified revenue streams—such as those selling premium food or services that are harder to cut—may be better positioned to weather the downturn.
Investors should also watch for M&A activity. If a major deal is announced, it could signal that larger players see value in the sector at current prices, potentially lifting sentiment across the group. However, any recovery in pet ownership is likely to depend on broader economic conditions, including inflation and wage growth.
For context, the broader market has been reacting to a mix of signals lately. For example, Latin American markets rallied on softer US jobs data, while European stocks edged lower as the AI rally paused. These moves show how sensitive markets are to economic data, which also influences consumer spending on pets.
Looking ahead
Bank of America's analysis suggests that the pet ownership decline may not reverse quickly. Vet costs are unlikely to fall sharply, and household budgets remain stretched. However, the lower valuations in pet e-commerce could create opportunities for investors who are willing to take a longer-term view.
For now, the message is clear: the pet boom of the pandemic era is fading, and the industry is adjusting to a new reality. Whether that adjustment leads to a wave of deals or a prolonged slump will depend on how companies adapt and whether the broader economy improves.
