Profiting From the Pet Boom

Humans may not be acquiring pets at a pandemic-induced pace anymore, but they still are spending plenty on food, supplies, and services to take care of the furry members of their families.

Investors in public and private markets have their eyes on all that pet-care spending. Increasingly, consumers have gone beyond buying kibble to snapping up premium products and services that ensure their pets are living healthy, environmentally friendly lives. It’s a trend familiar to anyone who has followed the growth in eco-friendly wellness products and services for humans.

The shorthand for this phenomenon? The “humanisation of pets,” according to Milwaukee-based Baird.

“What that meant 10 years ago was you started to see the premiumisation of the quality of the diets and the emergence of grain-free brands and premium, cleaner-labeled food brands,” says Spencer DePree, a director in Baird’s global consumer and retail group. “That certainly is true today, but you’re starting to see that expand into other parts of the lifestyle of the pet.”

The entire pet economy is valued at about US$130 billion to US$140 billion, divided into four main categories: nutrition, products and supplies, healthcare, and services, according to Baird. Nutrition products snag most consumer dollars, but the so-called humanisation trend touches all of them.

Australia, Canada, and parts of Europe are leading the pet-market conversion to “non-traditional, more premium food and nutrition,” says Scott Ehlen, a director in Baird’s global consumer investment banking group. For the U.S., it’s a question of “how quickly, not if,” the trend will take hold, Ehlen says.

Penta spoke with DePree and Ehlen about what’s driving the growth in pet-related purchases and some of the companies on their radar screen.

Proactive vs. Reactive

One reason for the uptick in purchases of healthier pet products is consumers have realised they can proactively keep their pets happy and free from illness. The simplest step is to provide them with a diet that won’t lead to health problems in future years, and, as with humans, mix in nutritional supplements and treats with health benefits, such as dental care.

“That’s something you’ve seen in human wellness over the last five to seven years,” DePree says.

In pet food, that’s led companies to go beyond making grain-free kibble to producing fresh foods and to offering “toppers,” such as fish oils or freeze-dried raw meat. Companies are even developing foods that don’t rely on traditional beef and poultry proteins, such as Berkeley, Calif.-based Jiminy’s insect-based pet foods—a company backed by venture capital, according to private-markets data company PitchBook.

“Their value proposition is pretty impressive when you just look at the energy consumption that goes into producing a pound of beef,” DePree says.

As people spent more time at home with their pets during the pandemic, they also realized their furry companions have a lot of downtime. Humans that have returned to the office want to make sure their pets stay happy and active, so many are putting their dogs in daycare facilities with cameras that allow them to check in to see how their pup is doing.

“It’s not a kennel, it’s doggy daycare, where it’s analogous to taking your child to daycare,” Ehlen says.

There are a handful of franchisors backed by private equity in this sector including Dogtopia, which Ehlen says is one of the larger companies with at least 200 franchisees and more in the pipeline. An investment vehicle formed by the New York-based private-equity firm Red Barn Equity Partners with funding from institutions and family offices made a major investment in 2020 in the company, which offers daycare, boarding, and spa facilities, according to a news release.

Pet grooming is another area that’s prime for investment. Ehlen says he takes his own dog to a groomer who keeps track of appointments on a paper calendar. “It’s impossible to get a hold of her, impossible to schedule,” he says.

“A vast majority of the market continues to exist in that state in 2023,” Ehlen says. “You’re finally starting to see folks realise that this is a huge market, it’s a non-discretionary market, it’s going to be around forever. It’s just in desperate need of investment, of capital, of innovation.”

The ‘Pet’ Play in Food

The importance of pets to the economy is evident within the four major consumer products companies—Mars, Nestlé, Post Holdings, and General Mills. All include pet foods among their brands; Post, in fact, made a push into the business in February by purchasing Nature’s Way and Rachael Ray Nutrish, among other more standard pet food brands, from J.M. Smucker Co. for $1.2 billion.

For an investor interested in the growth of premium natural pet food, the only pure public-market play is Freshpet, based in Secaucus, N.J., DePree says.

While bigger companies have grabbed more market share, independent, private companies are “still the birthplace of new brands, new innovation, and that could be coming from either new companies or new product lines,” he says. “When the category validates itself or the scale hits, then you may see one of the bigger players jump in through an acquisition.”

Independent companies in the natural pet food space include the Farmer’s Dog, based in New York, which is backed by venture capital, according to Pitchbook. Denver-based Alphia, a pet food co-manufacturer that supplies other companies, was bought late last month by PAI Partners, a private-equity firm, from another PE firm, J.H. Whitney, according to a news release.

In March, the specialty pet food brand Natural Balance, announced it would merge with Canidae, which makes premium sustainable pet food, a news release said.

Before the stock market became more volatile last year, there was a “big queue of folks circling the wagons,” DePree says. Considering that the large consumer products companies are still trying to figure out how to grow this market, “over the next 18, 24 months, you’ll see some more stories become public.” For now, he says, “the demand for ways to play ‘pet’ outstrips the supply.”

The Internet-of-Things for Dogs

Pets aren’t exempt from humans’ obsession with tech, either. The latest pet-tech trends range from fitness trackers to food-monitoring devices that not only monitor how much and when your pet is eating, but also automatically order more food when you’re running low, DePree says.

Old-tech—such as electronic fences that keep dogs confined to a designated space—are being replaced by devices considered more humane and able to collect data on a pet’s behaviour, Ehlen says.

An example is Halo Collar, which uses wireless GPS and allows owners to set up zones to contain their pets wherever they are. The company, based in Woodcliff, N.J., and co-founded by dog psychologist Cesar Millan and tech innovator Ken Ehrman, was backed in May by Utah-based Decathlon Capital Partners, which provides revenue-based financing.

Most innovations in the pet economy so far have focused on dogs, but Ehlen and DePree say companies also have their sights on improving the lives of cats.

“If anyone is doing any innovation in cat, it’s alongside dog, but now you’re starting to see a more purpose-driven and specific sort of focus on the category,” DePress says. But he chides, “cats might be insulted at the humanisation concept—they probably hold themselves in a higher place.”

Reporting season has once again reminded investors that a strong profit does not guarantee a rising share price, and a large loss does not always trigger a sell-off. What matters most is how each result compares with expectations and, increasingly, what management says about the year ahead. During the August 2026 season, companies offering credible turnarounds or unexpectedly strong guidance were rewarded handsomely, while those flagging weaker margins, slowing demand or greater uncertainty were punished.

The following ranking draws on Morningstar’s review of 164 ASX-listed companies and measures each company’s share-price movement on the day it reported. This captures the market’s immediate response to the earnings announcement, before subsequent economic developments, dividends and company-specific news cloud the picture. Here are the five biggest winners, and the five hardest-hit losers, of the season so far.

The five winners

1. Bapcor (ASX:BAP): +41.0%

Bapcor delivered reporting season’s largest relief rally after presenting early evidence that its troubled automotive-parts business was stabilising. Although underlying revenue fell 1.8% to $1.92 billion and underlying NPAT collapsed 85% to $10.8 million, underlying EBITDA of $152.5 million exceeded guidance.

More importantly, working-capital initiatives released $68.5 million in the second half, lifting cash conversion to 109.4% and reducing net debt by 63% to $135 million. The statutory loss was $431.6 million, largely because of non-cash impairments. Investors focused on improving operational momentum, stronger liquidity and management’s expectation of modest FY27 revenue growth.

2. Zip Co (ASX:ZIP): +18.2%

Zip comfortably surpassed its FY26 targets, sending the buy-now-pay-later provider’s shares sharply higher. Transaction volume rose 23% to $16.7 billion, while cash earnings before tax, depreciation and amortisation jumped 58% to a record $268.9 million. Statutory profit climbed 46% to $116.4 million, and the cash operating margin expanded by 4.2 percentage points to 20%.

The strongest signal was guidance for FY27 cash earnings of $340 million—around 26% growth and above analysts’ forecasts. US transaction volume increased 42.5% and now represents three-quarters of group volume, offsetting weaker customer activity in Australia.

3. CSL (ASX:CSL): +17.3%

CSL’s result was hardly spectacular in isolation, but it cleared a market bar that had fallen dramatically following earlier downgrades and restructuring announcements. Underlying NPATA was US$3.1 billion, down 2% in constant-currency terms, while operating cash flow reached US$3.51 billion.

CSL maintained its full-year dividend at US$2.92 per share and completed a A$1 billion buyback. The real catalyst was FY27 guidance for approximately 5% underlying profit growth, compared with market expectations closer to 2%. After an extended period of earnings disappointments, investors interpreted the outlook as evidence that CSL’s core plasma business was approaching a sustainable recovery.

4. Judo Capital (ASX:JDO): +16.9%

Judo Capital demonstrated strong operating leverage as its specialist business-lending franchise expanded. Full-year profit before tax rose 34% to $168.1 million, while pre-provision profit increased 42%. Gross loans and advances grew 18% to $14.7 billion, reaching the top of the bank’s guidance range and comfortably exceeding broader system growth.

Deposits increased 24% to $12.2 billion, return on equity improved by 1.1 percentage points to 6.4%, and earnings per share rose 29% to 9.9 cents. Reaffirmation of the FY27 outlook gave investors confidence that loan growth could continue without sacrificing margins or credit quality.

5. Super Retail Group (ASX:SUL): +15.8%

The owner of Supercheap Auto, rebel, BCF and Macpac reported record sales of $4.2 billion, up 3.2%, despite cautious discretionary spending. Profitability went backwards: normalised profit before tax fell 7% to $306 million and normalised NPAT declined 2.8% to $226 million as transformation spending weighed on margins. Nevertheless, the result exceeded subdued expectations, online sales grew 5.3% and membership across the group’s loyalty programs reached 13.1 million. Investors were also encouraged by positive early FY27 trading, stable gross margins and continued market-share gains. A fully franked 33-cent final dividend added to the appeal.

The five losers

1. Hansen Technologies (ASX:HSN): –21.2%

Hansen’s historic result met expectations, but investors recoiled from its outlook. The utility and communications software provider achieved an underlying EBITDA margin of 31%, exceeding its 30% target, while generating strong cash flow. However, management designated FY27 an “investment and transition year”, signalling a roughly five-percentage-point margin contraction as spending on products, sales capabilities and organisational changes increased.

Revenue had already been broadly flat, leaving investors concerned that the investment program would depress earnings before new growth appeared. Leadership changes, including the chief executive’s departure, added uncertainty. Management expects revenue growth and margins above 30% to return in FY28, but the market was unwilling to wait.

2. Life360 (ASX:360): –19.4%

Life360’s headline growth was impressive: quarterly revenue rose 38% to US$159 million, subscription revenue increased 31%, and adjusted EBITDA climbed 53% to US$31.1 million. Monthly active users reached 102.4 million and paying circles grew 27% to 3.2 million. The sell-off reflected expectations rather than a collapsing business.

Net income fell 18%, the net margin contracted from 6% to 3%, hardware shipments dropped 18%, and full-year EBITDA guidance was merely maintained. After a strong valuation run, investors wanted a larger upgrade and clearer evidence that heavy investment in advertising, international expansion and artificial intelligence would generate additional earnings.

3. PEXA Group (ASX:PXA): –17.0%

PEXA reported a 7% increase in continuing-operations revenue and 12% EBITDA growth to $152 million, accompanied by a two-percentage-point margin expansion. Free cash flow increased 39%, suggesting the core Australian electronic-conveyancing platform remained highly profitable. Investors instead concentrated on management’s warning that property-transfer volumes could decline, alongside regulatory uncertainty surrounding the fees PEXA can charge.

The company is also continuing to invest heavily in its loss-making international expansion. Morningstar considered the market reaction excessive, arguing that structural transfer-volume assumptions had not materially changed, but the combination of softer near-term activity and regulatory risk overwhelmed the respectable headline numbers.

4. SEEK (ASX:SEK): –14.3%

SEEK produced solid FY26 figures, including 10% revenue growth to $1.20 billion, a 15% rise in EBITDA and 28% growth in adjusted earnings per share. It also lifted its fully franked annual dividend by 13% to a record 52 cents. Those achievements were overshadowed by falling paid job-ad volumes and cautious FY27 assumptions.

The statutory accounts included a $201 million loss from the SEEK Growth Fund and $377 million of significant items, making the headline result considerably less attractive. Investors were particularly concerned that economic weakness could limit volumes while the company continued investing in platform integration and artificial-intelligence products.

5. JB Hi-Fi (ASX:JBH): –12.3%

JB Hi-Fi’s full-year result was broadly respectable, with group sales rising 5% to $11.1 billion and underlying earnings per share increasing 6% to $4.48. The damage came from its current-trading update. Australian sales were almost flat during the June quarter and deteriorated further in July, while earnings in the core Australian electronics business fell 3.6%.

Housing-related categories were particularly weak as higher living costs and interest rates constrained household budgets. With JB Hi-Fi entering the season on a demanding valuation, an in-line historic result was not sufficient: the loss of sales momentum prompted investors to rapidly reduce their expectations for FY27.

Overall, the season showed that share prices react less to whether profits rose or fell than to the gap between results and expectations. Bapcor was rewarded for being less troubled than feared, while several fundamentally profitable companies were punished because their outlooks failed to justify elevated valuations.