ANALYSIS-Pet firms feel pain as man and best friend separate

By Anuradha Ramanathan

BANGALORE, Jan 28 (Reuters) - The worst economic crisis since the Great Depression has forced a painful parting of ways between people and their homes.

But the grief is amplified for a select group -- pet-owners who had to give up their beloved companions.

At a time when cash is hard to come by, healthcare costs related to raising a pet -- which some would argue is akin to raising a child -- are becoming increasingly unaffordable for helpless pet-owners.

"We are getting multiple requests from people wanting to give up their dogs and cats... It's non-stop," Amber Sitko, President of Michigan-based All About Animals Rescue, said.

Sitko, whose organization sees about 300 pets on average being adopted in a year, said the number of pet adoptions in 2008 fell about 25 percent to 30 percent compared with a year earlier.

Stephanie Shain, Director of Outreach Companion Animals for the Humane Society of the United States, believes foreclosures are the main reason for pet owners giving up their pets, and said a shortage of money was leaving many unable to afford pet care.

Pets, whose owners were hit by the financial crisis, are not up to date on their vaccine shots, have not been neutered or are stricken with diseases, Debbie Durbin, the development co-ordinator of the Ohio-based Society for the Improvement of Conditions for Stray Animals, said.

As the global credit crisis rages, pet owners tend to skip their pets' medical appointments, barring emergency visits, or have cut the number of regular visits to the veterinarian.

Much of the business of veterinary-services firms such as Idexx Laboratories, VCA Antech and Abaxis, which provide diagnostic tools like blood tests, laboratory services for veterinarians and pet-pharmaceutical products, depends on how often pet-owners visit vets.

A rise in the number of owners giving up their pets, and a slowdown in the rate of pet adoption amid an uncertain job market might hurt the companies, analysts said.

The U.S. unemployment rate surged to 7.2 percent in December, the highest in nearly 16 years as a deepening year-long recession forced companies to axe more than half a million jobs.

"If one person loses his job, how many people think they might lose their job? Ten? Twenty? And that's probably where these trends have more of a bite," Garp Research & Securities Co analyst Alastair Mackay said.

Idexx Chief Executive Jonathan Ayers said the company saw a lower rate of revenue growth in the latest third quarter, particularly in its core companion-animal group segment.

Westbrook, Maine-based Idexx, which is a bellwether for the pet-healthcare industry, had in October cut its 2008 earnings forecast, partly due to lower revenue growth in few of its businesses that were hurt by the economic slump.

"Pets are always going to be a big part of people's lives, but they are certainly not to going to be the primary focus in bad times like this," Susquehanna Financial Group analyst David Turkaly said.

Still, analysts do not expect the decline in pet adoption to immediately hurt the companies' earnings.

"That's not going to have an impact overnight," SunTrust Robinson Humphrey analyst Jonathan Block said.

But if unemployment spikes up to about 10 percent, it could weigh on these companies, he said.

Analysts expect revenue to grow at pet-healthcare providers in 2009, but warned that the rate of increase will be lower than the past year.

Susquehanna's Turkaly sees 2009 revenue growth of 12 percent for Abaxis -- a decrease from about 17 percent a year earlier.

Ryan Daniels, an analyst at William Blair, expects more conservative commentary from the companies' management, reflecting "the continued choppiness and uncertainty in the companion animal market."

Nevertheless, Daniels believes the adage "A dog is not only for Christmas, it is for a life time" still rings true.

"Yes... I think so absolutely," he said. (Editing by Pratish Narayanan)