Chewy (CHWY) is showing Wall Street that it’s the top dog in the pet industry.
The online pet products seller launched its IPO Friday on the New York Stock Exchange. Shares quickly surged nearly 64% above their initial public offering to $36 a share. That’s over its initial public offering price of $22 per share and beyond the expected range of $19 to $21. Shares closed at $34.99 on Friday, having soared 59% in its first day of trade.
In total, Chewy sold 5.6 million shares and raised $1 billion.
The Florida-based company has seen rapid growth, owed, in part, to customer service that includes 24/7 access and two-day shipping of online orders, along with autoship subscriptions.
Another area of opportunity for the e-commerce giant may be to create more in-person experiences.
“There are other companies out there that Chewy can learn from, I think of Peloton,” Laurie Jennings, director of the Good Housekeeping Institute, said on Yahoo Finance’s YFi AM. “I think of other companies that have created this real sense of community around their product or their service, and Chewy, with pets, there’s an opportunity to really blow up the community angle.”
Chewy currently sends cards to consumers who have recently lost a pet, which the CEO outlined in an interview with Yahoo Finance’s Adam Shapiro. Jennings, however, said Chewy can expand this customer loyalty by developing other experiences like “pet conferences” and “pet get-togethers.”
Others, though, don’t think Chewy has the ability to match the experience created by independent pet retailers.
Independent pet store owners have a “different customer base,” says Glenn Polyn, editor-in-chief of Pet Age.
Polyn said the strength of small brick-and-mortar pet retailers remains in-person offerings like grooming, veterinarians, and in-store washing bays. And, he notes, much like other recent hot IPOs, Chewy has yet to report a profit. (The company lost $267.9 million in fiscal 2018 after losing $338.1 million in 2017; it had $3.53 billion in revenue, up 68% from 2017.)
Amazon, Target continue to ride Chewy’s tail
Chewy was acquired by PetSmart in 2017 for reportedly $3.35 billion. In the 2018 fiscal year, Chewy reported $3.5 billion in sales and a net loss of $268 million.
Chewy makes up a small fraction of the overall pet industry with competitors like Walmart (WMT), Amazon (AMZN) and Target (TGT) trailing it. According to the American Pet Products Association, pet owners spent a total of $72.56 billion in 2018 on their pets. That number is expected to increase to $75.38 billion this year.
Indeed, Chewy pitched its stock to investors as a way to buy into the trend of “pet humanization” by owners – or “pet parents” – who treat pets as members of their family, as well as investing in an industry that has historically held up well in economic downturns.
She says “If a recession were to hit us tomorrow, people would stop buying cars, they’d stop buying TVs, but they will never stop caring for their pets.”
Chewy, Inc. (CHWY - Get Rating) shares fell $0.18 (-0.51%) in after-hours trading Friday. Year-to-date, Chewy, Inc. (CHWY - Get Rating) has declined N/A%, versus a 16.25% rise in the benchmark S&P 500 index during the same period.
This article is brought to you courtesy of Yahoo! Finance.
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