Chewable stocks: what investors need to know
soft (NYSE: CHWY) has a lot of moving parts in its business. The pet food retailer has a huge e-commerce segment, as well as a significant footprint in the growing pet health care niche.
In this video, taken from “Beat & Raise”, broadcast on December 10Fool contributors Rachel Warren and Demitri Kalogeropoulos discuss key highlights investors should know about Chewy as they follow her efforts to dominate her industry.
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Demitri Kalogeropoulos: Rachel, tell us a bit about what happened with Chewy.
Rachel Warren: There is actually a lot to cover here. I’ve talked a lot about Chewy this week. But for those who may not have heard that, I’ll give a little insight into this company before diving into its latest earnings report, which it released yesterday, I believe.
Chewy is an online retailer of pet products. You can find just about anything for all types of pets on chewy.com, whether they are bigger – like farm animals, like horses – or dogs, cats, fish. So everything from food to treats to medications. The company has a telehealth service called Connect With a Vet, where Chewy’s customers can connect online and via chat or phone for a fixed fee, connect with a licensed veterinarian for any health concerns their pet has. company.
The company has also just announced a very exciting partnership with Trupanion, which is a well-known pet insurance provider. Starting in Spring 2022, Chewy will be offering customers access to Trupanion’s pet insurance policy on its platform, and you will be able to purchase it through there as a pet owner. Really interesting business model, lots of different income streams.
The stock, if anyone’s been careful, is going down [laughs] by many. Year to date, the stock is down about 42% and the stock is down about 13% in the past five days. Shares were down in both post-trade and pre-trade trading after the earnings release. Also, before the release of the company’s quarterly results, I read a report, I think it was on Barron, which analysts at Wedbush lowered the stock from outperformance to neutral on Monday, expecting slower growth in a COVID world. The stock is down, has fallen a bit further in earnings, which has resulted in a lot of really positive things in its earnings report, which we’ll dive into here in a second. And then there were a few weak points, which we’ll also dig into. Mixed earnings, slightly lowered its forecast for future earnings. But Chewy has been a publicly traded company since 2019. It has only been public for a few years.
Was founded about 10 years ago, then acquired by PetSmart. The companies are two individual entities and PetSmart eventually transferred part of its stake to a company called BC Partners. Chewy saw a huge increase in customer demand in the early days of the pandemic. There were a lot more people in the house and there was a huge demand for inventory. The company has spent a lot of money to increase its available inventory to meet this demand. There are thousands of brands on the company’s website for buyers to choose from.
The company has millions of square feet of execution space spread across the United States. It is currently working to resolve some of its supply chain issues, which we will see shortly had an impact on its third quarter results.
One way to achieve this is to open several automated distribution centers over the next year or so, and plans to open four by the end of 2022, for a total of 14 distribution centers. He is doing a lot to try to solve this problem of “we have a labor shortage, we have backlogs in the supply chain”. And one of the ways I think he tried to attract workers is by switching to a hybrid remote work model earlier in the pandemic. It’s just an interesting thing to note about the way the company runs its business.
Demitri Kalogeropoulos has no position in the mentioned stocks. Rachel Warren has no position in the stocks mentioned. The Motley Fool owns and recommends Chewy, Inc. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.