Chewy's Solid IPO Puts The Spotlight On These ETFs

Online pet products retailer Chewy CHWY made a sizzling debut on the New York Stock Exchange on Jun 14. Its shares skyrocketed as much as 85% on the first day and closed at up 59%. The pet e-tailer raised $129.8 million through the IPO offering of 5.6 million shares at $22 each - higher than the revised expected range of $19-$21 from $17-$19.

The astounding surge pushed Chewy’s market capitalization to $14.8 billion from nearly $9 billion at IPO price.

Chewy: A Good Bet?

Chewy, a subsidiary of PetSmart, is an online retailer of pet food and other pet-related products. It is betting on the "pet humanization" trend where owners splurge on their pets whom they consider part of the family. The company describes itself as the "largest pure-play pet e-tailer in the United States."

It generated $3.5 billion in total revenues last year, up 67% from 2017. About 42% of revenues come from sales of pet food. Another 22% comes from supplies and medicine and 25% from vet care. The rest comes from pet services and live animal sales. The company, which is yet to make a profit, had reported net loss of $268 million in 2018. However, losses narrowed from $338.1 million reported in 2017.

Under CEO Sumit Singh’s leadership over the past two years, the company has captured more than 50% of the online pet care market, which totals $6 billion, according to the American Pet Products Association (APPA). The U.S. pet industry is projected to top $75 billion this year. This online pet retailer has positioned itself well to tap into the growing market and the increasing shift toward online sales. Notably, Singh expects online share to hit 25% by 2022.

More than two-thirds of U.S. households, or about 85 million families, have a pet, according to APPA. Per Packaged Facts data cited by Chewy, spending on pet products and services expanded at 5.4% compounded annual growth rate in the five years through 2017 and is projected to witness 4.2% CAGR from 2017 to 2022.

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