UPDATE: June, 14, 2019: Chewy priced its initial public offering at $22 a share, or more than $1 billion for the company, according to a company press release. The figure tops previous expectations of the online pet retailer acquired by PetSmart just two years ago.
UPDATE: June 3, 2019: Chewy, Inc. on Monday announced the roadshow for its initial public offering, priced at an expected $17-$19 per share and approved for listing on the New York Stock Exchange under the ticker “CHWY". Chewy intends to use the net proceeds from the offering of 5.6 million shares of its Class A common stock for working capital and other general corporate purposes, according to its press release. The pet goods e-retailer will not receive any of the proceeds from the sale of 36 million shares of Chewy's Class A common stock to be offered by a subsidiary of owner PetSmart, Inc.
Chewy, Inc. on Monday announced the filing of Form S-1 with the U.S. Securities and Exchange Commission, indicating plans for an initial public offering of its Class A common stock, under the ticker symbol "CHWY." The number of shares to be offered and their price range have not been determined, according to a company press release. The effort could raise $100 million, according to the S-1 filing.
PetSmart, which bought the online pet retailer in 2017 for $3.35 billion, will retain control of the company through ownership of what will be Class B common stock. Each Class B share is entitled to 10 votes while Class A common stock is entitled to one, according to the filing. While the registration statement has been filed with the SEC it is not yet effective, the company also said.
That factors in the filing as a potential risk to Chewy. "PetSmart controls the direction of our business and PetSmart's concentrated ownership of our common stock will prevent you and other stockholders from influencing significant decisions," the filing reads.
Chewy hasn't managed to eke out a profit yet, but the e-retailer has been among the few that have managed to give Amazon a run for its money even in a space where the e-commerce giant has been assertive, with private label pet food and items of its own.
"Chewy is hot as a pistol at the moment. I'm not sure why it's not profitable yet, and am surprised that PetSmart is spinning it right off, but I think now would be a great time," Paula Rosenblum, co-founder and managing partner at RSR Research, told Retail Dive in an email. "I don't think it's too soon. The company is very dominant."
The e-commerce pet retailer last year fetched $3.5 billion in sales, up from $2.1 billion in 2017, but its $267.9 million net loss last year represented only a slight recovery from 2017's $337.1 million loss, according to the S-1 filing. But it is demonstrating strength in a category where established brands are difficult to push out and is helping boost online sales of pet food and other products more generally, according to research from analytical intelligence and consumer insights solutions firm 1010data.
Chewy is even outpacing Amazon's Wag private label: In August, Wag generated $345,000 in sales, while Chewy's American Journey label reached $940,000, 1010data found. "Although though pet owners seem hesitant to try new brands those that did chose American Journey," according to a 1010data report emailed to Retail Dive in October, which also found that nearly a third of American Journey dry dog food sales in August occurred after shoppers compared brands.
"I think the big takeaway so far in this is that they've been one of the few exceptions as a merchant that has been able to take on Amazon and come out ahead," Matt Pace, 1010data senior director of client insights and account management, told Retail Dive in an interview on Monday. "Our most recent data is that, across cat and dog food, Chewy has 55% market share. Going into private label is sure to improve profits — your own brand means you reap all the profits from that. If I were an investor I would see that as a positive sign. I would presume that when pet owners find a product that their dog enjoys and is moderately priced, they just want to stick with it."
That may be why Chewy appears to be doing well in a bumpy area of e-commerce, subscriptions, Pace also said. But Amazon's announcement that it's speeding up its free Prime two-day shipping to just one day could be a challenge for Chewy. "Chewy's got a bit of wind at its sail. Amazon hasn't had as much success — they're generally selling an undifferentiated product that you can get anywhere. ... But one-day shipping — how does Chewy compete with that?"