Summary
The management team at Chewy is supposed to report financial results for the company’s final quarter for 2021.
Analysts anticipate some improvement on both the top and bottom lines for the firm.
Recent growth and pricing is indicative of a rapidly expanding enterprise that very well could offer some nice upside if this strength continues.
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Sally Anscombe/DigitalVision via Getty Images For many people, pets become a part of the family. And as a member of that family, the pet owners in question only want what’s best for all parties involved. Unfortunately in this world, providing the best comes at a cost because it requires the purchase of goods and services such as food, health products, and so much more. Although there are many general retailers both online and brick and mortar on the market, one company has managed to seize for itself an interesting niche in the online space dedicated to providing pet products to pet owners. This business is Chewy (NYSE: CHWY ). Over the past few years, the company has exhibited tremendous revenue growth. Although profitability remains an issue, the business is now generating strong positive cash flows. It is unclear what the future holds for the company. But given how rapidly it continues to expand even today, it very well could make for an attractive opportunity even though shares look, at current pricing, to be rather expensive. A rapidly growing niche firm
Dating its roots back to 2011, Chewy has grown into a behemoth in the pet supply space. Today, the company has over 20,400,000 active customers buying from its platform a variety of goods provided by around 2,500 different brands that, collectively, offer over 70,000 products to their customers. Though some may think that the pet market is a small space with little potential, the fact of the matter is that, between 2014 and 2020, the overall pet market expanded from $73 billion to $98 billion. This translates to an annualized growth rate of 5%. Current forecasts call for this market to continue growing at a rate of about 6% per year through 2024, implying a market size at the end of this timeframe of $123.7 billion.
This sizable and growing niche market has proven advantageous for a company like Chewy. On top of this, the company also benefits from the fact that, from 2014 through 2020, the percentage of pet products sold in the US that came from online purchases expanded from 4% to 27%. That represents a 40% annualized growth rate over that timeframe. Some of this expansion was likely attributable to temporary impacts resulting from the COVID-19 pandemic. But Packaged Facts believes that the overall trend will continue long term. Author – SEC EDGAR Data Thanks to this strong paradigm shift in the market, the management team at Chewy has succeeded in growing the company at a rapid pace. Back in 2016, for instance, the company generated revenue of just $900.6 million. This number increased each year since, eventually climbing to $7.15 billion in 2020. This works out to an annualized growth rate of 67.8%. According to management, there really were two big factors driving sales here. The biggest was an increase in the number of active customers the company has on its platform. In 2016, this number was just 3.03 million. At the end of 2020, it had grown to 19.21 million. The other growth contributor, meanwhile, was a rise in sales per active customer. In short, the people on the company’s platform were spending more, on average, than they had in the past. In 2016, this figure came out to $297. By 2020, it had grown to $372. Author – SEC EDGAR Data As with most high-growth companies, Chewy suffered some on its bottom line. However, this suffering has become less severe over the timeframe covered. After seeing a net loss of $107.2 million in 2016 jump to $338.1 million in 2017, the overall trend for the business started to improve. Each year after, the companies in that loss narrowed. And in 2020, the business generated a loss of just $92.5 million. Other profitability metrics for the company also showed improvements. For instance, we need only look at operating cash flow. After turning from a positive $7.3 million in 2016 to a negative $79.7 million in 2017, it began to improve year after year. […]
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