Factbox: What is Chewy, the pet products website 'Roaring Kitty' is championing?

Petco Health and Wellness

01/07/2024 18:11

By Granth Vanaik and Siddharth Cavale
       July 1 (Reuters) - 
    Keith Gill, the meme stock trader "Roaring Kitty," thrust
Chewy Inc  CHWY.N  into the spotlight when he made a $245
million bet on the online pet products retailer on Monday.
    What is Chewy and why has it attracted Gill's interest?
    
    WHAT'S THE BUSINESS?
    Chewy is an $11 billion e-commerce retailer that offers
about 115,000 pet products, including food, beds, litter and
vitamins to U.S. customers through its websites and mobile app.
Their $9.99-a-month subscription plan, which targets dog and cat
owners, has been a key driver of their business.
    It sells products under brands including A Pet Hub, Bark and
Slumber, and Nutro, and its market capitalization stands at
$11.87 billion, according to LSEG data.
    By marketing its products to a narrow group of shoppers -
pet owners - Chewy has been able to keep its marketing costs and
inventory levels low, enabling it to grow its profit margins
over the years.
    The company reported net sales of $11.15 billion and 
merchandise margins of 28.4% for its fiscal year ended on Jan.
28, 2024.  
    Chewy competes with the likes of Amazon.com  AMZN.O  and
Etsy  ETSY.O , which also sell pet products online, in addition
to Petco Health and Wellness  WOOF.O , which operates over 1,500
stores in the United States. 
    
    WHAT'S CHEWY'S HISTORY?
    GameStop  GME.N  CEO Ryan Cohen and Michael Day founded
Chewy in 2011. They then sold the business to larger rival
PetSmart for $3.35 billion in 2017, the largest acquisition of
an e-commerce website at the time. 
    Two years later, PetSmart sold most of its Chewy shares in
an IPO, in part to trim the debt it had amassed as part of its
acquisition of the company. Chewy began trading on the New York
Stock Exchange at a $36 share price on June 14, 2019.
    Chewy's shares peaked at nearly $119 in early 2021, as
Americans adopted pets during the pandemic and spent lavishly to
care for them.
    Chewy is chaired by BC Partners' Raymond Svider. The private
equity firm continues to own around 68.6% of Chewy following its
IPO, representing 95.6% of the voting power, it disclosed in a
May 24 proxy statement.     
    BC Partners is also a majority shareholder of PetSmart. 
    
    WHY IS ROARING KITTY INTERESTED IN CHEWY?
    Gill said on Monday that he had amassed a 6.6% stake in the
company valued at $245 million, which analysts said was partly
influenced by the fact that the retailer was founded by
GameStop's Cohen.
    Gill has called Cohen "the man" and brilliant in the past. 
    His stake makes him the third largest shareholder, based on
the ownership disclosures in Chewy's proxy statement.
    Gill's Reddit  RDDT.N  posts championing GameStop in 2021
fueled a nearly 700% rise in the video game retailer's shares in
2021.

    HOW HAS CHEWY'S STOCK FARED?
    Chewy's stock has been volatile since Gill posted an
uncaptioned picture of a puppy on social media platform X that
resembled Chewy's logo and sent its shares to a near one-year
high on Thursday.
    But including Monday's trading, Chewy's shares have lost 13%
since Thursday's tweet.
    The stock is also highly shorted, with 15.7% of its
free-float shares in short position, as of June 27, according to
Ortex Technologies, an analytics firm. By comparison, about 0.9%
of Amazon's  AMZN.O  free float are shorted.

 (Reporting by Granth Vanaik in Bengaluru and Siddharth Cavale
in New York; Editing by Trevor Hunnicutt)
 ((Granth.Vanaik@thomsonreuters.com | On X : https://twitter.com/Vanaik_Granth;))