Chewy, a subsidiary of PetSmart, reported a 43% year-over-year rise in sales. The outlook for its first full year since its IPO earlier this year calls for year over year sales growth of as much as 36% and a full year top line revenue figure of as much as $4.75 billion.
Losses mount
But the company is spending a lot to secure those sales. According to information presented in an earnings call with analysts last week, the company lost almost $83 million in its second quarter. The company’s share price is up slightly in the past few days but overall has declined from a high of more than $35 a share in June to about $26 today.
Pet supplements have become a huge business as ‘pet parents’ (Chewy’s term for its customers) have demonstrated an increasing willingness to spend on their pets’ health and wellness needs. Chewy lists more than 2,300 dog, cat and equine vitamins & supplements products for sale on its website.
This is in spite of the fact that pet supplements exist within an ill defined regulatory framework. Bill Bookout, president of the National Animal Supplement Council, told NutraIngredients-USA that pet supplements exist within a pre-DSHEA regulatory scheme.
Growing market
The market for dog, cat and equine supplements was notched at slightly less than $2 billion in 2017. One market report pegs the global market for such products as more than $6 billion in 2019, projected to grow to about $8 billion in 2023.
Chewy CEO Sumit Singh said the call that the company is betting on a new data management platform to help it both drive better margins and personalize its offerings. Personalized nutrition, but for pets, not people, in other words.
“We have the millions of active pet profile data that allows us to connect and personalize that experience into a customer, but not just that, when we recognized health and wellness needs, we can actually surface that and connect the pet parent to the vet community,” Singh said. His comments were excerpted from a transcript posted on the site seekingalpha.com.
Innovation in the pets supplements space parallels that of human supplements, with new ingredients and modes of delivery appearing regularly. But the hottest ingredient out there should come as no surprise: CBD and/or hemp. For its part, Chewy lists 36 hemp/CBD products for sale on its website. The regulatory questions for hemp pet supplements are just as tangled as they are for human supplements.
Sitting on a bubble?
Even so, there are signs that the enthusiasm for these products on the part of investors may have outpaced the true opportunity. Influential hedge fund manager David Einhorn has placed both Chewy and fellow online supplement seller pets.com on his ‘bubble poster boys’ list. Einhorn notes that Chewy has burned through more than $1.6 billion in investors’ capital, while pets.com has spent more than $200 million.
