Chewy stock fell, but revenue strong with new customers

Between April 2021 and 2022, online pet food, treat and product retailer Chewy’s stock value declined by nearly 50% compared to the S&P500 index.

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Online marketing provides plenty of opportunities for pet food packaging to expand its branding role. (Husar Kristian | iStockPhoto.com)
Online marketing provides plenty of opportunities for pet food packaging to expand its branding role. (Husar Kristian | iStockPhoto.com)

Between April 2021 and 2022, online pet food, treat and product retailer Chewy’s stock value declined by nearly 50% compared to the S&P500 index. While Chewy’s stock slid, the company’s revenues increased by 24% in 2021. Investment bank Cascadia Capital analysts explored Chewy’s performance in “Pet Industry Overview Spring 2022.” Cascadia follows Chewy in its index of publicly traded pet industry stocks, which includes Nestlé, J.M Smucker and FreshPet. Smucker and Purina’s stocks finished nearly on par with the S&P500 in 2021, while Chewy and FreshPet finished lower.

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Approximately 1.46 million new customers helped fuel Chewy’s revenue growth, according to Cascadia’s analysts. Nevertheless, Chewy faces challenges to pet product access, driven by manufacturing constraints and raw material availability, like many in the industry. The Russia-Ukraine War made this worse. Product access challenges are expected to continue in the first half of 2022. Likewise, labor challenges affected Chewy’s 14 fulfillment centers. In November and December of 2021 especially, the omicron variant of the coronavirus SARS-CoV-2, the virus that causes COVID-19. These labor challenges didn’t stop its economy of scale from benefiting Chewy as its margin line posted a gross profit of 26.7%. Chewy’s management may plan to offset labor headwinds by leveraging advertising and marketing expenses.

Pet food industry stock market revenue peaked in June 2021

According to Cascadia analysts, pet food industry stocks reached higher peaks in 2021 than the year, but the performance wasn’t consistent throughout the year. However, 2021 revenues from an index of publicly traded pet food companies beat out figures from 2020. Yet, those pet food company revenues peaked in June 2021 at more than US$6 billion in the second quarter of 2021. Nevertheless, pet food industry stocks in Cascadia’s index grew by 16.2% in 2021, compared to 9.8% in the prior year. Overall, established pet food industry companies yielded higher earnings per share than emerging businesses. 

Subtle threats to strong spring 2022 pet food growth

The United States pet food industry continues growing atop the pandemic-fueled surge in pet ownership and premiumization, but Cascadia analysts warned that the good news may hide weaknesses in the dog, cat and other pet food markets. While the pet food industry grew through the lingering pandemic, they observed how the influence of the disease on society may have distorted the market, making long-term prediction complicated.

Overall consumer spending recovered for the pet food industry in 2021, but a scarcity of suitable comparisons may distort the meaning of the growth percentages. Along with that, pet food and treat market performance data form 2021 was boosted by new pet acquisitions that had yet to annualize or reach a point where data could go from allowing short-term versus long-term calculations. Those new pandemic pets and increased premium pet food purchases, especially among wealthier Americans, served as a bulwark against financial caution and concern among lower-income groups in early 2022. Those monetary worries may be less focused on the pandemic’s immediate effects now though.

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