As with many "pandemic winners", investors got a bit ahead of themselves, as $49 billion turned out to be a huge valuation for a company that, at its simplest, just sells pet stuff online.
Sticky sales
Investors weren't just feeling fuzzy about their pets. They really liked Chewy's business model because it doesn't look like a lot of other e-commerce businesses for one simple reason: pets need to eat (and do other things) every day... and unlike us they are usually happy to eat the same thing over and over. That means repeat, predictable, purchases — which investors love.
Indeed, as of its latest quarter, over 70% of Chewy's sales were from "Autoship subscriptions" — repeat subscription purchases for food, treats, cat litter, medicines or other pet supplies.
But despite its attractive model, the company still isn't consistently profitable, per its latest results this week. Supply chain issues and rising costs meant another quarterly loss, which was okay when sales were roaring ahead, but with a more muted outlook for growth (more like 13% growth rather than 30%) the company's shares shed almost one-fifth of their value on Wednesday... taking them right back to where they were roughly 2 years ago.
