Chewy spikes as picky US pet owners shy away from Chinese imports anyway
Bank of America says Chewy is one of the e-commerce companies that’s the most insulated from tariffs.
As traders scramble to figure out what tariffs are on, which ones are getting rolled back, and what comes next, there’s one company that looks like it won’t roll over: Chewy.
Shares of the online retailer of pet products are up 5%, as its chief financial officer presents at an investor conference today and Bank of America flagged that the company is well insulated from tariffs.
“Our top stocks for least tariff exposure are Chewy (less than 10% from China) and eBay (5% from China, high exposure to refurbished), though all stocks in the sector could be impacted by a consumer spending slowdown,” analysts led by Justin Post wrote.
BofA has a buy rating and $40 price target on the stock.
“Pets, it’s the only category besides kids that I can think of, or perhaps relatives, that’s just incredibly emotive; people talk about themselves as being pet parents,” Chewy CFO David Reeder said at a TMT conference hosted by Morgan Stanley on Wednesday. “That humanization has led to premiumization, that trend has not only continued, but perhaps even accelerated in recent years, which is also a tailwind for Chewy.”
Coming from a household whose monthly spend on the pet e-commerce platform is only barely surpassed by its Amazon expenses, the thinking here is simple: we’re very willing to buy cheap stuff for ourselves, but when it comes to our very handsome miniature poodle, quality and safety standards go way up. And particularly when it comes to pet food, there’s an unfortunate history of illnesses in pets and recalls of food and treats when China is part of the supply chain.
“We have a very small reliance and presence on China specifically,” Reeder said during a conference call with analysts in early December. “We do source some hard goods from China, primarily related to some of our hard goods, but the vast, vast majority of our net sales at Chewy are pretty much domestically sourced.”
