Shares of Chewy, the online pet product retailer owned by PetSmart, climbed as high as 85% Friday after the company made its public debut. It closed up 59.05% at $34.99 a share, up from its IPO price of $22.
Founded in 2011 by Ryan Cohen and Michael Day, Chewy calls itself the “largest pure-play pet e-tailer in the United States.” It has separated itself from many of its competitors with top-notch customer service that includes 24/7 access and two-day shipping of online orders.
Larry Cheng at Volition Capital explains on CNBC, “What we saw was the rise of the premium pet food market, and in the early days the premium pet food manufacturers didn’t want to work with Amazon. They didn’t view Amzon as understanding their product and able to represent it well. And what they saw in Chewy was a company that was totally committed to the pet category and the pet customer. So they understood the customer. So there was a merchandising advantage for Chewy at the outset.
After its IPO, parent PetSmart will own about 70% of Chewy’s common stock and hold 77% voting power. PetSmart, which is backed by private equity firm BC Partners, acquired Chewy in 2017 for $3 billion.
Cheng feels that online competitors like Amazon will be left in the dust based on Chewy’s passion for the pet food industry and its customers.
“Chewy cares about the customer way more than Amazon. You’ll see that the level of service, the level of content, the level of touch that they will give to a pet food customer absolutely exceeds what Amazon can do… they are trained and they are guided to just wow the customer with service, and that’s something that Amazon will never do,” added Cheng.
One of the things that separates Chewy from its competition is its ongoing customer loyalty.
“What’s the most unbelievable is what the customer spends is year five is the same as the customer spends in year one, and that level of loyalty is really exceptional,” Cheng stated.
The online pet food retailer’s CEO sees a brilliant future for the company.
“Today, in the United States, we’re only about 14% penetrated from an online point of view,” Chewy CEO Sumit Singh said on CNBC’s “Squawk on the Street ” before the company began trading. “Chewy, if you look at it — it’s a $70 billion industry — we’re penetrated in about roughly 10% of the households.”
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