Chewy Stock: What Investors Should Know

Chewy (CHWY 1.92%) has a lot of moving pieces in is business. The pet food retailer has a huge e-commerce segment, plus a significant footprint in the growing pet healthcare niche. 

In this video, from "Beat & Raise," aired on Dec. 10, Fool contributors Rachel Warren and Demitri Kalogeropoulos discuss the main highlights investors should know about Chewy as they follow its efforts to dominate its industry. 

Demitri Kalogeropoulos: Rachel, tell us a little bit about what happened with Chewy.

Rachel Warren: There's actually a lot to cover here. I've been talking a lot about Chewy this week. But for anyone who maybe hasn't heard that, I'm going to give a little bit of an overview of this company before we dive into its most recent earnings report, which it released yesterday, I believe.

Chewy is an online pet products retailer. You can find pretty much anything for all types of pets on chewy.com, whether it's larger -- like farm animals, like horses -- or dogs, cats, fish. So everything from food to treats to medications. The company has a telehealth service called Connect With a Vet, where Chewy customers can log online and via chat or phone for a set fee, connect with a licensed vet for whatever their pet healthcare concern might be.

The company also just announced a really interesting partnership with Trupanion, which is a well-known pet insurance provider. As of spring 2022, Chewy is going to offer customers access to Trupanion's pet insurance policy on its platform, and you'll be able to purchase it through there as a pet owner. Really interesting business model, lots of different streams of revenue.

The stock, if anyone has been paying attention, is down [laughs] by a lot. Year to date, stock is down about 42%, and the stock is down about 13% over the last five days. Shares were falling in post-market and pre-market trading after earnings were reported. In addition, before the company's quarterly results came out, I read a report, I think it was on Barron's, that analysts at Wedbush had downgraded the stock from outperform to neutral on Monday, expecting slower growth in a COVID world. The stock is down, fell again a bit on earnings, which there was a lot of really positive things from its earnings report, which we will delve into here in a second. And then there were some low points, which we'll also delve into as well. Mixed earnings, slightly downgraded its upcoming earnings guidance. But Chewy has been a publicly traded company since 2019. It's only been public for a couple of years.

Was founded about 10 years ago, later acquired by PetSmart. The companies are two individual entities, and PetSmart eventually transferred part of its ownership stake to a company called BC Partners. Chewy had a huge surge in customer demand during the earlier days of the pandemic. There was a lot more people at home and there was a huge demand for inventories. The company spent a lot of money increasing its available inventory to meet that demand. There are thousands of brands on the company's website for shoppers to choose from.

The company has millions of square feet of fulfillment space spread across the US. It's actually currently working to deal with some of its supply chain issues, which we will see shortly impacted its third-quarter earnings.

One of the ways it's doing that is, it is opening multiple automated fulfillment centers over the next year or so, plans to have four open by the end of 2022, up for a total of 14 total fulfillment centers. It's doing a lot to try to deal with this issue of, "We have a labor shortage, we've got supply chain lags." And one of the ways I think it's been trying to attract workers is it switched to a hybrid remote-work model earlier in the pandemic. That's just an interesting thing to note about how the company runs its business.