What happened
Chewy (CHWY +2.04%) shareholders were in the red on Tuesday as the stock shed 3% by 3 p.m. ET, compared to a 0.5% decline in the S&P 500. That downtick added to a tough year for owners of the pet supply e-commerce retailer, which saw its stock go down 35% so far in 2022
Tuesday's downtick appeared to be sparked by general bearishness around growth stocks and tech specialists, in particular.
So what
The main pressure pulling Chewy's shares lower was a falling Nasdaq Index, which shed 1.4% by 3 p.m. ET. Many tech giants were down by 2% or more by then, including Amazon. Chewy's stock tends to fall along with the broader tech market, due to its position as an e-commerce specialist.
NYSE: CHWY
Key Data Points
The pet products-retailer's business is somewhat sensitive to slowing consumer-spending patterns, which management said in early December had pushed sales of many of its discretionary product lines lower through late October. That exposure makes it likely that Chewy's stock will fall in sympathy with other growth-focused tech stocks during increased fears of a recession ahead in 2023.
Now what
Chewy isn't as exposed to a recession as many of its e-commerce peers. Most of its sales are in the pet essentials category, which includes food and other consumables. Chewy also counts over 70% of its sales from customers who have committed to regular automatic shipments. These factors help explain why sales are still up 13% so far in 2022 and why the company remains profitable, despite soaring expenses.
The stock's path in 2023 will depend, in part, on how wider economic growth trends impact the tech-stock world. But the company also has a good shot at outperforming the industry if it continues expanding its customer base and gaining more market share. Those are the metrics to watch that support positive long-term returns, despite these volatile daily periods for the stock price.
