Another COVID-Winner Falls From Grace
More than 23 million American families (nearly one in every five) got a pet during the pandemic and many new owners have spent big on their new companions. U.S. consumers spent $21.4 billion on non-medical pet supplies in November 2022, plus another $28.4 billion on dog food, according to market research firm Euromonitor International.
- Pet-related companies such as Freshpets, Chewy and Rover were ideally positioned to take advantage of this significant rise in spending
- Rover, a gig economy company that focuses on overnight boarding and dog-sitting, announced a quarterly revenue of $157.1 million for the third quarter of 2021, aided by the COVID-19 pandemic's boost to online shopping and pet ownership
- In March 2021, Chewy declared its first quarterly profit and revenues of more than $2 billion for the most recent quarter. The online pet-products store also anticipated full-year sales to eclipse $9 billion
Slowing Down
Yet, Chewy's stock dropped by 13% on Wednesday after the business reported higher-than-expected fourth-quarter losses. The online pet-products retailer lost $63.6 million, a significant drop from its first quarterly profit of $21 million a year ago. Analysts had predicted a $36 million loss.
- The loss was attributed to a drop in gross margin and higher selling, general, and administrative expenses, which increased 35% to $516.5 million, according to the business
- The increased costs were linked to greater labor costs and investments in new projects, according to the corporation
The company's third straight quarterly loss comes as supply-chain difficulties and inflation have begun to offset record revenues achieved during the Covid-19 outbreak and to a surge in pet adoption.
BENCHMARK'S TAKE
- Next to tech stocks, pet stocks took the central stage during the pandemic as pet adoption grew and locked-at-home consumers spent big on their furry companions
- Yet, as the pandemic recedes, inflation bites and supply chain issues persist, pet-related companies have a hard time growing their profits from the all-time highs they reached mid-pandemic
- Most pet stocks have fallen back to their pre-COVID levels, erasing all gains but potentially presenting investors with an appealing entry point today
Disclaimer
Please note that this article does not constitute investment advice in any form. This article is not a research report and is not intended to serve as the basis for any investment decision. All investments involve risk and the past performance of a security or financial product does not guarantee future returns. Investors have to conduct their own research before conducting any transaction. There is always the risk of losing parts or all of your money when you invest in securities or other financial products.
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