CHWY - Embedded Expectations Analysis - 2020 12 01
Chewy, Inc. (CHWY:USA) currently trades at a historical high relative to UAFRS-based(Uniform) assets, with a 22.2x Uniform P/B. At these levels, the market has bullish expectations for the firm, but management may be concerned about sales growth,
margins, and customer behavior
Specifically, management may lack confidence in their ability to sustain net sales growth, adjusted EBITDA margin improvements, and SG&A cost reductions while scaling fulfillment centers. In addition, they may have concerns about the coronavirus impact on labor costs, the changing retail industry, and their pharmacy customers' behavior. Moreover, management may lack confidence in their ability to retain their pet health customer base, keep growing the hardgoods business, and generate the benefits of fulfillment center automation. Additionally, they appear concerned about their ability to continue to acquire customers at pre-COVID levels. Finally, they may be exaggerating the potential of their new pet personalization offering and the benefits of spending on media during election years
Chewy is a pure play e-commerce business geared toward pet products for dogs, cats, fish, birds, small pets, horses, and reptiles. The company serves its customers through its retail website, www.chewy.com, and its mobile applications and focuses on delivering exceptional customer service, a large selection of high-quality pet food, treats and supplies, price, convenience (including Chewy's Autoship subscription program), fast shipping, and hassle-free returns.
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