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Chewy IPO: A Hybrid Play On Lucrative Pet Care Market, E-Commerce

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Chewy IPO: A Hybrid Play On Lucrative Pet Care Market, E-Commerce

Chewy Inc., an e-retailer of pet products that's majority owned by PetSmart Inc (NASDAQ: PETM), recently set terms for its initial public offering.

The IPO Terms

Launching its roadshow for the IPO, Chewy said it is offering 5.6 million shares of Class A common stock, while a subsidiary of PetSmart is offering 36 million shares of Chewy Class A common stock, plus up to an additional 6.24 million shares for which underwriters have the option to purchase.

The company expects to price the IPO between $17 and $19.

With a total of 41.6 million shares offered, the offer size is $748.8 million at the midpoint of the estimated price range. 

The shares have been approved for listing on the NYSE under the ticker symbol CHWY.

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The company said it intends to use the net proceeds for working capital and other general corporate purposes.

It will not receive any proceeds from the sale of securities offered by the PetSmart subsidiary.

The Company

Launched in 2011, Chewy promotes itself as the largest pure-play pet "e-tailer" in the U.S., offering virtually everything a pet needs. The company partners with 1,600 brands in the pet industry and also offers its own private brands.

"Through our website and mobile applications, we offer our customers more than 45,000 products, compelling merchandising, an easy and enjoyable shopping experience, and exceptional customer service," the company said in its S-1 filing.

Chewy also offers an Autoship subscription program, providing customers, whom it calls "pet parents," a convenient and flexible automatic reordering process.

The Finances

For 2018, Chewy reported net sales of $3.53 billion, up about 68 percent from $2.104 billion in 2017. The net loss narrowed from $338.06 million to $267.89 million.

From fiscal 2012 to fiscal 2018, Chewy's net sales per active customer grew from $223 to $334 and its net sales grew from $26 million to $3.5 billion.

The company sees the pet industry in the U.S. as a burgeoning one with an attractive market potential.

The industry was estimated at $70 billion in sales in 2017. Spending on pet products and services is projected to continue its historically consistent growth at a 4.2-percent CAGR from 2017 to 2022, the company said, citing Packaged Facts.

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