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Chewy Shares Find A Natural Home In ProShares Pet Care ETF

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Chewy Shares Find A Natural Home In ProShares Pet Care ETF

Newly public pet products retailer Chewy, Inc. (NYSE:CHWY) has found a logical exchange traded fund home in the form of the ProShares Pet Care ETF (NYSE: PAWZ).

What Happened

PAWZ, the first and still the only ETF dedicated to the booming pet care industry, made room for shares of Chewy on June 21. The stock entered PAWZ as the ETF's fourth-largest holding at a weight of 7.41%.

Interestingly, Chewy entered PAWZ before it was admitted to the Renaissance IPO ETF (NYSE: IPO) or the First Trust US Equity Opportunities ETF (NYSE: FPX), two ETFs that track initial public offerings.

Why It's Important

Chewy is the 27th member of the PAWZ roster. The ETF, which debuted last November, tracks the FactSet Pet Care Index.

“PAWZ is the only ETF focused on the pet care industry,” said ProShares. “It gives investors the opportunity to gain broad exposure to public companies in the global pet care industry—companies like Chewy that stand to potentially benefit from the proliferation of pet ownership and the emerging trends affecting how we care for our pets.”

PAWZ, which had $27.16 million in assets under management at the end of the first quarter, is up 16.6% year to date. It remains to be seen how a stake in Chewy will affect the ETF. Shares are down almost 10% since the IPO earlier this month.

Still, Chewy is seen as one of the leaders in the rapidly growing online pet retail market.

The company's “wide assortment of products, competitive product prices, customizable and convenient automatic reordering, quick and efficient order delivery and top-notch customer service create a compelling customer value proposition, leading Chewy to capture a remarkable two-thirds of the online pet care industry’s rapid annual sales growth in recent years,” Wedbush analyst Seth Basham told Barron’s.

What's Next

ProShares estimates that global pet care sales could vault to $203 billion by 2025. Chewy will undoubtedly command a slice of that pie, but its ability to consistently be profitable will determine its fortunes and how it affects PAWZ investors.

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