Chewy, the company that sells pet supplies online, laid off more than 200 employees. This happened in various locations, including their headquarters in Florida. Let’s delve into the details of the Chewy layoffs and explore their implications for both the company and its employees.
Chewy confirmed this news and explained that they are trying to streamline their team to focus on what will make customers happy and bring in the most money for the company.
The roles affected by these layoffs included jobs in areas like H.R., recruiting, data, and business intelligence. There’s talk on discussion forums about the specific positions, like engineers, developers, product managers, and supply chain personnel, being impacted. Chewy offered a minimum of one month’s severance pay and more weeks based on how long people have worked there.
Chewy’s CEO, Sumit Singh, mentioned concerns about how inflation is affecting their business. People are being more careful with their spending and choosing cheaper items like dry dog food instead of wet food. The company also noted a decline in the number of people actively using their website, which analysts found worrisome.
About Chewy
Chewy, Inc. is an American online store that sells pet food and other pet stuff. It’s located in Plantation, Florida, and started trading on the New York Stock Exchange with the symbol CHWY in 2019.
Chewy was started in June 2011 as “Mr. Chewy” by Ryan Cohen and Michael Day. After about a year, in 2012, they made around $26 million in revenue, even though they didn’t make a profit at first.
By 2017, they were making about $2 billion in revenue and had more than half of all online pet food sales in the U.S. In that same year, PetSmart bought Chewy for $3.35 billion, which was the biggest purchase of an online store at that time.
After the buyout, Ryan Cohen continued as Chewy’s CEO. Between 2017 and 2018, Chewy’s sales grew from $2.1 billion to $3.5 billion. Sumit Singh took over as CEO in March 2018.
In 2019, Chewy decided to go public and trade under CHWY. In the same year, they reported a net loss of $268 million on total sales of $3.5 billion for 2018. In 2019, their sales went up to $4.85 billion. The COVID-19 pandemic made more people buy from Chewy, and they launched a free service called Connect With a Vet in 2020. They also started making and delivering custom prescription medications in November 2020.
In 2020, it was decided that Chewy and PetSmart would operate separately. In March 2021, Chewy reported making a profit for the first time in Q4 of 2020, with $2.04 billion in revenue. In 2021, their net sales were $8.89 billion.
Overall, Chewy is a big online pet store that started small and grew over the years, especially during the COVID-19 pandemic.
Who Bought Chewy?
B.C bought Chewy. Partners in the past and went public in 2019. B.C. Partners later separated Chewy from PetSmart but still own a significant part of Chewy. Earlier this year, B.C. Partners sold a part of PetSmart to Apollo. In 2023, there were concerns about directors sitting on both PetSmart and Chewy boards, and an advocacy group asked the Department of Labor to investigate this.
The Layoffs Are Happening Gradually
Even though these layoffs are significant, they won’t have a huge impact on the overall U.S. economy. Every month, around 5 million people either leave their jobs or get laid off, according to government data. At the same time, more than 5 million new people are hired.
Despite the upsetting effects of layoffs on individuals, the job market, as a whole, is doing well. The number of people asking for unemployment benefits, which is a way to measure layoffs, remains low. Additionally, data from sources like the ADP payroll provider shows that private companies are still hiring new workers.
Why Are Some Companies Hiring While Others Are Laying Off?
Many types of businesses have been hiring more workers. For instance, manufacturers added 56,000 jobs, and places like restaurants, hotels, and entertainment companies gained nearly 60,000 jobs. Health care providers, such as hospitals, doctors’ offices, and dentists, added a significant 300,000 jobs.
These jobs aren’t all low-paying either. The government has a group of jobs it calls “professional and business services.” This includes jobs like accountants, engineers, lawyers, and their support staff. Now, this category has 120,000 more jobs than it did in October. Also, government jobs at the federal, state, and local levels, which reached the number of jobs they had before the pandemic in September, added almost 120,000 jobs during that time.
However, job cuts have been more focused. Even though the government doesn’t specifically track technology jobs, signs in job reports show challenges in the industry. The unemployment rate for workers in the “information” sector, which includes media and tech workers, went up to 5.5% in January from 3.9% a year ago.
It may be confusing why companies would cut workers when the economy is growing and people continue to spend money. The government estimated that the economy expanded at a healthy pace of 3.3% annually in the October-December quarter after robust growth of 4.9% the previous quarter.
Companies cut jobs for various reasons, sometimes to reflect changes in their business strategy or to maintain or boost their profit margins. Many high-tech companies that hired a lot in 2022, as the economy bounced back from the pandemic, miscalculated the long-term demand for their products and services.
In a survey of job cuts, Challenger, Gray & Christmas mentioned that the leading reason companies gave last month for laying off workers was “restructuring.” A year earlier, it was “economic conditions,” meaning companies were more worried about the state of the economy at that time. Todd McKinnon, CEO of the software company Okta, explained that they hired too many people in 2022 based on the demand they experienced and had to cut about 400 jobs as a result.
Why Do Employees Get Laid Off, And How Do Companies Decide Who Stays Or Goes?
When someone is laid off from work, it means they no longer have a job, and they stop getting paid and receiving work benefits. However, they might get some extra pay and benefits for a little while, known as a severance package. If they have a retirement account like a 401(k), they keep the money in it, including what their employer added. But they might need to move this money to a new account after some time.
Now, how do bosses decide who stays and who goes when they need to save money? Well, it depends on the company. Sometimes, they look at how well each person is doing their job and keep the ones who do the best. Other times, they only keep the people they think are super important for making money for the company, like those who sell things, make products, or work on important projects. And in some cases, the employees might have a say in who leaves. They might offer good deals to older workers who are close to retiring or to anyone who wants to leave on their own, maybe because they are thinking about changing jobs.
What’s Chewy’s Future Like?
Looking ahead is crucial when deciding on a stock, especially if you want your investment to grow. Buying a strong company with a positive future at a good price is a smart move. Let’s see what Chewy’s future might hold. Experts predict that Chewy’s earnings in the coming years will double, showing a very hopeful future. This could lead to more money coming in, resulting in a higher stock value.
Is Chewy a Good Investment?
Reports suggest that Chewy’s current price is fair, just a bit higher (1.97%) than what we think it’s actually worth. This means if you buy Chewy now, you’re paying a reasonable price. If the stock’s true value is $19.47, there’s only a small downside when the price drops to its real value. Also, Chewy’s stock doesn’t swing as much as the overall market, making it less risky.
Who Are Some Competitors Of Chewy?
Chewy has some other companies to compete with. Let’s check out a few of them:
- Petco: Petco, around since 1965, is one of the biggest pet stores in the U.S. It has lots of physical stores in the U.S., Mexico, and Puerto Rico.
- PetSmart: This used to be Chewy’s parent company. PetSmart is a big competitor, selling pet stuff both online and in physical stores.
- Amazon: You know, the giant online shop? Yeah, Amazon also sells pet stuff, giving Chewy a run for its money with a huge variety of products and lots of customers.
- Pet Valu: Another pet store, Pet Valu, sells various pet supplies and services.
- Woof Gang Bakery: This one is known for special treats and grooming for pets, competing with Chewy in some specific areas.
- PetFlow: PetFlow is an online store focused on pet food and supplies, offering a lot of choices and convenience.
- Primal: Primal is into natural and raw pet food, targeting pet owners who are into healthy options.
These companies have different things to offer, and while they compete with Chewy, they all play a part in the big world of pet products.
The Bottom Line
In the end, Chewy’s recent layoffs, impacting over 200 employees, reflect the company’s strategic move to streamline operations and enhance future growth. The decision, while difficult, aims to align efforts with key priorities for greater customer success and business returns in 2024. Chewy assures affected team members with a minimum of one month’s severance, emphasizing ongoing support during this transition. Despite a recent profitable quarter, concerns over declining active users prompt these adjustments. As Chewy adapts to market dynamics, the pet supplies industry remains dynamic, with competition and challenges shaping its landscape. The company remains committed to resilience and customer satisfaction.
