Prospectus Summary
PROSPECTUS SUMMARY This summary highlights selected information contained elsewhere in this prospectus. This summary does not contain all of the information that you should consider before deciding to purchase our Class A common stock in this offering. You should read the entire prospectus carefully, including the sections titled “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our consolidated financial statements and the related notes included elsewhere in this prospectus, before making an investment decision. See “About This Prospectus.”Overview
Our mission is to be the most trusted and convenient online destination for pet parents everywhere. Since our launch, we have created the largest pure-play pet e-tailer in the United States, offering virtually everything a pet needs. We believe that we are the preeminent online destination for pet parents as a result of our broad selection of high-quality products, which we offer at great prices and deliver with an exceptional level of care and a personal touch. We are the trusted source for pet parents and continually develop innovative ways for our customers to engage with us. We partner with more than 1,600 of the best and most trusted brands in the pet industry, and we create and offer our own outstanding private brands. The loyalty of our customers has helped us deliver more than 100 million orders since 2011. From fiscal year 2012 to fiscal year 2018, our net sales per active customer grew from $223 to $334 and our net sales grew from $26 million to $3.5 billion. In addition, Autoship customer sales have grown from $115 million in fiscal year 2014 to $2.3 billion in fiscal year 2018.
We launched Chewy in 2011 to bring the best of the neighborhood pet store shopping experience to a larger audience, enhanced by the depth and wide selection of products and around-the-clock convenience that only e-commerce can offer. At Chewy, we love pets and pet parents. We view pets as family and are obsessed with serving pet parents by meeting all of their needs and exceeding expectations through every interaction. Over the past seven years, we have successfully created a customer-centric culture, striving to “WOW” our customers through exceptional customer service and expert advice available around the clock, every day of the year. Our high-quality service and customer satisfaction are demonstrated by our strong Net Promoter Score, which we have calculated to be 86 for fiscal year 2018. 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. In addition, our Autoship subscription program makes shopping with us even easier, providing pet parents with a convenient and flexible automatic reordering process.
Growth in Net Sales
Our Industry
The pet industry in the United States—including food, supplies, veterinary services, and non-medical services—is a growing and highly-attractive market, with 2017 sales reaching approximately $70 billion.
Pet Products and Services Market by Product
Source: American Pet Products Association (the “APPA”) 2018, Packaged Facts.
Some key characteristics of the pet industry include:
Projected Growth in Online Penetration
The pet humanization trend manifests in multiple ways in the United States, such as the following:
U.S. Pet Industry Grew During the Recession of 2008 to 2010
(market size, $ in billions)
Source: APPA (2005-2018E).
Pet Care Is a Fragmented Industry
What Sets Us Apart
We are a passionate group of people who love pets of all breeds, types, shapes, and sizes. We believe that pet parents are attracted to our trusted and convenient offering of high-quality products via our versatile e-commerce platform, and that they continue to shop with us because we offer personalized, high-touch customer service to every customer, every day, and in every interaction.
Our Value Proposition to Customers
Our value proposition to customers is driven by our broad selection of high quality products at competitive prices, an easy and enjoyable shopping experience, fast and reliable delivery options, including our convenient Autoship subscription program, and strong commitment to serving and bringing delight to our loyal customers. We are dedicated to customer service and believe that this sets us apart from our competitors. We have almost 10,000 team members, known as “Chewtopians,” in 12 locations across the United States, who are available to serve our customers 24/7 every single day of the year. We believe that our customers are loyal because we strive to provide exceptional service every time they interact with us. Our highly trained and passionate customer service representatives (“CSRs”) are available to provide the type of tailored, knowledgeable service and guidance that customers can usually find only at the highest quality neighborhood pet stores. Our high-quality service and customer satisfaction are demonstrated by our Net Promoter Score, which we have calculated to be 86 for fiscal year 2018. Our customer service is further enhanced by our internally developed technology platform, which serves our customers through its easy-to-use functionality, and by offering everything from educational resources to 24/7 access to our online pet experts.
Our Value Proposition to Partners
We believe that the rapid growth of our customer base and net sales, coupled with our versatile e-commerce platform, provide our partners with the opportunity to grow their brands. Our partners benefit from our investments in cutting-edge technology and educational resources, including free educational videos about their products. In addition, our Autoship subscription program leads to increased repeat orders of our partners’ products by our customers. Our robust distribution and fulfillment network also benefits our partners by providing fast and reliable delivery options for their products.
Our Strengths
subscription program and the exceptional customer experience that we provide. Our marketing programs, coupled with our high customer retention rates, yield high returns on investment, which in turn enable us to continue to invest in growth. All of these attributes work together to form the backbone of our superior business model.
Our Growth Strategy
We believe that we are still early along our growth path and we are focused on growing both our net sales and expanding our margins through a number of different strategies, including:
applications after their first year as they discover the wide range of our product offering and the value proposition we provide. For example, our net sales in fiscal year 2018 would have grown by 20% compared to fiscal year 2017 as a result of increased spending among our customer base without any net increase in customers during fiscal year 2018. Our exceptional customer service and “WOW” programs help us retain customers and increase their level of engagement and spending.
Summary Risk Factors
Our business is subject to numerous risks described in the section titled “Risk Factors” and elsewhere in this prospectus. You should carefully consider these risks before making an investment. Some of these risks include:
Our Corporate Information
We began operating Chewy.com in 2011 and, in October 2013, Chewy.com, LLC was formed as a Delaware limited liability company. On March 16, 2016, Chewy.com, LLC converted from a Delaware limited liability company to a Delaware corporation and we changed our name to Chewy, Inc.
Our principal executive offices are located at 1855 Griffin Road, Suite B-428, Dania Beach, Florida 33004 and our telephone number is (786) 320-7111. We maintain a website at the address www.chewy.com. Information contained on, or accessible through, our website is not a part of this prospectus and you should not rely on that information when making a decision to invest in our Class A common stock.
PetSmart owns a majority of our outstanding common stock through its subsidiaries. PetSmart is a wholly owned, indirect subsidiary of Argos Holdings, which is owned by affiliates of funds advised by BC Partners, La Caisse de dépôt et placement du Québec, GIC Private Limited, Longview Asset Management LLC, StepStone Group LP and certain other investors. Argos Holdings is controlled by affiliates of BC Partners. For more information on our relationship with PetSmart and its owners, see “Certain Relationships and Related Party Transactions” and “Principal and Selling Stockholders.”
Upon consummation of this offering, we will have two classes of common stock: Class A common stock and Class B common stock. See “Description of Capital Stock.” All of our outstanding common stock prior to this offering will automatically be reclassified as Class B common stock upon consummation of this offering. As a result, following this offering, PetSmart will own shares of our Class B common stock, which will represent approximately % of our total outstanding shares of common stock and approximately % of the combined voting power of both classes of our common stock outstanding immediately after this offering. Upon completion of this offering, we will be a “controlled company” as defined under the corporate governance rules of the . As a result, PetSmart will be able to exercise control over all matters requiring approval by our stockholders, including the election of our directors and approval of significant corporate transactions. PetSmart’s controlling interest may discourage or prevent a change in control of our company that other holders of our common stock may favor. See “Risk Factors—Risks Related to Our Relationship with PetSmart.”
The Offering
We intend to use the net proceeds from this offering (including any additional proceeds that we may receive if the underwriters exercise their option to purchase additional shares of our common stock) for working capital and other general corporate purposes. See the section titled “Use of Proceeds” for more information.
We will not receive any of the proceeds from the sale of our Class A common stock offered by the selling stockholder.
Each share of Class B common stock is entitled to ten votes and is convertible at any time into one share of Class A common stock. Holders of Class A common stock and Class B common stock will generally vote together as a single class, unless otherwise required by law or our amended and restated certificate of incorporation that will be in effect upon completion of this offering. See the sections titled “Principal and Selling Stockholders” and “Description of Capital Stock” for additional information.
We currently intend to avail ourselves of the “controlled company” exemption under the corporate governance rules of the .
Unless otherwise indicated, this prospectus reflects and assumes the following:
The number of shares of our Class A common stock and Class B common stock to be outstanding after this offering is based on no shares of Class A common stock and shares of Class B common stock outstanding as of , 2019 and excludes shares of Class A common stock reserved for future issuance under our 2019 incentive award plan.
Summary Consolidated Financial and Other Data
The following tables set forth our summary consolidated financial and other data for the periods presented and at the dates indicated below. The summary consolidated statement of operations data and consolidated balance sheet data presented below as of February 3, 2019 and for the fiscal years ended December 31, 2016, January 28, 2018 and February 3, 2019 have been derived from our audited consolidated financial statements included elsewhere in this prospectus. Our historical results are not necessarily indicative of the results that may be expected in any future period. The following summary consolidated financial data should be read together with the sections titled “Selected Consolidated Financial and Other Data” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our audited consolidated financial statements and related notes included elsewhere in this prospectus.
We currently use a 52- or 53-week fiscal year, with our fiscal year ending each year on the Sunday that is closest to January 31 of that year. Each fiscal year generally consists of four 13-week fiscal quarters, with each fiscal quarter ending on the Sunday that is closest to the last day of the last month of the quarter. Throughout this prospectus, all references to quarters and years are to our fiscal quarters and fiscal years unless otherwise noted. In periods prior to the fiscal year ended January 28, 2018, we used a fiscal year ending December 31. Therefore, references in this prospectus to “fiscal year 2014,” “fiscal year 2015” and “fiscal year 2016” refer to the fiscal years ended December 31, 2014, 2015 and 2016, respectively. References to “fiscal year 2017” and “fiscal year 2018” refer to our fiscal years ended January 28, 2018 and February 3, 2019, respectively. Unless otherwise indicated, due to the change in our fiscal year, the transition period from January 1, 2017 to January 31, 2017 is not included in either fiscal year 2016 or fiscal year 2017. See “Selected Consolidated Financial and Other Data” and our consolidated financial statements and related notes included elsewhere in this prospectus for more information, including our audited financial information for the transition period.