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PetSmart - Chewy /
Region:North America
Transaction Value:PetSmart - US$8,677m / Chewy - US$3,000m

Partially Realised

PetSmart is the leading bricks and mortar specialty pet retailer in North America, with 1,600+ stores across the US and Canada. PetSmart is seen as a destination for pet parents and their pets, with the widest in-store variety of pet products, including food, treats, toys, and accessories. Additionally, it has the largest pet services offering in the country, including grooming, training, boarding, and veterinary care.

PetSmart was acquired in March 2015 in a public to private (PtoP) transaction by a consortium led by funds advised by BC Partners along with a number of Limited Partners.

PetSmart Investment Thesis

  • Pet Specialty Market Tailwinds: "Humanisation" of pets anticipated to support industry growth in the next medium term.

  • Category Leadership: PetSmart is the largest scale bricks and mortar specialty retailer in North America, with the widest breadth of products and services, and a very strong brand name.

  • Strong Services Offering: Significantly ahead of competitors on service offering across grooming, training, and boarding. Furthermore, through partnership with Banfield, offering customers full veterinary services through vet hospitals in over 800 locations.

  • Operational Improvement Opportunities: through diligence, identified a number of opportuntities to implement retail best practices and invest in improved customer experience, while simultaneously driving cost control.

In the two years following the transaction, PetSmart materially improved its profitability through such elements as implementing a holistic pricing architecture, moving to expand global sourcing capabilities, and improving corporate efficiency. However, one area of the industry where the Company saw an unexpected degree / speed of change was in the overall shift to e-commerce, driven in large part by the success of, the leading online specialty pet retailer in the US.

In May 2017, PetSmart acquired Chewy.

The Chewy investment thesis included:

  • Best-in-Class Customer Service: customer service is at the core of the Chewy brand, and is a differentiator against all competitors.

  • Leading Online Pet Retailer: offers the widest assortment of pet products available at any pet specialty retailer, available at competitive prices.

  • Loyal Customer Base: customers spend more on average the longer they remain active, and customer cohorts behave in an extremely consistent fashion, allowing the company to optimise its customer acquisition strategy.

  • Efficient and Effective Distribution: the company's network of 7 fulfillment centers enables 1-2 day shipping to most of the US

  • Synergistic Cooperation: while Chewy and PetSmart have always operated independently of one another, they have collaborated in areas of driving synergy, such as in vendor negotiations, to bring value to both businesses.

The case studies are presented herein for illustrative purposes only and should not be relied upon for investment decision making. This information is being furnished for the sole purpose of providing information about BC Partners. The specific investments identified are not representative of all of the companies purchased, sold or recommended for BC Partners' private equity funds, and it should not be assumed that investments identified were or will be profitable or are representative of investments that will be made by BC Partners in the future. Unless otherwise indicated, information with respect to the investments included herein has been obtained from the relevant portfolio company. Past performance of any BC Partners-sponsored fund, vehicle, account, or investment is not indicative of future performance. There can be no assurance that BC Partners will make comparable or equally successful investments in the future. For a list of all investments made by the private equity funds managed by BC Partners since its inception, please click here.