What Chewy’s Addition to the S&P MidCap 400 Means
S&P Global, the financial services company that manages the S&P indexes, confirmed that Chewy will replace Stericycle (NASDAQ: SRCL) on the S&P MidCap 400, as Stericycle is being acquired by Waste Management (NYSE: WM). Chewy’s inclusion in this prestigious index takes effect before the market opens on Wednesday, which is expected to attract new investments from funds that track the S&P MidCap 400, thus increasing demand for Chewy’s stock.
Being added to the S&P MidCap 400 also symbolizes Chewy’s solid financial health. Companies included in S&P indexes are carefully chosen based on criteria like market capitalization, liquidity, and financial stability.
Chewy’s Path to the S&P 500
Joining the S&P MidCap 400 could be the first step toward Chewy’s potential inclusion in the S&P 500 (NYSE: GSPC), which requires companies to reach large-cap status and maintain a stronger revenue track record. While joining the S&P 500 would represent a higher level of recognition, Chewy would need to achieve further growth in revenue and market cap.
Recent Financial Performance and Growth Prospects
Chewy has faced some challenges in recent quarters, with its revenue growth slowing. In its second quarter, Chewy reported a modest 2.6% revenue increase to $2.86 billion. However, the company managed to increase its profitability as controlled costs and a shift in its sales mix boosted its gross margin by 120 basis points.
With the pandemic-induced slowdown impacting the pet industry, Chewy’s revenue growth has been sluggish. However, industry experts are optimistic about a revival in demand for pet products, which could benefit Chewy in the long term.
What’s Next for Chewy?
Chewy’s inclusion in the S&P MidCap 400 not only boosts its visibility but also underscores investor confidence in its long-term potential. As the pet industry continues to recover, Chewy may be well-positioned to capitalize on this growth, especially if it can accelerate its revenue gains in upcoming quarters.