Pet foods e-commerce giant Chewy is reducing its distribution operations at its Dallas fulfillment hub in a move expected to cut 674 jobs.
The company sent a letter to the Texas Workforce Commission this week notifying officials about the job cuts and the distribution center's reduced operations. The layoffs are expected to begin around May 10 and run through June 25 at Chewy's massive 663,000-square-foot industrial hub at 7243 Grady Niblo Road, about 16 miles southwest of downtown Dallas.
It wasn't immediately clear how reduced the company's distribution operations would be at the fulfillment facility.
"It doesn't surprise me they are letting people go, with dog food being delivered having peaked after the pandemic," Steve Triolet, a senior vice president of research and market forecasting for Houston-based Partners, told CoStar News. "People once paid more to have their dog food or cat food delivered. Now, shoppers are tightening their belts."
In addition, commute patterns and shopping are changing as companies force employees back to the office five days a week, Triolet said.
"I think we're going to see this across the board with DoorDash and all delivery systems of food — whether that's people or dog food — cutting operations as commute patterns change and consumer behavior shifts," Triolet said.
Chewy did not immediately respond Thursday to an emailed request for comment from CoStar News.
The Florida-based company also has customer service centers in North Texas. It is unclear if those leased facilities will be impacted by the reduced operations at the distribution hub.
The decision to cut jobs in Texas comes as Chewy has expanded its business in the Lone Star State through national brick-and-mortar vet clinic expansion. Chewy Chief Financial Officer Dave Reeder told investors at a conference earlier this month that the company has opened eight vet clinics in Georgia, Florida, Texas and Colorado. The company is also expanding its U.S. pet pharmacy business, Reeder added.
About half of Chewy's shipments to customers use some form of automation, said CEO Sumit Singh in the company's last earnings call. About six of the company's distribution centers are equipped with automation equipment, he said.
Like other e-commerce businesses, Chewy has been upgrading its logistics hubs as it focuses on automation in recent years. The company, which opened its Dallas distribution hub in February 2018, has about two years left on its lease at the property.
Cody Gibbs, CoStar's market analytics director in the Dallas-Fort Worth region, said he is seeing a "right-sizing" of industrial space throughout North Texas.
"This is especially relevant for some of these bigger facilities, but [this area] is fairly well-insulated compared to its nearby neighbors and has good lease-up on these big-bomber buildings," Gibbs said.