The company’s New Shepard rocket, flying the NS-23 mission carrying science and research payloads, suffered a failure in September 2022. No people were onboard, and Blue Origin says its capsule’s emergency escape system functioned properly, but the rocket’s reusable booster was destroyed.

Bezos’ company had previously said little about its investigation over the past six months, which was conducted with Federal Aviation Administration oversight.

In a blog post on Friday, Blue Origin said it identified “a thermo-structural failure of the engine nozzle” as the direct cause of the issue, and is now modifying the engine, including design changes to account for higher-than-expected temperatures during the flight.

“Blue Origin expects to return to flight soon, with a re-flight of the NS-23 payloads,” the company said.

The New Shepard rocket launches from Blue Origin’s private facility in West Texas, carrying people and payloads above 100 kilometers — or more than 340,000 feet — for a couple minutes of weightlessness. The capsule is flown autonomously, with no human pilot, and floats down with the assistance of a set of parachutes to land in the Texas desert. The New Shepard rocket booster is reusable, returning to land on a concrete pad near the launch site.

Blue Origin said its investigation found that NS-23 flight’s engine failure was due to “operational temperatures that exceeded the expected and analyzed values of the nozzle material.” The company recovered fragments of the BE-3PM engine’s nozzle, finding “clear evidence of thermal damage and hot streaks resulting from increased operating temperatures.”

The company noted that its design changes are intended to improve the engine’s performance at high temperature, as well as strengthen the engine’s nozzle.

The retailers, which both released their quarterly earnings on Wednesday, began investing heavily into pet health when the pandemic-fueled pet boom saw 23 million American households welcome a new animal into their homes. 

The boom turned the overall U.S. pet market into a $123.6 billion dollar powerhouse in 2021, and it’s expected to grow to $200 billion by the end of the decade, according to the American Pet Products Association and new research from Bloomberg Intelligence.

Pet health care – and the high margins that come with it – is a crucial component to that overall market and is driving the growth in spending in the U.S., according to Bloomberg Intelligence.

“Increased pet nutrition is leading to longer pet lives around the world,” said Ann-Hunter Van Kirk, a senior biopharmaceutical analyst with Bloomberg Intelligence who co-authored the report. “With this comes an increased need for spending relating to expensive healthcare for aging pets, and we project that this spending on lasting health for pets will continue to swell over the next decade.”

The companies may still have to win over investors with the approach, though, as shares of both companies fell Thursday.

Chewy, the ecommerce giant known for its convenient auto-ship services and generous customer service policies, has focused on building out its pharmacy, insurance and telehealth verticals while partnering with veterinarians to get a cut of their consumables revenues. 

The company, founded by Ryan Cohen in 2011, now operates the largest pet pharmacy in the U.S., CEO Sumit Singh told investors on an earnings call. 

“Non-discretionary categories, including consumables and health care, remain the pillars of strength,” Singh, a former Amazon executive, said on the call. 

Petco, on the other hand, has also invested into insurance and pharmacy but has focused on leveraging its brick-and-mortar footprint to set up veterinary hospitals. It changed its name to Petco Health and Wellness Company in 2020.

The longtime pet retailer now has a total of 247 hospitals across the country, up from 10 at the beginning of 2018, bringing a veterinary presence to 90% of Petco’s stores, chairman and CEO Ron Coughlin said during an earnings call. 

“Petco’s hospitals and clinics saw nearly 1.9 million pets in 2022, positioning us as one of the leading providers of veterinary services in the United States,” Coughlin told investors, adding Petco is among the top 10 in the nation from a hospital unit standpoint. 

“Vet customers are also demonstrating a 2.3 times higher lifetime value than non-vet customers,” he said.

Against the backdrop of a tough veterinary job market and a dearth of pet doctors, Petco hired 1,100 veterinarians in 2022, a 40% year-over-year increase.

Chewy has not shared how many veterinarians or vet techs it employs for its veterinary telehealth service, Connect With a Vet.

Pet adoptions surged during the pandemic, triggering a surge in demand for pet goods. With uncertainty in the macroeconomic environment and an increasingly cautious consumer, sales from high margin hard goods such as toys and leashes have been trending down at both companies.

At Petco, where discretionary supplies and companion animals account for about 38% of sales, the category suffered a 9% decline for the full year, the company said. 

At Chewy, which is not nearly as reliant on hard goods, the company celebrated its first annual profit in its history Wednesday. But executives also repeatedly noted softness in the discretionary and hard goods categories during the company’s earnings call. Singh said he doesn’t expect hard goods sales to accelerate in 2023.

Plus, there’s now more competition in the hardgoods market, making it harder for Chewy and Petco to hang on to their market share, said Jessica Ramirez, a senior analyst at Jane Hali and Associates. 

“Off-price retailers have a really good category and those categories continue to grow,” she told CNBC. 

However, when it comes to pet care, there are far more avenues for growth and longevity. 

“A puppy that was, you know, adopted or bought, during 2020 is now three years old. As they get older, they’re only going to require more health care,” said Anna Andreeva, a senior equity research analyst and managing director at Needham and Company. “And I think both companies are being smart in developing those verticals.” 

Pet insurance has very little penetration in the U.S. compared to other markets, such as the UK, which can “definitely” be changed moving forward and will be another driver in the space, Andreeva said.

In addition, the footprint of independent veterinary providers is dwindling, which is creating an “interesting” market share opportunity, said Andreeva.

“There’s definitely been, you know, share donation out of that channel,” she said.

CNBC previously reported that Chewy, along with other pet companies, have sponsored a lobbying organization that’s working to change those regulations and some veterinarians are concerned that veterinary telehealth could be unsafe and problematic for pets. 

Petco hasn’t faced the same issues because they haven’t yet branched into telehealth, and all of their veterinarians practice in physical locations. However, it will take some time before the hospitals are profitable.

“The margins on our services business are growing. It’s a three year payback on those vet hospitals and we’re ahead of our model on that,” Coughlin, Petco’s CEO, told CNBC in an interview.

Either way, as the consumer continues to focus on wellness and seek more ease to meet all of its needs, branching into pet health is a positive avenue for growth for both of the companies, said Ramirez, the Jane Hali analyst. 

“As wellness continues to be a key category for us the consumer, it’s also being reflected into pet,” said Ramirez. “It only makes sense that sort of lifestyle is extended to our furry animals at home because again, it makes everything much more streamlined, much easier, so I think that’s something that makes sense on both sides.”

The home features a Kobe Bryant-themed basketball court, car showroom and a 70-foot infinity pool that appears to float some 45 feet above the mountainside, and it’s on sale for a reduced price of $38 million.

If it doesn’t sell by April 1, the property would be subject to a looming new, local mansion tax, which goes into effect next month and could cost the owner a further $2 million.

The Brentwood estate, now known as the Star Resort, was built by veteran spec developer Ramtin Ray Nosrati, who sold it back in 2021 for $44 million. According to public records, the almost 16,700-square-foot residence was purchased by the trust of wealthy investor Jeffrey Feinberg, who runs Feinberg Investments. 

About a year after buying it, Feinberg put the home back on the market for $48 million but couldn’t find any takers. Feinberg brought in David Malka of Ikon Advisors to implement a more aggressive pricing strategy, and the original asking price was chopped down $10 million, or almost 21%. To put that price cut into perspective, it amounts to the home dropping almost $64,000 in value every single week for 94 weeks straight since Feinberg bought it.

Malka told CNBC yearly real estate taxes on the Star Resort run his client around $550,000 a year, plus about $20,000 a month in utilities.

“Plus, the staff and so on, so probably a million dollars of expenses [per year],” Malka said.

Trying to unload an expensive mansion in the midst of a banking crisis with the LA real estate market softening and uncertainty looming large isn’t exactly great timing. 

Feinberg, like all luxury mansion sellers in LA, is also contending with the new mansion tax approved by voters in November. The ULA tax, as it’s called, was designed to “fund affordable housing projects and provide resources to tenants at risk of homelessness,” according to the city of Los Angeles website.

It’s levied on the seller as a transfer tax upon the sale of a home, or any real property, that trades for $5 million or more.

For homes priced between $5 million and $10 million, sellers will have to pay the city 4% of the total sale price. For real estate trading north of $10 million, the rate increases to 5.5%.

The new tax is on top of the city’s current 0.45% transfer tax. And it’s levied based on sale price, not profit, which means sellers will have to pay up even if they’re already taking a loss, as could be the case with the Star Resort.

The city’s website includes a tax calculator, which estimates ULA and city transfer taxes owed on a $38 million deal at $2,261,000, or just under 6% of the total deal.

For many high-end home sellers and their agents, the race is on to lock in profits and close on a sale before the new tax takes effect. But for Malka, who wouldn’t discuss his client by name with CNBC, the pressure is on to get the best price and rein in his client’s losses before the new tax takes them even higher.

“That’s why we decided to give a good price cut and send a signal to the market that my seller is motivated to sell and that he wants to move on,” said Malka, who still holds out hope he can broker a deal before the first of the month.

“It’s crazy,” said real estate broker Aaron Kirman of AKG/Christies International. “People had a four-month window from the day [the new tax] passed to sell a house.”

Kirman, who is one of LA’s top-producing luxury real estate brokers, does not represent the Star Resort, but he does have many clients who are also in a big rush to sell.

It’s a trend, he said, that’s reflected in LA’s Multiple Listing Service (MLS), which according to Kirman shows 86 homes with sale prices over $5 million currently in escrow.

“The tax is coming out at a complicated time with interest rates, inflation and bank issues,” Kirman told CNBC. “It couldn’t have been more of a perfect storm.” 

The ULA tax, he said, “has led to dramatic price reductions on many homes.”

Potential homebuyers are swooping in with all-cash offers, and the promise of a fast-closing deal, Kirman said, but at deep discounts.

Jonathan Miller, president of the real estate appraisal firm Miller Samuel, told CNBC it will be hard to project the impact of the tax on any one piece of real estate, but he does have a prediction across the region: “It ultimately lowers achievable prices as compared to the period before April 1 and becomes baked into market expectations in the future.”

In other words, the new tax will create a downward pressure on homes over $5 million as owners anticipate the future cost of higher tax bills.

CNBC asked Miller to crunch market data to see how much sellers of luxury single-family homes in LA would have paid in 2022 if the mansion tax were already in effect. Last year, sales of $5 million-plus totaled almost $2.5 billion.

According to his calculations, all of those sellers combined would have racked up a mansion tax bill of almost $131 million. Sellers of homes trading between $5 million and $10 million would have seen an average tax bill of $43,000, according to Miller’s estimates, and sellers of $10 million-and-up homes would have footed an average bill of $1.2 million.

It’s important to note Miller’s analysis focused exclusively on single-family home sales over the price threshold. According to the city’s projections, which include commercial and multifamily sales, the new tax could generate between $600 million and $1.1 billion annually.

According to Miller, the rush to sell before the April 1 deadline matches a similar frenzy in New York four years ago.

“When New York implemented the mansion tax in 2019, there was a surge in closings just short of the July 1 start date and a void of sales in the following months,” he said.

Kirman said even with the tax pressures, one thing will remain the same: “The house is worth what the buyer is willing to pay for it.”

And if that amount is over $5 million, there will be some new taxes to pay on it.