Chewy is getting longer within the tooth as an organization, and it is nonetheless hoping to be its clients’ greatest good friend.
Widespread pet provide retailer Chewy (CHWY -0.60%) is betting that market share and buyer loyalty will repay in the long term, at the same time as short-term earnings dip. As the corporate matures, its technique has shifted from fast progress to nurturing loyalty and recurring purchases. Chewy’s membership plan, Chewy+, and autoship program proceed to develop steadily.
Chewy’s future may not be as a high-growth inventory, however as a substitute as a priceless, regular, and defensive enterprise. It will proceed to point out resilience, even by a slowing economic system, as pet house owners sustain care for his or her animals.
Picture supply: Getty Photos.
Rising buyer base and market share
Within the fiscal second quarter of 2025 (ended Aug. 3) , Chewy reported internet gross sales of $3.1 billion, an 8.6% enhance from the identical quarter final yr. That progress charge is not essentially thrilling a lot as it’s sustainable, and demonstrates the corporate’s consistency. The autoship program (repeat deliveries) accounted for 83% of Chewy’s whole internet gross sales and grew 15% yr over yr.
It is a very constructive signal, because the recurring income will assist Chewy sail easily by probably unstable financial instances. Chewy+ membership remains to be small, however it’ll play an important function in Chewy’s continued, sustainable progress.
Chewy’s buyer base is rising and spending extra as nicely. The corporate reported 21 million energetic clients, spending a median of $591 per yr. Chewy wins in market share amongst pet house owners, hogging an estimated 41% of the client base for on-line pet provides. Petco and PetSmart path considerably in second and third place, with simply 9.7% and 6% share, respectively.
What makes Chewy stand out is its early adoption of autoship and e-commerce excellence in comparison with its brick-and-mortar-focused rivals. Chewy’s on-line presence helped it rocket previous business rivals in the course of the preliminary years of the pandemic as folks adopted extra pets, however shopped from residence. Petco is Chewy’s largest rival within the area, however it continues to see declining income, weaker gross sales, and debt burdens.
Brief-term earnings down; long-term prospects up
The corporate’s most up-to-date quarterly report confirmed a decline in earnings on a typically accepted accounting rules (GAAP) foundation, and that spooked buyers. Chewy defined this sharp decline was principally as a consequence of a one-time tax break acquired in 2024. Different necessary metrics displayed stable enchancment, together with a margin enhance. Gross margin grew 90 foundation factors to 30.4%, a powerful quantity contemplating the high-overhead enterprise Chewy participates in.
Chewy additionally reported an adjusted earnings earlier than curiosity, taxes, depreciation, and amortization (EBITDA) enhance to $183.3 million, with margin coming in at 5.9%, an 80-basis-point enhance from 2024. Adjusted internet earnings elevated to $0.33, a $0.10 hike from final yr. Regardless of some dips in metrics, Chewy’s operational developments are shifting in a bullish route, and that is what long-term buyers ought to care about essentially the most.
Even with the current dip in inventory worth, Chewy remains to be pretty costly. This should not scare away potential consumers, although. If the corporate can proceed to ship on its autoship and membership program progress, very like proudly owning a golden retriever, there’s a lot to like and acquire from shopping for Chewy. The corporate’s outcomes are extra predictable than its rivals due to the recurring purchases.
The largest dangers with Chewy embody considerations about its capability to proceed increasing margins, but the membership program and investments in veterinary care ought to assist. The corporate might additionally run into bother with provide chain and inflationary issues within the quick time period.
Chewy will stay the highest canine for years to return
Chewy has achieved a wonderful job capturing the wallets of pet house owners. The autoship and membership applications are a number one indicator of loyalty amongst buyer. Chewy’s management has indicated the corporate will proceed to deal with these metrics.
The expansion in these areas can also be a constructive signal for buyers in Chewy inventory. None of Chewy’s rivals are threatening the massive canine’s prime spot.
Total, Chewy is embracing its standing as a mature worth inventory. Whereas it doubtless will not see high-double-digit progress numbers once more anytime quickly, Chewy ought to proceed to dominate on this new chapter. Buyers could be sensible to see Chewy for what it’s: a terrific buyer retention money machine that’ll proceed to purr as long as people love their animals.
