Chewy’s Recurring Orders Drive Growth and Investor Enthusiasm

Chewy stock experienced its most significant surge in nearly four years following the pet-products retailer’s sales performance that surpassed expectations. The company’s stock received a boost from the success of its recurring-purchase program.

Chewy CEO Sumit Singh said in a Wednesday (May 31) earnings release that net sales per active customer and sales through autoship, which provides prescription refills, discounts, and scheduled deliveries of supplies, have achieved record highs for the company and have contributed to strengthening customer loyalty and increased spending on the Chewy platform. Net sales per active customer has surpassed $500, up nearly 15% compared to the previous year.

Upon these findings, Chewy raised its full-year sales guidance.

On Thursday, Chewy’s shares surged as much as 27%, the largest gain since 2019. The  increase helped reduce the stock’s year-to-date decline to about 2%.

In a shareholder letter, Chewy expressed its anticipation for consistent growth in profitability. The company outlined various initiatives, including its venture into international markets with its first expansion into Canada. These endeavors are expected to contribute to Chewy’s ongoing success.

During the previous quarter, Singh highlighted the value of the U.S. pet industry, estimated at $130 billion. Singh said Chewy experienced success in the fourth quarter, primarily driven by consumables and healthcare products. Sales in this category, at the time of the reporting, rose 18.5% compared to the previous year, accounting for 82% of the company’s net sales.

While there were declines in less essential categories like dog beds and toys, the growth of consumable and healthcare products played a pivotal role in offsetting those losses for Chewy. Singh characterized these product categories as “pillars of strength” for the company.

Furthermore, Chewy experienced a shift in its sales composition, with 73% attributed to recurring shipments of food and health products. In the fourth quarter, autoship sales witnessed a 18% increase, representing 73% of total sales during that period. Chief Financial Officer Mario Marte revealed that autoship products alone generated $1.98 billion in sales during the quarter.

Petco Also Invests in the Essentials

Chewy’s performance stands out as Petco’s stock witnessed a record drop following the release of its recent results. The report indicated a decline in spending on nonessential pet items such as collars and leashes. Petco CEO Ron Coughlin commented on this trend, suggesting that it aligns with patterns observed during times of economic uncertainty in the past.

Petco has leaned into essentials in a variety of ways, two of them through partnerships and private labels. By collaborating with various partners in the pet health and grooming sectors, Petco can curate a more holistic experience for pet parents. Petco reported a rise in veterinarian services and mobile vet clinics.

Petco also reported robust sales for its fresh and frozen products, including Freshpet, and momentum with premium brands like Science Diet, Royal Canin, and ACANA.

Simultaneously, Petco has observed an increased interest in private-label offerings, such as WholeHearted.

Read more: Petco Gets Paws Deep on Pet Essentials

Petco also doubled down on personalization this week with the opening of its Petco’s flagship store in Union Square in New York City which includes a grooming salon, veterinary hospital, a JustFoodForDogs kitchen, and a thoughtfully curated merchandise selection.

See also: Petco Opens One-Stop Destination for Pet Health and Wellness in New York City

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