Consumers May Trim Spending, but Not on Fido, Chewy Says

This retail season, the spotlight is on customer value, and Chewy is serving it up to its customers who foot the bill for their furry companions — also cherished customers.

According to the company’s latest earnings report, Chewy exhibited strong performance during Black Friday and Cyber Monday, with robust customer purchasing throughout the crucial holiday shopping week. Across all aisles, including hard goods, foot traffic and sales, pirouetted past expectations, demonstrating a year-over-year increase in conversion rates.

New customer acquisition took center stage and surpassed the biweekly average by 40%. While post-holiday trends have reverted to preholiday levels, the encouraging aspect lies in the sustained momentum from Chewy’s Black Friday and Cyber Monday performance.

“What we are essentially calling out is the way that we went to market, the specific offers that we took to market, the way customers engage with the overall proposition, our existing customers engaging along with, along with the healthy mix of new customers that we picked up, essentially signals to the fact that structurally the business is sound,” said Sumit Singh, chief executive officer of Chewy, during the company’s latest earnings call Wednesday ( Dec. 5 ).

During Black Friday, Singh noted that Chewy had slightly steeper promotional activity compared to the previous year, although it remained generally “rational.”

The earnings report comes after a PYMNTS report indicating that persistent macroeconomic challenges are placing strain on consumers’ grocery budgets. While many are opting for lower-quality goods to cut costs in their grocery shopping, there is a reluctance to extend that approach to their pets.

Data presented in the most recent edition of PYMNTS’ Consumer Inflation Sentiment series, “ Consumer Inflation Sentiment Report: Consumers Cut Back by Trading Down ,” derived from an April survey involving over 2,000 U.S. consumers, found that 47% of all shoppers have opted for a more budget-friendly retailer for at least one grocery item.

For personal care products, 33% are trading down, and for snacks, 32%. However, when it comes to pet food and supplies, only 19% of grocery shoppers have made the switch to less expensive merchants.

Read more: Grocery Shoppers Don’t Scrimp When Buying Food for Their Pets

Chewy by the Numbers

Chewy concluded the third quarter with 20.3 million active customers.

“Chewy continues to gain market share, with third quarter net sales increasing 8% against industry growth in the low single digits,” said Singh in a press release. “Our team also continues to execute admirably, as reflected by another strong quarter of 28.5% gross margin and 3% adjusted EBITDA margin profitability.”

In the fiscal third quarter of 2023, Chewy achieved an 8.2% YoY improvement in net sales, reaching a total of $2.74 billion, while the gross margin rose 10 basis points to 28.5%.

Despite a net loss of $35.8 million, including share-based compensation expense and related taxes amounting to $65.8 million, Chewy demonstrated resilience in its operations. The net margin fell 140 basis points, to (1.3)%. Basic and diluted loss per share decreased to $0.08, down by $0.09 from the previous year.

On a positive note, adjusted EBITDA rose $11.7 million, to $82.1 million, with the adjusted EBITDA margin also growing by 20 basis points to 3%. Chewy’s adjusted net income increased to $63 million, reflecting an increase of $14.6 million YoY, and adjusted basic and diluted earnings per share increased to $0.15, a $0.04 uptick from the preceding year.