Short-sighted Investors Chew Up Chewy
More than 94 million pet-owning US households are expected to spend $157 billion on their little Lunas and Rexes this year.
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Chewy’s not rolling over, despite its stock falling nearly 20% after the online pet retailer reported earnings. The Amazon-for-pets met analysts’ expectations in the second quarter and raised its sales guidance for the year, but it also warned that it plans to give up some profit to invest in its long-term success. Its stock is still up for the year.
As pet parents spend more than ever on their fur babies, pet retailers are cashing in on the puppy love.
Barking Up The Right Tree
More than 94 million US households own a pet, the American Pet Products Association found, and Americans are expected to spend $157 billion on their little Lunas and Rexes this year. That total has been climbing every year since 2018.
And it seems a massive chunk of these animal owners are Chewy regulars:
- Chewy was a pandemic winner as locked-down and lonely people adopted animals to keep them company. Its revenue popped 47% in 2020, and it has kept growing since, albeit at a slower pace.
- Now, Chewy has more than 21 million pawrents on its platform after adding 150,000 net customers last quarter. Those shoppers spent $591 annually, on average, nearly $30 more than they did a year ago. Chewy attributes its growth to its paid membership program, Chewy+, and its autoship service (which can be set to, for instance, auto-ship Greenies monthly) — which makes up 83% of sales.
Dog Years: It’s been about 35 years since the pandemic … if you’re a dog. The pet industry was boosted early in the pandemic when new pet owners splurged on their initial set-ups (crates, beds, leashes). Now, pet retailers are looking ahead to cater to an aging animal population. Chewy is the No. 1 online pet pharmacy and started opening in-person vet clinics last year. Rival pet retailer Petco Health + Wellness has also focused on pharmacies, revamping its stores as part of a wider turnaround plan. It’s a lucrative area to cash in on: The cost of services like vet care and grooming has gone up 42% since 2019, nearly double the price increase of food and treats, Bank of America found. Unfortunately, the high prices may also be contributing to pet surrenders to shelters.
