Snapshot:
- Chewy's Q3 sales reached a staggering $2.2 billion, a 24.1% increase year-over-year and an 86% surge compared to 2019, all thanks to robust customer interest.
- The online pet retailer managed to attract over 2.6 million new customers, bringing their total active customer base to a whopping 20.4 million. Each active customer spent an average of $419, a 15.4% increase from the previous year.
- Chewy's net loss narrowed slightly, recording $32.2 million compared to $32.8 million in the same quarter last year. This was due to strong sales, margin expansion, elevated costs, and improved marketing efficiency.
Insights:
Strong sales growth continues for Chewy, reaching 24%, demonstrating robust consumer demand.
Despite thriving during the early pandemic days, Chewy isn't entirely immune to industry pressures such as labor shortages, increased freight costs, and inflation. These factors, especially inflation, held back gross margin expansion by around 100 basis points in the quarter.
In a call with analysts, Chewy's CFO, Mario Marte, acknowledged difficulties in executing operations due to these pressures, with challenges including shortages in wet dog food and certain hard goods leading to a negative sales impact of about $15 million more than anticipated.
While some of these hurdles may be short-lived, others could persist, potentially impacting revenue and EBITDA growth. Analysts from Wedbush share these concerns.
To enhance its online pet destination status and retain customers, Chewy has made strategic investments. These include strengthening its pet pharmacy, launching its "Connect with a Vet" telehealth service, introducing compounded medications for pets, creating a marketplace for veterinarians, and jumping into pet insurance with Trupanion.
Looking ahead, Chewy expects Q4 sales to be between $2.4 billion and $2.44 billion, and full-year sales to be between $8.9 billion and $8.94 billion. As the pet industry continues to grow, Chewy aims to tap into non-vet offerings like grooming, training, and boarding, with a potential total addressable market of $10-14 billion.
- The pandemic's impact on Chewy's success is not exclusive, as it faces challenges such as labor shortages, inflation, and changes in weather, affecting their operations and gross margin.
- Amidst these difficulties, Chewy is exploring growth opportunities in technology, collaborating with AI companies like Trupanion for pet insurance, and introducing telehealth services for pets.
- As cybersecurity becomes increasingly important in the digital age, Chewy is committed to ensuring the security of its online platform, ensuring customer trust and safety.
- In the policy arena, Chewy is advocating for pet-friendly policies, recognizing the importance of pets in human health and culture, and aiming to make a positive impact on pet welfare.
- Chewy's focus on fashion extends beyond pet food and services, as it explores opportunities in pet apparel and accessories, catering to the growing demand for personalized pet style and trends.
- Meanwhile, on TV screens, pet-focused shows continue to break new ground, showcasing the incredible bond between humans and animals, and highlighting the growing importance of pets in our lives.
