DISCUSSION
Chewy gains customers and increases sales, but will it ever be profitable?
Written by George Anderson
Chewy.com, the pet products e-tailer, posted a 43 percent gain in net sales year-over-year during the second quarter. The company also reported that its active customer base grew to 12 million during the quarter, 39 percent higher than this time last year. Chewy also managed to cut its adjusted loss to 10 cents a share, a penny better than Wall Street’s expectations. All in all, the numbers look encouraging for Chewy, even as its share price fell slightly on its earnings announcement.
CEO Sumit Singh told CNBC that he sees a big upside for Chewy. “We’re playing in a very large market size, $70 billion,” said Mr. Singh. “I’d also point to the fact that it’s the early days for e-commerce. [The company is] 14 percent penetrated but we believe this number could be 25 percent or 30 percent in the next few years.”
Mr. Singh also said that Chewy is currently capturing about 40 percent of its customers’ spending, a percentage that he believes can be improved by building on the e-tailer’s customer service strengths and by moving into new areas, such as pet pharmacy.
“We continue to invest in product and business innovation that will make it easier for pet parents to shop our Chewy Pharmacy and veterinarians to partner with us, including tools targeted specifically at improving the vet experience,” said Mr. Singh on an earnings call with analysts yesterday. “Our newly launched RxManager is continuing to help customers better manage their pet's prescription diets and medications in a streamlined manner making compliance and record keeping easier for pet parents, and we continue to evolve this product to provide similar convenience to the vet community in the future.”
Making the shopping experience easier and more enjoyable for “pet parents” is central to Chewy’s mission. The company recently broke ground on its ninth fulfillment center to enable even quicker deliveries. Chewy management has been encouraged with the continuing popularity of auto-ship, which now accounts for 69.3 percent of its sales.
Chewy, which was spun off by PetSmart to pursue its initial public offering in June, does not currently appear to be moving into brick and mortar retail. The e-tailer, at least for now, is bucking a trend that has seen more and more consumer direct brands and retailers opening stores.
Everlane CEO Michael Preysman, who said in a 2012 interview that he would rather “shut the company down” before opening a store, told CNBC last week that one of the industry’s dirty secrets is that online-only companies are not profitable.
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