Online pet retailer Chewy is a big dog now, but the business continues to grow as a young puppy.
Chewy posted better-than-expected first quarter results, posting net sales of $ 2.14 billion, up 32% year-over-year. Net income was $ 38.7 million and adjusted income was $ 77.4 million.
It added 600,000 active customers in the quarter from the fourth quarter total, bringing the number of active customers to 19.2 million.
Wall Street recently worried that the momentum Chewy gained during the pandemic will stop once vaccinated consumers return to stores and offices, and start spending less time at home with their pets. company.
Chewy has been somewhat of a pet on Wall Street since its IPO on June 14, 2019, but concerns about its post-pandemic outlook have had an impact recently. The stock closed at $ 79.35 ahead of the release of aftermarket results, up more than 250% from its IPO price of $ 22, but down about 35% from its IPO price of $ 22. at its peak of $ 120 over 52 weeks on February 16 of this year.
The headline edged down after the results were released, down about 1% for most of the four hours after the results were released.
Chewy, however, convincingly demonstrates that the customers he added during the pandemic will remain loyal and that those customers’ biggest spending years are still ahead of them.
“Our average active customer is always on the left side of the spending curve in their life with us,” said Sumit Singh, CEO of Chewy.
Chewy customers, he said, historically spend over $ 400 in their second year of purchase from Chewy, around $ 700 in their fifth year, and $ 900 in their ninth year.
The influx of 8.4 million more active customers over the past two years means that the average tenure for a Chewy customer is just under two years.
“We believe that we still have a significant portion of portfolio gain to achieve from a substantial component of our customer base,” he said.
Average spend per active customer continued to increase in the quarter, increasing 8.7% to $ 388.
Average spending for new customers increased 13% in the first quarter.
Chewy is also trying to create more pet parents with one of its more recent initiatives, a partnership with animal rescue organizations that post links to dogs and cats available for adoption.
A report this week by Cardify.ai, a consumer data analytics company that collects anonymized credit and debit card data, found that Chewy was stealing market share from its older competitors Petco and PetSmart, and increasing the average basket size faster than predominantly physical ones. rivals.
While all three brands earned revenue during the pandemic and into 2021, “Chewy’s revenue growth has significantly outpaced Petco and PetSmart,” Cardify.ai said.
Chewy’s average basket size (or total purchase per site visit) increased from $ 55 to $ 65 between 2019 and 2021, while Petco and PetSmart both hovered around $ 35 to $ 40 during that time period. .
Chewy increased its market share from 33.5% in the first quarter of 2019 to 42.4% in the first quarter of this year, according to Cardify.ai. Chewy’s gains appear to come mostly at the expense of PetSmart, according to the report, as the retailer saw its market share drop to 33%, from 41.4%, during the same period.
Cardify.ai CEO Derrick Fung attributes the higher spending by Chewy customers to online retailer customer service, which is frequently praised in Cardify.ai surveys.
Chewy’s biggest challenge is awareness, Fung said, Cardify.ai surveys have found that pet owners who don’t shop at Chewy “haven’t used it because they don’t. haven’t heard of ”or haven’t had a chance to try it yet. he. Those who tend to stick with it, and Fung expects this to continue after the pandemic is over.
“There has been a lot of chatter when things open up, is e-commerce going to go down, are we going to go back to our old ways,” Fung said. “The data says no. It shows that convenience is still very important and once you try it I don’t think you’ll want to go back to the store.
The earnings report comes nearly two years after Chewy’s IPO began on June 14, 2019.
Ahead of the post-market results release, Chewy’s stock closed at $ xx.xx on Thursday, down x% from its 52-week high of $ 120 on February 16.