Chewy takes a bigger bite out of the pet products market
Chewy reported its first quarterly profit yesterday and is looking for big things ahead as market trends and forecasts all appear to be going its way.
The online pet products retailer reported that net sales grew 51 percent to $2.04 billion during the fourth quarter, with a net profit of $21 million. Chewy revealed that its net sales for 2020 grew $7.15 billion, with improvements in gross margin. The retailer, which picked up nearly 43 million new customers in 2020, said positive sales trends in November and December continued into January after the holiday season ended.
CEO Sumit Singh, speaking on the company’s earnings call yesterday, said steps Chewy took to keep frontline employees safe from COVID-19 paid off as its fulfillment centers remained open throughout the year.
He said the pandemic pushed the retailer to accelerate initiatives in 2020, including the opening of the company’s first automated and high-velocity fulfillment centers, its telehealth service, Connect with a Vet chat, personalized products and eGift cards.
Chewy has benefited from an increase in pet adoptions. Mr. Singh said the number of households with pets increased 5.7 percent last year. He said pet profiles for newly adopted pets grew 40 percent on Chewy in 2020.
“We get excited about these insights because that newly adopted Chewy puppy is going to grow up, eat more food and shred more toys, leading to a long-lasting relationship with us, resulting in a stream of recurring revenues for years to come. Understanding our customers and anticipating their wants and needs help us create sustainable advantages to win in the pet space,” he said.
Chewy’s CEO continues to emphasize that the retailer is currently only competing in 70 percent of the pet space and that moves into healthcare and services will help grab a share of the remaining market.
“Online penetration rates in the retail food and supplies category are estimated to have grown from seven percent in 2015 to 30 percent in 2020, and are expected to reach 53 percent by 2025, which is in line with the current online penetration rate of categories like books and electronics,” he said. “Further, as we are observing, healthcare and services have already begun to shift online, and we believe this trend will continue and accelerate.”
- Chewy, Inc. (CHWY) CEO Sumit Singh on Q4 2020 Results – Earnings Call Transcript – Seeking Alpha
- Chewy Announces Fiscal Fourth Quarter and Full Year 2020 Financial Results – Chewy, Inc.
- Chewy is barking up the right tree when it comes to customer loyalty – RetailWire
- Will Chewy build on its current sales momentum once the COVID-19 threat has passed? – RetailWire
- Chewy gains customers and increases sales, but will it ever be profitable? – RetailWire
DISCUSSION QUESTIONS: Are Chewy’s 2020 results an outlier or a sign of things to come for the pet retailer? Where do you see Chewy’s initiatives best lining up with market opportunities going forward?