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Chewy Reports “Strong” Third Quarter


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Chewy’s strategy of long-term, sustainable growth and margin expansion is paying off, according to company officials. Net sales reached $1.23 billion, an increase of 40 percent for the company’s third quarter ended Nov. 3, compared to $875.6 million in the year-ago period.

Specifically, recent investments in both private brands and its Chewy Pharmacy have been a driving factor in making Chewy’s third quarter successful, according to Sumit Singh, CEO of the Dania Beach, Fla.-based online pet retailer, who outlined the quarter’s results in a December earnings call.

“Over the past year, we have grown our Chewy private brands assortment by over 80 percent, a significant portion of which was in higher margin hardgoods products,” Singh said. “As part of this process, we work backwards from customer needs and bring high-quality exceptional customer rated products to life.”

Chewy’s Frisco branded beds, dog apparel and waste management products, for example, have an average of 4.5 out of 5 stars and more than 90 percent repeat purchase recommendations, according to Singh.

Chewy private brands sales grew more than 60 percent year-over-year in the third quarter, and these private brands now have double-digit share of sales in several growing subcategories, such as frozen foods, jerky treats and natural bones and chews, according to Singh.

“Similarly, in hardgoods Frisco potty pads, poop bags, apparel and leashes have reached over 30 percent of sales in their specific subcategories,” Singh said.

As far as the company’s Chewy Pharmacy, it is the fastest growing market in the company and continues to receive favorable reviews from customers, according to Singh.

“Additionally, we continue to work on products and process improvement behind the scenes to raise the productivity and efficiency of our pharmacy operations,” Singh said. “As a result of these efforts, pharmacies fulfillment and customer service costs improved by over 1,000 basis points year-over-year, and the business reached profitability at the order level.”

My Pet Prescriptions, which helps pet owners manage information and accessibility of their pet’s prescriptions, has seen a continued increase in use by customers, therefore driving up engagement with the company’s platforms, according to Singh.

In another move to entice customers, Chewy recently upgraded its shopping checkout by launching digital payment products such as PayPal.

Company officials are also garnering “valuable insights” into customers and their pets with its Pet Profiles feature.

“We now have more than 5 million Pet Profiles which enable us to provide pet parents with a more personalized experience that helps them discover new products, including treats and toys that are breed and age appropriate,” Singh said.

With the third quarter tucked away, Chewy officials are now setting its sights on the fourth quarter, which lands during the holiday season.

“The holidays provide us an opportunity to expand our assortment and category depth in our most popular seasonal categories of holiday toys, treats, costumes and apparel, and particularly in hardgoods and our private brands,” Singh said. “For example, this year we launched seasonal toys and dog beds as part of our private label brand, Frisco, and have already seen a positive customer response to these newly launched categories. To further support our holistic assortment, we implemented an integrated marketing approach to amplify visibility of our holiday shop through a combination of smart and well thought out social media, email, on-site and digital tactics.”

The Holiday Shop, which was launched this year, aims to provide a “broad yet personalized selection of holiday products for every type of pet and pet parent.”

“Last but not least, we also enhanced our recommendation engine, leveraging our vast amount of data to make better and more targeted product suggestions,” Singh said. “This strategy, which we designed to be even more deliberate this year given the shorter holiday calendar, has been well received by our new and existing customers. We are thrilled that Black Friday and Cyber Monday were record setting days, with Cyber Monday being the single biggest shopping day in our company’s history.”

 

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