Chewy Shares Have the Bite to Match the Bark
Photo Credit: Chewy Instagram page
Chewy had a lot to prove in order to match Wall Street’s elevated expectations heading into its earnings report and the pet e-tailer lived up to the hype. Chewy added a record 1.6 million net active customers in the first quarter, which was more than double its average quarterly pace in 2019. Total revenues of $1.62 billion increased by 46.2% year-over-year, and the company notched its first-ever positive adjusted EBITDA quarter.
Pantry party: Pantry loading accounted for $70 million of revenue growth, or 6.3%. The company emphasized it does not expect this trend to reverse in Q or beyond.
Pet adoption: Active customer growth was supported by a 60% year-over-year jump in pet adoptions in March and April, according to Wedbush analyst Seth Basham.
Subscription play: At first glance, one may not think of Chewy as a subscription company, but Chewy’s revenue is highly recurring. Autoship sales hit the $1.1 billion milestone, and now account for 70% of total revenue. Autoship provides customers with automatic reordering and delivery. Analyst Mark Mahaney, who raised his price target to $62 a share, expressed optimism for Chewy’s “highly recurring nature of the business” and “economic resilience of consumer spend on pet supplies.”
Not a one-off event: Chewy expects the momentum to continue. The company shared a positive trend that newly acquired customers have order sizes that are 11% higher than pre-COVID customers. Additionally, a higher percent of new customers returned to make a second purchase and the average value of those repeat orders was as much as 5% higher than the pre-COVID customers, according to the company.
