Local ShoppingChewy sales up 14% in Q2, beating expectations

Chewy sales up 14% in Q2, beating expectations

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Dive Brief:

  • Exceeding its guidance, Chewy on Wednesday reported second-quarter net sales increased 14.3% year over year to $2.8 billion. 
  • The online pet retailer’s active customer growth was essentially flat year over year, falling 0.6% to 20.37 million customers, down from 20.49 million a year ago, according to a filing with the Securities and Exchange Commission.
  • Net margin was 0.7%, down 20 basis points from last year. Chewy’s net income during the quarter narrowed, down 15.2% year over year to $18.9 million.

Dive Insight:

Even as Chewy continues to face a slowdown in active customer growth, the online pet retailer managed to report revenue growth ahead of expectations.

Executives on a Wednesday evening call touted the retailer’s Autoship subscription service as a key driver of that growth. The retailer said that Autoship customer sales as a percentage of net sales is now 75.5%, a 240 basis point year-over-year increase. Autoship sales grew 18.1% year over year to reach $2.1 billion.

“Chewy once again gained share as our customers recognize the power of our personalized Autoship service, best-in-class healthcare experience, and overall value proposition as key differentiators, resulting in robust ordering behavior, which in turn is driving our strong performance,” CEO Sumit Singh said in a statement.

Chewy has also been working to improve its profitability. While net income narrowed during Q2, for the first six months of the year, net income grew 0.8% to $41.1 million.

To help create long-term value in its business, the company has emphasized its healthcare offering, pushed into sponsored ads and in the spring announced international expansion plans. Chewy remains on track to expand into Canada in the third quarter of this year.

And while the pet category of retail has historically been more insulated from economic uncertainty, Chewy is “not fully exempt from the pressure,” Singh said. The executive said that for the first time in July, the company saw a shift away from wet food toward dry food, which indicates more value-seeking behavior.

“That household formation remains relatively muted and … the consumer mindset continues to be pressured. These factors taken together, make the current environment a challenging period to forecast consumer behavior,” Singh said.

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