Chewy unleashed higher earnings in its Q2 report, growing sales and Autoship orders year over year.
Net sales exceeded the high end of the company’s guidance range, growing 8.6% year over year to $3.1 billion. Autoship, which enables recurring orders, also continued to be a bright spot for the pet food giant, continuing to increase its share of customers.
“Autoship customer net sales increased 15% and represent 83% of total net sales for the quarter,” said Sumit Singh, CEO of Chewy.
Singh said the company grew its overall customer base to 21 million.
Chewy is No. 9 in the Top 2000 Database. The database tracks North America’s largest online retailers, ranking them by annual web sales. Digital Commerce 360 categorizes Chewy as a Specialty retailer.
Autoship’s impact on Chewy sales in Q2
Chewy noted in its Q2 results that it drove sales in its Autoship business through its growing paid membership program, Chewy Plus.
“In the month of July, roughly 3% of Chewy’s total monthly sales were to Chewy Plus members,” Singh said, noting that those members are increasingly adopting Autoship, which is gradually resulting in a higher spend per customer.
“As we exit this year, we expect approximately mid-single-digit percentage of our net sales to go through the Chewy Plus program,” Singh stated.
Overall, Autoship outpaced most company growth areas. Singh said Autoship customer sales continued to outpace overall top-line growth, increasing by nearly 15% year over year in Q2.
The only drawback to the Chewy Plus program is that the margin on sold products is slimmer than regular sales, something Singh acknowledged the company would need to watch.
“We will remain disciplined in evaluating the program structure, including pricing and member benefits,” Singh assessed.
Autoship and Chewy Plus act to keep customers in the Chewy ecosystem
“The more customers we push into programs like Autoship or bring in through programs like Chewy Plus, the more our ability to keep them in the funnel,” Singh explained during the company’s earnings call.
Singh noted that Chewy has successfully convinced customers to spend more and more of their allotted pet budgets with Chewy. To that end, the company is giving customers more and more ways to spend their money. In August, Chewy launched Get Real, a private brand of healthy, fresh dog food — a trend Singh says is driven by humanization and premiumization in pet spend.
“Consumers believe that their pets deserve fresh and nutritious food, leading to longevity and an overall higher quality of life for their beloved pets,” Singh said.
Ultimately, more products mean more opportunities for Autoship.
“Within the program itself, we have worked towards improving settlement rates,” Singh said. “For example, if you think about Autoship, it’s a two-sided funnel, right? We’re bringing in gross subscription, and then we’re retaining net subscribers.”
Singh discussed improvements on both fronts.
“Our rate of gross subscription add to Autoship has increased, and our second order, third order, fourth order settlement rates into Autoship have improved, which then means that the net retention in Autoship is much better,” he stated.
General challenges for pet supplies sales
John LeVert, a managing director in the consumer retail group at financial advisory firm Solomon Partners, said the pet sector has persevered through an unprecedented set of disruptions over the last few years. That has included the COVID-19 pandemic, subsequent supply chain and freight disruptions, inflation and interest rate spikes, geopolitical tensions and tariff policy uncertainties.
“The industry has re-baselined and is showing signs of returning to its long-term growth trajectory,” LeVert said.
He notes that pets are part of the family more than ever — and this humanization is the primary driver of the increasing spending per pet and the industry’s enduring growth.
Percentage changes may not align exactly with dollar figures due to rounding. Check back for more earnings reports. Here’s our last update on Chewy sales.
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