Prescriptions, Subscriptions Unleash Growth At Chewy

Prescriptions and subscriptions are two tickets to continued growth at direct-to-consumer pet supplies marketer Chewy, whose sales increased 40% in its third fiscal quarter.

Launched in 2011, Chewy still has an undetermined distance to travel before fetching profitability. Third-quarter net sales totaled $1.23 billion -- with a 25% increase in stock-keeping units year over year -- while the company’s net loss grew slightly, to $79 million from $78.6 million.

Chewy grew its base of active customers -- defined as those who order or for whom an order has shipped at least once during the preceding 364-day period -- by 33%, to 12.7 million. Net sales per active customer grew 11.4% to $360.

One of Chewy’s foundational strengths is its subscription model, which encourages repeat orders for items like food and treats. It’s a feature that’s touted in advertising like this split-screen video, in which one woman lugs a bag of cat food while another talks about shopping with the Chewy app.



Dubbed “autoship,” subscription sales as a percent of net sales reached 70.4% in the third quarter, with growth of 49.2% in the period. Chewy now offers more than 45,000 items, including private-label brands and prescription food and medication products, with private label sales increasing more than 60% year over year.

“These private brands now enjoy double-digit share of sales at Chewy in several growing subcategories such as frozen foods, jerky treats and natural bones and chews,” CEO Sumit Singh said on an investor conference call on Monday. “Similarly, in hardgoods Frisco potty pads, poop bags, apparel and leashes have reached over 30% of sales in their specific subcategories.”

He described Chewy Pharmacy as the fastest-growing vertical in the company, while noting, “we are focused on building a structurally profitable and enduring franchise.”

While most CPG brands are intent on collecting data about humans, Chewy has amassed 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.”

The company recently added PayPal to its payment options, which had consisted of credit and debit cards. “This represents another step in our journey of providing current and future customers with easy-to-use and broadly accepted payment options.”

Cyber Monday was the single biggest shopping day in Chewy's history, according to Singh.

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