Paw Prints: Chewy Results Reflect Lower Discretionary Spend

Even though they don’t buy things, pets are not immune to price inflation.

In the case of Chewy Inc., that means fewer purchases of toys, accessories and treats as their owners tighten purse strings.

The trend of lower discretionary, pet-product sales also reflects lower levels of pet-household formation coming out of the pandemic, Chewy executives said yesterday when discussing Q2 financial results.

Quarterly sales rose 13% to $2.43 billion in the period ended July 31, with consumables and pet care representing 83% of net sales and hard goods making up the remainder.

“Looking forward, we believe that the current dynamic that we are observing in discretionary categories like hard goods is temporary in nature and that demand will improve as consumer sentiment recovers and pet household growth returns to historical levels,” CFO Mario Marte said on the earnings call.



Unit demand for pet food industrywide was down 1%, compared to a loss of 8% for discretionary items overall, according to CEO Sumit Singh.

“So there's a big delta there” during a period when “accelerating inflation placed incremental pressure on an already stressed consumer.”

Even so, Chewy’s net sales per “active customer” increased 14.4% in the quarter—up $58 to $462—while total active customers climbed 2.1% year over year to 20.5 million.

The company spent $144.2 million on advertising and marketing—about 6% of net sales—on things like “Chewtorials.” Recent iterations include how to manage cat separation anxiety and select the best pet Halloween costumes.

In June, the company launched a pet-wellness and insurance program called CarePlus in two states. It’s now available in 29 more.

In addition, Chewy now has more than 1,000 veterinarian practices using its Practice Hub platform, up from approximately 300 in March.

Via an app, veterinarians create, pre-approve and manage medications and diet prescriptions while earning recurring revenue when customers place in-clinic orders or make purchases on the Chewy website.


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