Dive Brief:
- Chewy on Wednesday reported fourth-quarter net sales increased 4.2% year over year to $2.83 billion, while its gross margin expanded 10 basis points year over year to 28.2%. Fourth-quarter net income increased 370% year over year to $31.9 million.
- The online pet retailer ended the year with 20.1 million active customers, a decline of 1.6% from the year-ago period, according to a filing with the Securities and Exchange Commission.
- For the full year, net sales increased 10.2% from the year-ago period to $11.1 billion, while gross margin expanded 40 basis points to 28.4%. Full year net income fell 20.6% to $39.6 million.
Dive Insight:
Even as other online players struggle, Chewy continues to post sales gains.
The pet retailer benefits from operating in a category that, historically, has remained resilient in the face of economic uncertainty and consumer spending pullback. Chewy has made investments in its non-discretionary consumables and health categories, which together represented 85% of its sales last year, according to CEO Sumit Singh.
Late last year, the company announced the launch of Chewy Vet Care veterinary clinics. Chewy, which anticipates opening four to eight clinics this year, will soon open the first location in Florida with other locations following in the first half of 2024, Singh said on a call with analysts Wednesday. Earlier this year, the executive said that vet health represents a $40 billion market-size opportunity.
Also helping propel the company’s growth is its Autoship subscription business. Singh describes the service as “enhancing customer stickiness” for Chewy, driving repeat purchases. The company reported $8.5 billion in Autoship customer sales for the full year, a 14.7% increase from 2022. Growth from Autoship also outpaced the company’s overall topline, Singh said. Autoship customer sales also represented about 76% of overall net sales for the year, according to newly minted CFO David Reeder, who joined the company last month.
Looking ahead, the company is anticipating modest growth across the overall pet category this year before normalizing in 2025. Despite this, Singh believes Chewy will continue to gain market share this year.
The company projects net sales to grow about 2% in Q1, reaching between $2.84 billion and $2.86 billion. For the full year, Chewy anticipates sales growing between 4% and 6%, reaching $11.6 billion to $11.8 billion, while adjusted EBITDA margin is expected to be 3.8%.
