Dive Brief:
- Chewy on Wednesday reported first-quarter net sales increased 3.1% year over year to $2.9 billion, beating both its own and analysts’ guidance for the period. Gross margin increased 130 basis points to 29.7%.
- The online pet retailer posted an operating profit of $64.6 million, or a 161% year-over-year increase, and a net income of $66.9 million, or a 193% increase from last year.
- Chewy on Wednesday also announced a $500 million share repurchase program for its Class A and Class B common stock.
Dive Insight:
While Chewy continues to post sales gains — unlike many other digitally native retailers in recent months — the online pet retailer’s active customer base is shrinking.
Chewy’s active customer base has faced year-over-year declines for the past six quarters. Active customers fell 2.1% from the year-ago period to just under 20 million in Q1, according to a press release. Active customers were nearly flat from the previous quarter, falling 0.5%. The retailer expects active customers to be flat to slightly down in the first half of the year, with some recovery in the second half of the year, executives said on a call with analysts Wednesday.
The retailer’s net sales per active customer increased 9.6% year over year to $562. The company’s Autoship subscription service also posted gains during the quarter, with sales increasing 6.4% year over year to $2.2 billion, representing 77.6% of net sales.
But even as consumers cut back on spending in other areas of their lives, the pet category historically has been better positioned to weather economic uncertainty. Further aiding itself, Chewy in recent years has made investments in areas like health and wellness and veterinary clinics. Nondiscretionary consumables and health categories represented 85% of the retailer’s sales last year.
Looking ahead, the retailer expects second-quarter net sales to be between $2.84 billion and $2.86 billion, a 2% to 3% year-over-year increase. Chewy’s full-year outlook remained unchanged from the previous quarter, with net sales expected to grow 4% to 6%.
