There's no denying that folks today are making their dogs and cats a bigger part of the family. We're starting to take our pets more places, spoiling them along the way. With the pandemic spurring a surge in pet ownership, savvy investors are looking for the best ways to buy into the trend.
Chewy (NYSE:CHWY), Freshpet (NASDAQ:FRPT), and PetMed Express (NASDAQ:PETS) are three companies growing quickly as the humanization of pets trend plays out. It's raining cats and dogs. Investors may as well bring buckets.
With the shelter-in-place phase of the pandemic keeping folks at home -- with their pets -- it's easy to see why business is booming at Chewy. The online retailer of pet supplies is making it easy to load up on pet food, treats, toys, and other necessities with its digital storefront.
Net sales rose 46% in its latest quarter, the fiscal period ending in May. This is Chewy's strongest top-line growth since going public 14 months ago. It's easy to like Chewy's chances even once it's safe to head back out to the neighborhood pet supply store. A secret sauce in the Chewy's arsenal is the Autoship component where customers can subscribe to get their pet food and treats replenished at set intervals. Shoppers get a discount going that route, and it tethers them to the platform. Autoship now accounts for 68% of the sales mix.
Profitability is a couple of years away, but it's a fair trade-off for investors given Chewy's healthy and for now accelerating growth. Its customer base now tops 15 million, and those pet owners are spending more on average.
Dry kibble isn't enough for pet owners with the means to truly spoil their dog or cat, and that's where Freshpet comes in with its growing fleet of branded fridges and coolers popping up in local supermarkets, convenience stores, and superstore retailers. Freshpet has become the niche leader in refrigerated food for dogs and cats, and it's a pretty strong niche at a time where folks want to give their furry friends fresh and healthy meals.
Net sales rose 33% in Freshpet's latest quarter, its strongest top-line growth in nearly five years. Freshpet also surprised the market in this week's financial update with an unexpected profit. With Freshpet boosting its full-year guidance -- it now sees net sales climbing at least 30% higher in 2020 -- it's easy to see why this is a hot stock with a cool approach to getting noticed in conventional mainstream retail outposts.
The smallest of the three stocks -- by market cap -- is PetMed Express. It's a direct seller of prescription and nonprescription pet medications and supplies through its 1-800-PetMeds phone line and website.
Growth has been slow and unspectacularly steady at PetMed Express in recent years. It has rattled off five consecutive years of single-digit percentage growth. However, the pandemic has naturally sent some more customers its way. Revenue rose 15% in the fiscal fourth quarter that ended in March, accelerating to a 20% uptick in its latest report.
PetMed Express also pays out a healthy and growing quarterly dividend. Its yield currently stands at 3.6%, with PetMed Express boosting its payout back in May. With more people meeting more of their pet's health needs remotely, and the increased focused on animal wellness in general, it's only logical to expect the growth in pet medications to continue.
Chewy, Freshpet, and PetMed Express are riding a hot trend that's resulting in accelerating sales momentum. They are growth stocks in a growing market, and that is making it rain more than cats and dogs these days.