Chewy (CHWY -1.58%) recently announced solid sales growth for its fiscal third quarter, but continuing losses.
In this video, from "Beat & Raise," aired on Dec. 10, Fool contributors Rachel Warren and Demitri Kalogeropoulos discuss why those losses aren't particularly worrying, given Chewy's high customer engagement levels.
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Rachel Warren: Have any other thoughts on that slide while I pull this up, Demitri?
Demitri Kalogeropoulos: I'm not really surprised, either, but the net losses makes sense in terms of, like you said, they're investing a lot in growth. They've done a lot of really valid niches they can push into. Like you said, the connection with the vet services is interesting. So they've got that whole angle, and they've got different products that they can sell so they can really ramp up the number of SKUs [stock keeping units], I guess, that they market to their customers. All that depends on -- the core thing is customer engagement.
Looking through the report, that all looks pretty good to me in terms of, they're gaining customers, customers aren't leaving. They're sticking around. They're staying. I think they had a record number of customers signing up for those automatic shipment subscription services, too, which as an investor, I love to see that. I think it's something like over 70% of their sales are in the subscription model, which is basically pet food or pet supplies as a service, which is so much better from a retail standpoint versus just being regular retailer. We've seen that with companies like Costco, which gets most of its revenue from those renewal fees and membership fees. Chewy seems to be doing a good job of keeping its customers engaged and giving a lot of new ones good reasons to sign up.
Rachel Warren: It's interesting that auto-ship aspect of its business, and we'll see here in a bit, is really becoming more and more of a source of its overall growth.
It's cool because you think about it as a pet owner, it is easier if you have your basket of items that you shop every month for your pet or pets, and then you just have it shipped to you automatically. You don't even have to think about it. So you can see why that would be such a big draw.