Popular pet supply retailer Chewy (CHWY +1.44%) is betting that market share and customer loyalty will pay off in the long run, even as short-term earnings dip. As the company matures, its strategy has shifted from rapid growth to nurturing loyalty and recurring purchases. Chewy's membership plan, Chewy+, and autoship program continue to grow steadily.
Chewy's future might not be as a high-growth stock, but instead as a valuable, steady, and defensive business. It'll continue to show resilience, even through a slowing economy, as pet owners keep up care for their animals.
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Growing customer base and market share
In the fiscal second quarter of 2025 (ended Aug. 3) , Chewy reported net sales of $3.1 billion, an 8.6% increase from the same quarter last year. That growth rate isn't necessarily exciting so much as it is sustainable, and demonstrates the company's consistency. The autoship program (repeat deliveries) accounted for 83% of Chewy's total net sales and grew 15% year over year.
This is a very positive sign, as the recurring revenue will help Chewy sail smoothly through potentially volatile economic times. Chewy+ membership is still small, but it will play a crucial role in Chewy's continued, sustainable growth.
NYSE: CHWY
Key Data Points
Chewy's customer base is growing and spending more as well. The company reported 21 million active customers, spending an average of $591 per year. Chewy wins in market share among pet owners, hogging an estimated 41% of the customer base for online pet supplies. Petco and PetSmart trail significantly in second and third place, with just 9.7% and 6% share, respectively.
What makes Chewy stand out is its early adoption of autoship and e-commerce excellence compared to its brick-and-mortar-focused competitors. Chewy's online presence helped it rocket past industry rivals during the initial years of the pandemic as people adopted more pets, but shopped from home. Petco is Chewy's largest rival in the space, but it continues to see declining revenue, weaker sales, and debt burdens.
Short-term profits down; long-term prospects up
The company's most recent quarterly report showed a decline in earnings on a generally accepted accounting principles (GAAP) basis, and that spooked investors. Chewy explained this sharp decline was mostly due to a one-time tax break received in 2024. Other important metrics displayed solid improvement, including a margin increase. Gross margin grew 90 basis points to 30.4%, an impressive amount considering the high-overhead business Chewy participates in.
Chewy also reported an adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) increase to $183.3 million, with margin coming in at 5.9%, an 80-basis-point increase from 2024. Adjusted net earnings increased to $0.33, a $0.10 hike from last year. Despite some dips in metrics, Chewy's operational trends are moving in a bullish direction, and that's what long-term investors should care about the most.
Even with the recent dip in stock price, Chewy is still fairly expensive. This shouldn't scare away potential buyers, though. If the company can continue to deliver on its autoship and membership program growth, much like owning a golden retriever, there is a lot to love and gain from buying Chewy. The company's results are more predictable than its competitors because of the recurring purchases.
The biggest risks with Chewy include concerns about its ability to continue expanding margins, yet the membership program and investments in veterinary care should help. The company could also run into trouble with supply chain and inflationary problems in the short term.
Chewy will remain the top dog for years to come
Chewy has done an excellent job capturing the wallets of pet owners. The autoship and membership programs are a leading indicator of loyalty among customer. Chewy's leadership has indicated the company will continue to focus on these metrics.
The growth in these areas is also a positive sign for investors in Chewy stock. None of Chewy's competitors are threatening the big dog's top spot.
Overall, Chewy is embracing its status as a mature value stock. While it likely won't see high-double-digit growth numbers again anytime soon, Chewy should continue to dominate in this new chapter. Investors would be smart to see Chewy for what it is: a terrific customer retention cash machine that'll continue to purr so long as humans love their animals.
