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COVID-19 pandemic has forever changed the pet products business: Chewy CEO

·Anchor, Editor-at-Large
·2 min read
In this article:
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Chewy CEO Sumit Singh contends his already red-hot online pet retailer has seen even better demand this holiday season compared to the third quarter. Just don’t pin the accelerated momentum solely on quarantined pet parents showering their pooches or kitties with consoling presents.

Nope. Singh says the pandemic has fundamentally altered how pet parents shop for bones, cat food and whatever else one’s indoor animal needs to be their best selves.

“We believe what we are seeing in the third quarter into the fourth quarter is, in fact, organic and structural and not driven by a second surge of COVID or the pandemic,” Singh told Yahoo Finance Live. Singh points to consistent strength in retention rates for auto-ship customers and spending by customer as support for his view.

Chewy’s active customers grew 39.8% year-over-year to 17.8 million. The average spent by customer rose 2.8% from a year ago to $363. To Singh’s point, both metrics are consistent with the second quarter in terms of growth rate.

Here’s how Chewy performed versus Wall Street’s projections for sales and profits.

  • Net Sales: sales up 45% year-over-year to $1.78 billion versus estimates for $1.72 billion

  • Non-GAAP EPS: loss of 8 cents versus estimates for a loss of 14 cents

Chewy (CHWY) shares had initially sold off slightly on Tuesday evening after the results. But shares popped 3% Wednesday morning.

Local dog Frankie poses for photos outside the New York Stock Exchange, decorated for the Chewy IPO, Friday, June 14, 2019. Chewy, the online seller of pet food and squeaky toys, went public Friday and its shares soared 71%. (AP Photo/Richard Drew)
Local dog Frankie poses for photos outside the New York Stock Exchange, decorated for the Chewy IPO, Friday, June 14, 2019. Chewy, the online seller of pet food and squeaky toys, went public Friday and its shares soared 71%. (AP Photo/Richard Drew)

By and large, Wall Street is staying upbeat on Chewy into 2021. Besides holding a commanding lead in online pet product sales, analysts are growing jazzed by the company’s recent expansion into telehealth and pharmacy services. Singh says Chewy is actively looking for ways to monetize its new telehealth service (now live in 47 states), which links pet parents to vets directly. Currently, the service comes with a membership to Chewy’s auto-ship function.

“With impressive growth and a business model that is levered to industry tailwinds, we believe Chewy can continue to achieve strong sales growth,” Jefferies analyst Stephanie Wissink wrote in a note Wednesday. Wissink reiterated her Buy rating on Chewy and $100 price target.

Chewy shares currently trade around $80.

Brian Sozzi is an editor-at-large and anchor at Yahoo Finance. Follow Sozzi on Twitter @BrianSozzi and on LinkedIn.

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