Private brands fuel 40% growth at Chewy

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Private brands fuel 40% growth at Chewy

By Mike Troy - 12/12/2019
The Chewy Holiday Shop department featured new seasonal private label goods such as costumes and toys.

An 80% increase in online pet retailer Chewy’s private brand assortment during the past year propelled the company to record third quarter sales and active customer growth.

Online pet supplies retailer Chewy continued to gobble market share during its third quarter with sales advancing 40% to $1.23 billion. The company’s active customer count increased 32.8% to 12.7 million and average sales per customer increased to $360 from $323. Those are impressive figures, but equally noteworthy because it speaks to the stickiness of the Chewy platform is the fact that 70.4% of third quarter sales were auto-replenishment.

From a national brand perspective, auto-replenishment is a concern, as it becomes tougher for brands to get consumers to switch up. From a private brand’s perspective — and one where they’re so successful on Chewy — it should be a deeper concern. That national brand could find it’s way off the shopping list at Chewy and tougher to return.

Private brands (along with increases in pharmacy) for the company are contributing to “ongoing expansion in lifetime value and an equal or faster payback period that proves out the efficacy of investments in new customer acquisition,” said Sumit Singh, CEO of Chewy.

“We believe we are transforming the industry with our truly unique and personalized, high-bar shopping experience that builds trust and brand loyalty by keeping the customer at the center of everything we do,” he added.

The company has executed a dramatic ramp up of its product assortment, including an increase emphasis on private label. As CEO Singh explained on a call with investors, private brands are an important part of the company’s proposition to delight customers.

“Over the past year, we have grown our Chewy private brands assortment by over 80%, a significant portion of which was in higher margin hard goods products,” Singh said. “As part of this process, we work backwards from customer needs and bring high-quality exceptional customer rated products to life.” 

In the third quarter, private brand sales grew more than 60%, according to Singh.

Our private brands portfolio has the potential to contribute meaningfully over time and is yet another proof point against our strategy of delivering growth and incremental profitability.
Sumit Singh, CEO of Chewy

“Our private brands portfolio has the potential to contribute meaningfully over time and is yet another proof point against our strategy of delivering growth and incremental profitability,” he said.

One example where private brands excelled was during the holidays, being featured in the “Holiday Shop,” where items like seasonal toys, costumes and dog beds were sold under the Frisco private brand. Another area is offering more premium private label food and treats under its American Journey brand, according to Singh.

Based on the momentum evident in the company’s third quarter performance it increased its full year sales forecast to a range of $4.82 billion and $4.84 billion.

The American Journey private brand offers premium food and treats.

From a merchandise standpoint, consumable products which accounted for 74% of the total sales increased 34.1% to $910.8 million while hard goods grew 28.8% to $172 million. The fastest growing category was, “other,” a designation that includes a recently launched pet pharmacy, which grew 113.6% to $146.8 million.

Despite the top line growth, the eight year old company reported a net loss of $79 million, including a $39.3 million non-cash share-based compensation charge. The newly public company is adding employees at a rapid pace and incenting them with stock grants. Chewy went public on June 18, 2019 at $22 a share following its May 2017 acquisition by privately held PetSmart.