Online pet products retailer Chewy posted a 47% year-over-year gain in revenue in the second quarter of 2020 — and will use an expanding fulfillment network and prescription offerings to achieve further growth as the holidays approach, according to company executives.
Chewy had net sales of $1.7 billion in the second quarter ended Aug. 2. The company also posted a $32.8 million net loss, a sharp reduction from a prior year loss of $82.9 million for the same period.
Chewy continues to invest in its e-commerce operations, said CEO Sumit Singh.
“Over the past few years, we have invested in technology, new businesses, fulfillment capacity, and in building an extraordinary team,” Singh said. “This has prepared us to quickly adapt to the acceleration of our own growth curve. This preparation, agility and business athleticism enabled us to provide top-notch service to the growing millions of pet-owning households in the U.S. who depend on Chewy.”
Net sales per active customer increased 3.2%, reaching $356 in Q2 as the online retailer smoothed out inventory problems from earlier in the pandemic.
“By early Q2, we had cleared the backlogs and corrected the inventory imbalances that weighed on Q1 gross margins,” Singh told analysts and investors on the post-earnings conference call. “Our newest business verticals, private label and healthcare combined contributed 140 basis points to the year-over-year expansion in gross margin.”
Chewy also is anticipating more growth in its pet prescription business.
“In the RX business, we served our broadest customer base on record; serving millions of American households at a time when they needed us the most,” he said. “Additionally, our newest RX sites in Kentucky and Phoenix became fully licensed in Q2 to fulfill customer orders nationwide, allowing us to further improve customer experience and optimize logistics costs.”
The retailer also intends to add to its fulfillment network in the coming months as the holiday shopping season approaches — an expansion that will involve some of the latest logistical technology.
“Our next fulfillment center or FC launch will be Archibald, Pennsylvania facility, which begins shipping orders by mid-October. Archibald will be our 10th FC overall and our first automated facility,” Singh said. “Just last week we expanded our network with the opening of a new limited catalog fulfillment center in Kansas City. This incremental fulfillment capacity added by Kansas City provides us the flexibility to effectively load balance across our other FCs and gives us available buffer capacity as we head into the busy second half of 2020.”
A second automated fulfillment center is also scheduled to open in Kansas City area in mid 2021, he said. “By the end of 2020, our fulfillment center network will consist of 11 centers with over 7 million square feet plus 3 pharmacy focused fulfillment centers,” Singh said. “We believe this makes us one of the largest dedicated e-commerce fulfillment networks in the U.S. and is certainly unparalleled in the dedicated pet space.”
As the holiday shopping season approaches, Singh anticipates that gift cards and recent moves toward more personalization for its shoppers will help build sales in the fourth quarter.
“We took pet personalization to a whole new level by launching a service that allows pet parents to personalize dozens of people products like coffee mugs, water bottles and picture frames to celebrate their pets or create personalized gifts,” he said. “Using a first of its kind, 3D powered user interface pet parents can easily upload images and add customizable text and then interact in real time with a 3D rendition of their item before ordering.”