The pet care industry in the U.S. is valued at $130 billion +, and continues to grow, even during economic downturns. Morgan Stanley predicts the industry will be worth $230 billion by 2030.
Both market leaders Chewy and Petco grew sales on 2022 and have plans to keep growing and tap into this growing market.
Market leaders Chewy and Petco, two of the biggest pet retailers, grew sales on 2022 and saw significant increases over the past year. Chewy vs. Petco: Let's take a look at their recent sales growth.
Chewy’s sales increased 13% year-over-year, reaching $10.1 billion, while Petco’s sales increased by 4% to $6 billion. However, there are some notable differences in how the two companies performed in specific areas.
Petco had a larger total active customer count of 25.1 million, compared to Chewy’s 20.4 million. Moreover, Petco’s active customer count grew about 25% since the end of FY2020, compared to Chewy’s 6% increase during the same period. Nonetheless, Chewy’s customers spend more on average, with an annual spend of $495 compared to Petco’s $239, indicating that Chewy sees a bigger impact from each new customer it gains.
Recurring revenue streams, such as autoship sales, subscription services, and Vital Care memberships, have a significant impact on both retailers’ bottom line. Chewy’s $7.4 billion in autoship sales accounted for 73% of its overall revenue stream, while Petco’s $1 billion represented only 17% of sales. Chewy's dependence on consumable sales, which account for around 70% of its annual revenue, makes it more insulated from inflation than Petco.
Both companies also had different gross margins, with Petco’s 40.2% margin comparing favorably to Chewy’s 28.1% margin. However, Petco's gross margin fell 158 basis points in FY2022, while Chewy’s grew 270 basis points year-over-year. Petco’s sales from its low-margin consumables business increased 16%, while sales in its non-consumables business, which typically delivers higher margins, was down 8%.
These figures suggest that Petco’s customers are paying more for their pets’ food, leaving them with less discretionary spending for items like toys and other accessories. Petco is hoping to offset this trend by growing its higher-margin service offerings, revenue from which was up 20% in FY22.
One of the advantages that Petco has over Chewy is its network of more than 1,500 North America stores, which it uses as micro distribution centers to offer same-day delivery and buy online, pick up in-store (BOPIS) options to more than 90% of its online customers.
Petco's investment in veterinarians and groomers is also paying off, as customers who use these services are worth 2.3 times the lifetime spending of customers who do not. The company hired an additional 1,100 veterinarians in 2022, and now has a vet presence in 90% of its stores. Petco's services, including vet and grooming, were up 15% in the quarter.