Chewy, Petco tout health care as path to profits

If there’s one thing that’s clear from Chewy and Petco’s latest earnings reports, it’s that pet health care will be key to whether the companies can grow and make higher profits over the longer term. 

The retailers, which both released their quarterly earnings on Wednesday, began investing heavily into pet health when the pandemic-fueled pet boom saw 23 million American households welcome a new animal into their homes. 

The boom turned the overall pet market into a $123.6 billion dollar powerhouse in 2021, and it’s expected to grow.

Pet health care – and the high margins that come with it – is a crucial component to that overall market. 

The companies may still have to win over investors with the approach, though, as shares of both companies fell Thursday.

Chewy, the ecommerce giant known for its convenient auto-ship services and generous customer service policies, has focused on building out its pharmacy, insurance and telehealth verticals while partnering with veterinarians to get a cut of their consumables revenues. 

The company, founded by Ryan Cohen in 2011, now operates the largest pet pharmacy in the U.S., CEO Sumit Singh told investors on an earnings call. 

“Non-discretionary categories, including consumables and health care, remain the pillars of strength,” Singh, a former Amazon executive, said on the call. 

Petco, on the other hand, has also invested into insurance and pharmacy but has focused on leveraging its brick-and-mortar footprint to set up veterinary hospitals. It changed its name to Petco Health and Wellness Company in 2020.

The longtime pet retailer now has a total of 247 hospitals across the country, up from 10 at the beginning of 2018, bringing a veterinary presence to 90% of Petco’s stores, chairman and CEO Ron Coughlin said during an earnings call. 

“Petco’s hospitals and clinics saw nearly 1.9 million pets in 2022, positioning us as one of the leading providers of veterinary services in the United States,” Coughlin told investors, adding Petco is among the top 10 in the nation from a hospital unit standpoint. 

“Vet customers are also demonstrating a 2.3 times higher lifetime value than non-vet customers,” he said.

Against the backdrop of a tough veterinary job market and a dearth of pet doctors, Petco hired 1,100 veterinarians in 2022, a 40% year-over-year increase.

Chewy has not shared how many veterinarians or vet techs it employs for its veterinary telehealth service, Connect With a Vet.