Petco and Chewy Focus on Services and Customer Loyalty Programs

Elevating product offerings, customer engagement and operational efficiency to drive long-term growth in the competitive pet care market were common themes for pet health and wellness company Petco and online pet product retailer Chewy in their respective third-quarter financial results released Thursday (Dec. 5).

Petco’s third-quarter performance featured growth in consumables and services, including a 9% increase in services revenue, while it works to optimize its product assortment and improve the customer experience. Similarly, Chewy capitalized on its successful Autoship program, with a 9% year-over-year growth in sales, and is seeing positive early results from its Chewy+ membership initiative.

Petco CEO Joel Anderson outlined a strategic plan to strengthen the company’s retail fundamentals to drive sustainable growth, despite challenges in some areas of the business. The company’s third-quarter performance showed modest growth (net revenue rose 1.2% to $1.51 billion while comparable sales increased 1.8%). However, some segments, particularly supplies and companion animals, saw declines.

Petco Leverages ‘Welcome to the Family’ Program

The company is optimizing its assortment to align more closely with customer demand, focusing on faster-turning SKUs and simplifying decision-making for shoppers. Petco is also working on enhancing vendor relationships and improving pricing strategies to stay competitive. Anderson highlighted the “Welcome to the Family” program, designed to support first-time pet owners.

“An example of our merchandising work in action is the recent launch of our Welcome to the Family Program, given the importance of first-time pet ownership,” Anderson said. “We designed this program in partnership with our key vendors, as well as our expert vet, training, and grooming teams to provide dog and cat parents with guidance, resources and savings on new pet essentials and services.”

Services Division Key Growth Area

A significant growth area for Petco is its services division, particularly its veterinary offerings. Services revenue rose by 9%, keyed by strong performance across veterinary hospitals and mobile clinics. Anderson highlighted the potential for further growth by leveraging customer data to drive increased engagement and spending.

“In services, our bed offering remains a key growth driver and differentiator for Petco,” Anderson said. “As our hospital fleet continues to mature, our services team is focused on accelerating utilization to support structural margin improvement of our vet hospitals and ensure we can meet the growing demand for our customers in a timely manner. And we’re leveraging our vet customer data to better understand their purchasing patterns, inform how we engage with them, and ultimately drive greater wallet share. These initiatives are having a direct impact on our top and bottom line as we’re creating more selling opportunities for partners while simultaneously driving greater efficiencies.”

Chewy’s Q3 Growth Driven by AutoShip, Membership

Chewy’s third-quarter net sales rose 4.8%, to $2.88 billion, attributable largely to the company’s flagship AutoShip program and success of its new paid membership initiative, Chewy+, according to CEO Sumit Singh.

“Both the strength of our flagship Autoship program and our customers’ loyalty in nondiscretionary categories, particularly within consumables and health, anchored our Q3 net sales performance,” Singh told analysts on the company’s earnings call. “Our Autoship program enables high visibility and predictability in our business and drives customer stickiness for Chewy.”

Autoship customer sales reached $2.3 billion in the quarter, representing 80% of Q3 net sales and a year-over-year increase of 9%, Singh noted. Nondiscretionary categories, including consumables and healthcare products and services, accounted for 85% of Q3 net sales.

“Over the last few quarters, we have increased our assortment across popular categories such as pet tech, vet food, and supplements, to name a few, adding several new premium brands, most of which launched exclusively on chewy.com,” he said.

Chewy+ Members More Engaged

Early data on the Chewy+ membership program, launched in the summer, reveals that Chewy+ members are more engaged than non-members, placing more orders, exploring more categories and showing higher mobile app usage.

“Based on the data we have analyzed over the last several months, we are seeing that Chewy+ members consistently place more orders, have higher cross-category penetration, and greater mobile app engagement relative to non-Chewy+ customers. We are seeing higher Autoship adoption rates from this early cohort of customers, signaling a potentially compelling flywheel effect off the Chewy+ program,” he said.

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