Chewy’s Volume Growth and Rising Per-Customer Spending Reflect Strong Brand Intangibles

The petcare industry is quite attractive, with brand loyalty, sticky purchase habits, pet humanization, and limited cyclicality representing just a handful of alluring structural features in a more than $152 billion US market (per the American Pet Products Association). While a slew of players compete for manufacturing and retail market share, Chewy's subscription-driven platform appears poised to capture a disproportionate share of online sales, with the firm building a strong brand around customer service and perceived quality. In recent quarters, Chewy has also prioritized its retail media network offering—Chewy Ads—and its higher-margin healthcare businesses, which represent key pillars in its effort to achieve 10%-plus long-term adjusted EBITDA margin, which we view as attainable.