5 Reasons Chewy's Profits Are Heading Higher
Two days after Chewy (NYSE: CHWY) reported its third-quarter earnings, Sumit Singh and Mario Marte, the CEO and CFO, respectively, presented at two investment conferences in New York and San Francisco. The most interesting takeaway from these events was Marte's discussion of the online pet retailer's future gross margin drivers. Last quarter, gross margin expanded to 23.7% from 19.6% in the same quarter in the prior year, but the e-commerce company appears to have several levers to pull to continue increasing margins over time.
Here are five ways Chewy could see further margin improvement.
Chewy makes more profit on reorders from existing customers than it does from a new customer's first order. That's because some orders from first-time customers come with promotional pricing from one-time coupon codes or from the large discount customers get the first time they sign up for the autoship program. In addition, repeat orders from existing customers tend to have larger basket sizes as customers buy more per order from Chewy after a favorable first experience. Chewy's aggressive increase in product assortment has been a huge driver of that. For example, just two years ago, the company had 35,000 stock-keeping units (SKUs) on the site. Today, it has 55,000.
Source Fool.com
