It might be a surprise to learn that during the worst of recessions, pet spending has historically grown and Chewy (CHWY) sits squarely in the middle of the trend.
The stock has steadily climbed over the past 10 months, from $16.50 in late May 2024 to above $33 per share in early April 2025.
Is Chewy a growth stock to buy? Despite fierce competition against larger retailers in its space, this bargain stock could be a smart bet for investors. Look for this stock to grow in 2025 for several reasons.
Two Reasons Why Chewy Is a Growth Stock to Buy
The major market average have been stunningly volatile over the past few months and Chewy was not immune to the turbulence.
Regardless of the recent VIX spike, the numbers from Q4 2024 were a thing of beauty. Free cash flows spiked to $452.5 million, a record for the online retailer and a handy beat versus the prior year’s $342.9 million.
Net income was also on the up and up, mushrooming to $392.7 million was quite the spike versus the $39.6 million in the prior year’s equivalent period.
Management reported an adjusted EPS of 28 cents in Q4 2024, up 55.6% from the previous year. The amount was 5 cents higher than the consensus estimate.
Big Money Taking a Bite Out Of Chewy Stock
Clearbridge Investments LLC increased its ownership of the pet-centric online retailer from 2.6 million to 3.9 million shares, a stunning 47% increase during Q4 2024.
Other institutional owners increased their stock holdings of Chewy in Q4, including Pictet Asset Management Holding SA, Schroder Investment Management Group, Norges Bank ($3 million worth), Winton Group, and Artisan Partners ($10 million worth).
It’s not surprising Chewy shares are in high demand because management has developed a loyal following of return customers thanks in large part to its Autoship platform that automatically reorders and ships products directly to customers’ homes. The platform, not dissimilar to Amazon (AMZ) Prime, is very popular.
Loyal Customers Lead To Steady Sales
Autoship makes up 70% or more of Chewy’s revenue and last quarter the service accounted for more than 80% of the company’s total sales. As a result, sales friction is low, and the business model is firing on all cylinders.
Customer sales improved 21% for the quarter compared to the previous year, indicating holiday sales were better than the year prior. Sales were up 11% for the entire year and peaked at $11.86 billion, or a 6.4% climb year over year for the fourth quarter.
Management reported the addition of over 430,000 active net customers in 2024 and, better yet, spending for them increased. The online retailer knows how to keep its loyal customers happy so they return for more. That’s the key to sustainable, long-term growth.
It’s important to note that Chewy is expanding its business model to include services and not just products. It wants to be a full-service pet care provider.
Chewy Now Has Vet Care Clinics
Chewy launched its pet pharmacy for customers to purchase prescription medications in 2018. It then introduced a telehealth solution, called “Connect with a Vet,” to supplement visits to a veterinarian at a clinic. In 2023, Chewy had the largest online pet pharmacy. It also stated that one of its goals is for pet health to account for 30% of its revenue as the company expands.
Under the brand name of “Chewy Vet Care,” the online retailer opened clinics in Florida, Texas, Atlanta, and Denver in 2024. It plans to expand into other markets in the future. Brick-and-mortar clinics are the next evolution and expansion of the vet care line, with a goal of making pet care and wellness more affordable.
The move makes sense. Shareholders will be hoping Chewy doesn’t expand too rapidly with physical locations. It needs to test the market viability first to see if clinics are a long-term solution for expansion.
Pets Are a Recession-Resistant Part of the Economy
Spending money on pets is widely regarded as a recession-resistant investment and the pet industry is forecast to reach $277 billion by 2030 with 8% CAGR.
With tariffs, trade wars, and fears of a looming recession making headlines in Q1 2025, the pet industry has some tailwinds to move it forward. During the Great Recession in 2008, pet spending saw a 5.1% increase in sales. In 2020, pet product sales grew at a rate of 16.2% compared to just 4.3% for the American economy in general.
Millennials and Gen Z shoppers outspend other generations when buying supplies for their pets. Gen Z spends an average of $6,103 a year on their pets. Millennials spend about $1,000 less per year. Gen X tops out at $3,900 annually, while Baby Boomers fork over $2,454.
The pet industry also benefits from younger generations delaying or forgoing having children. One in three Gen Zers and Millennials ither do not have children or do not want children, according to a Newsweek poll published in November 2024.
How much will these younger people spend on their pets in the coming years? One forecast from pet industry analysts projects spending to top $157 billion in the United States, a record. That’s about $5 billion more than 2024’s sales.
Is Chewy a Growth Stock to Buy?
Yes, Chewy deserves a closer look as a stable mid-cap stock. Seventeen analysts have rated Chewy stock a buy rating. Target prices range from $38.68 to $42.
Chewy has a strong and growing customer base, and so offers plenty of potential for steady long-term growth. In addition, cash flows and the broader financials are stable though not so impenetrable as to withstand recent market volatility.
The author has no position in any of the stocks mentioned. Financhill has a disclosure policy. This post may contain affiliate links or links from our sponsors.
