Chewy, Inc. CHWY and Central Garden & Pet Company CENT are two key players in the pet care industry, each executing distinct strategies. Chewy has evolved from a pure-play e-commerce retailer into a vertically integrated pet care platform, combining retail, membership, logistics and healthcare services to strengthen customer relationships. Central Garden & Pet, by contrast, operates a diversified portfolio across pet and garden segments, emphasizing operational excellence, cost control and balanced capital allocation.
As the pet sector adjusts to slower category growth, inflation and tariff-related cost pressures, both companies are managing profitability while investing selectively in growth. The key question for investors: Which company offers better risk-adjusted upside in the year ahead?
Chewy continued to demonstrate strong execution in the second quarter of fiscal 2025, reinforcing its leadership in the online pet retail market. The company reported net sales of $3.10 billion, up 8.6% year over year and above the high end of its guidance. This solid performance reflects Chewy’s ability to capture market share amid a broader pet category that continues to normalize, demonstrating consistent operational strength and resilient customer demand.
A key driver of performance remained the Autoship program, which delivered record sales of $2.58 billion, representing 83% of the total net sales and a 14.9% year-over-year increase. Autoship continues to be a foundation of Chewy’s recurring revenue base and customer loyalty, supporting predictable growth and reinforcing the company’s subscription-led model.
Customer metrics also strengthened in the quarter. The active customer base grew 4.5% year over year to 20.9 million, with net sales per active customer rising 4.6% to $591. These gains were fueled by higher-quality customer cohorts, increased spend consolidation and strong category performance in health, consumables and hard goods, which grew more than 15% year over year.
Strategic initiatives beyond core retail continued to build momentum. Chewy Vet Care outperformed expectations, with plans to open 8-10 additional clinics in fiscal 2025. The Chewy+ membership program exceeded internal targets, contributing 3% to July sales. It is expected to register net sales in the mid-single-digit range by the year-end. Additionally, the launch of Get Real, Chewy’s exclusive fresh dog food line, expanded the company’s presence in the fast-growing Fresh & Frozen segment, positioning it for future premium growth.
Chewy continues to balance solid growth with disciplined margin management. The company reported adjusted EBITDA of $183.3 million, representing a 5.9% margin and an 80-basis-point year-over-year increase. Management noted that the fiscal second quarter likely marks the peak for gross margin in fiscal 2025, with modest sequential moderation expected due to seasonality and increased investments in Chewy+, private brands and fulfillment capabilities.
Marketing and advertising expenses totaled $200.6 million, or 6.5% of net sales, in line with the company’s full-year target of 6-7%. Looking ahead, Chewy raised its full-year net sales guidance to $12.5-$12.6 billion, indicating 7-8% year-over-year growth and a $175-million increase at the mid-point from the prior guidance. This outlook highlights management’s confidence in sustaining momentum through continued investment in growth, customer experience and category expansion.
Central Garden & Pet continued to strengthen its market position through innovation and portfolio optimization. The Central-to-Home strategy advanced meaningfully, with consumables rising to 82% of the total Pet sales in the third quarter of fiscal 2025, up from 79% a year ago and 65% four years ago, reflecting a deliberate shift toward higher-margin categories.
Meanwhile, the e-commerce performance remained a key growth driver, contributing 27% to the total Pet sales and delivering double-digit growth in Garden categories, led by strong demand in Wild Bird and Grass Seed. Enhanced digital capabilities and robust omnichannel execution continue to support Central Garden & Pet’s long-term growth trajectory.
The gross margin expanded 280 basis points year over year to 34.6%, driven by the company’s Cost and Simplicity program, and operational efficiency gains, underscoring its ability to sustain profitability in a volatile market environment.
However, the total net sales declined 4% year over year to $961 million in the fiscal third quarter, reflecting softer consumer demand and strategic product exits. The Pet segment faced a 3% sales drop due to weaker performance in durable products and assortment rationalization. Although these moves support margin stability, they limit short-term revenue growth. The impacts of higher promotional activity in retail channels pressured sales momentum.
The Garden segment also encountered challenges, with sales down 4% year over year following the loss of two product lines and unfavorable weather conditions. Extended periods of rain disrupted the seasonal selling cycle, weighing on categories like Controls and Live Plants. Despite improved productivity and margin expansion, the segment struggled to offset these external factors. This underscores its exposure to weather-related risks and cyclical garden demand.
Management anticipates tariff-related costs and inflationary pressures to intensify in the final quarter. Approximately $10 million in tariff impacts are expected for fiscal 2025, with the majority of that striking in the fiscal fourth quarter. Rising SG&A expenses and persistent consumer caution may also constrain earnings leverage. Although Central is pursuing mitigation through sourcing diversification and pricing, near-term conditions remain challenging.
The Zacks Consensus Estimate for Chewy’s fiscal 2025 sales and earnings per share (EPS) implies year-over-year rallies of 6.1% and 22.1%, respectively. The consensus estimate for EPS for the current fiscal year has been unchanged in the past 30 days.
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The Zacks Consensus Estimate for CENT’s fiscal 2025 sales and EPS suggests a year-over-year decline of 2.6% and a rise of 22%, respectively. The consensus estimate for EPS for the current fiscal year has been unchanged in the past 30 days.
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Chewy’s shares have lost 3.3% over the past three months. Meanwhile, Central Garden & Pet’s stock has declined 18.5%. While CHWY’s smaller drop reflects investor confidence in its steady sales growth, expanding customer base, and resilient Autoship-driven recurring revenues, CENT’s sharper decline stems from softer consumer demand, weather-related Garden segment challenges, and near-term revenue pressures despite strong margin gains from its Cost and Simplicity program.
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Chewy is trading at a forward price-to-sales (P/S) multiple of 1.09, above its median of 1.12 in the last three years. Central Garden & Pet’s forward 12-month P/S multiple sits at 0.64, down from its median of 0.72 in the last three years. We note that Chewy appears to be pricier than CENT in terms of their current P/S ratios.
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While both companies are adapting to shifting consumer patterns and inflationary pressures, Chewy emerges as the stronger choice. Its vertically integrated, digital-first platform continues to drive growth through Autoship, healthcare expansion and membership programs. Consistent sales momentum, rising customer spending and disciplined margin management underscore its ability to scale profitably in a normalizing market.
In contrast, Central Garden & Pet faces declining sales, tariff impacts and weather-driven volatility that limit near-term growth. Despite margin improvements from cost initiatives, its exposure to cyclical garden categories constrains upside potential. With a recurring revenue model and expanding ecosystem, Chewy offers superior visibility and sustainable growth, making it the smarter bet for investors seeking long-term resilience.
CHWY currently carries a Zacks Rank #3 (Hold), while CENT has a Zacks Rank #4 (Sell).
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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This article originally published on Zacks Investment Research (zacks.com).
