CHWY vs. CENT: Which Pet Care Stock Deserves a Spot in Your Portfolio?

Core Insights - Chewy, Inc. (CHWY) and Central Garden & Pet Company (CENT) are key players in the pet care industry, each with unique operational models and growth strategies [1] - Chewy focuses on e-commerce and customer engagement, while Central Garden & Pet emphasizes a diversified portfolio and operational efficiency [1] Chewy, Inc. (CHWY) - Chewy reported net sales of $3.12 billion in fiscal Q1 2025, an 8.3% year-over-year increase, exceeding guidance [2] - The Autoship program generated $2.56 billion in sales, accounting for 82% of total net sales, with a 14.8% year-over-year growth [3] - Active customer base grew by 3.8% year-over-year to 20.8 million, with net sales per active customer rising 3.7% to $583 [4] - Chewy Vet Care operates 11 clinics and plans to open 8-10 more in fiscal 2025, while the Chewy+ membership program shows early success [5] - Adjusted EBITDA margin for Q1 was 6.2%, but management expects a decline due to seasonality and increased marketing investments [6] - Marketing expenses reached $193.8 million, or 6.2% of sales, projected to rise to 6.7-6.8% for the year [7] Central Garden & Pet Company (CENT) - CENT's adjusted gross margin improved by 200 basis points to 33.3% in Q2, reflecting strong cost management [9][13] - E-commerce accounted for 27% of Pet segment sales, driven by new products and digital strategies [14] - The company opened a 300,000-square-foot distribution center in New Jersey, enhancing fulfillment capabilities [12] - Financially, CENT ended Q2 with $517 million in cash and no borrowings, maintaining a net leverage ratio of 1.7X [15] - The consensus estimate for CENT's fiscal 2025 sales suggests a year-over-year decline of 1.7%, while EPS is expected to grow by 17.8% [20] Comparative Analysis - Chewy's shares gained 1% over the past three months, while CENT's stock rose 19.6%, driven by strong margin expansion and cost execution [21] - Chewy's forward price-to-sales (P/S) multiple is 1.20, while CENT's is 0.85, indicating a more attractive valuation for CENT [22][23] - Central Garden & Pet is viewed as a better investment due to disciplined cost management and consistent margin expansion, while Chewy faces near-term challenges [26][27]