MW Pets adopted during the pandemic are getting older. Chewy's expansion into this business stands to benefit.
By Bill Peters
BofA analysts said Chewy's pharmacy segment and vet clinics stand to benefit from a rebound in pet adoptions
Online pet-supplies retailer Chewy Inc. only runs a handful of veterinary clinics, after opening its first one last year, and its pharmacy segment probably isn't being used by customers as much as it could be.
But BofA analysts on Tuesday said those businesses could get bigger in the years ahead as dogs, cats and other pets adopted during the pandemic get older and adoptions rebound overall.
An expansion in those businesses, they noted, could bring in $1 billion over the next several years.
"We expect growth to accelerate in '26/'27 on improving pet-adoption trends and as pets adopted during COVID enter senior years, trends that Chewy is well positioned to capitalize upon with a growing veterinary practice and leading pharmacy share," the analysts said in a research note.
Shares of Chewy $(CHWY)$ were up 2.3% on Tuesday, at last check.
Chewy has 11 veterinary locations and their reviews on Google, at least, were largely positive, BofA said - with some praising the facilities' modern atmosphere, although others criticized high prices and misdiagnosed treatments. Chewy executives have said the locations were doing better than expected.
The BofA analysts said Chewy is opening roughly 10 clinics per yea, and that the company will likely accelerate those openings.
Meanwhile, Chewy's pet-pharmacy business, with an estimated $1.1 billion in sales, is the biggest in the U.S. However, its market share stands at just 7%, the analysts noted - saying they believe only around a quarter of Chewy's customers will use its pharmacy services this year.
That's below the 40% to 50% Chewy says it can achieve, according to the analysts. However, assuming spending on Chewy's pharmacy services remains at an estimated $238 per customer, they said the company's pharmacies could generate an incremental $750 million in sales if 40% of customers starting using them.
"We also see opportunity for pharmacy to capture more spending as pets age, pushing the dollar amount per consumer higher," the analysts wrote. "We estimate that even a modest $10 increase in the amount customers spend on Chewy Pharmacy equals a $50 [million] opportunity."
The veterinary-care and pharmaceuticals business was a roughly $40 billion market overall last year, the analysts said, citing figures from the American Pet Products Association. That market is expected to expand by another 4% this year, with more growth in the years ahead.
Pet adoptions surged during the pandemic. But the cost of caring for a pet has risen in recent years, as private-equity firms and other corporations consolidate their ownership of vet clinics. Clinics are also dealing with higher drug, labor and technology costs and a higher standard of care overall for pets.
KMPG estimates that around 30% of the U.S.'s vet clinics are owned by private-equity firms, with 20% by corporations, the BofA analysts noted. The remaining 50% are largely independent.
Chewy's stock is up around 15% so far this year. However, expectations have been high, and a dent in margins in the first quarter disappointed investors.
The company's pharmacy business faces more competition from Amazon.com Inc. $(AMZN.UK)$ and others. But the BofA analysts said Chewy's pharmacy segment was already "well engrained into the vet community" and that the company offers a bigger selection of products.
"Chewy Pharmacy's selection is far more expansive than competitors, covering dogs, cats, equine, small pets, reptiles, fish and birds, as well as providing compound medications for dogs, cats and horses," they wrote.
-Bill Peters
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July 15, 2025 14:00 ET (18:00 GMT)
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