I’m not sure what’s the worst part of getting back from summer vacation.

Is it unpacking the luggage and doing a week’s worth of laundry? Catching up on the endless emails that pile up while you’re away? Or maybe spending some quality time with the lawnmower and taming that jungle of a yard out there.

For me, it’s settling the bill at the dog boarder. Nightly rates are now approaching $50 – more than I’ve spent on some hotel rooms. And I had to call around to even find a vacancy.

Inflation-weary consumers may be cutting back in some areas. But when it comes to Fido or Fluffy, we spare no expense.

According to surveys, Americans spend an average of $760 annually on their feline companions. That covers food, of course, along with cat litter, toys, treats, flea/tick collars, veterinary care and other miscellaneous needs. Dogs are even more expensive, costing about $900 per year on average.

That doesn’t include repairs when your puppy chews through the vacuum cleaner cord and the internet router power cable in the same night. True story.

Nearly two-thirds of U.S. households (about 100 million) have at least one pet. And we pamper our furry friends more than any other country on the planet. According to the American Pets Products Association (APPA), we spend about $147 billion annually – a figure that has more than doubled over the past decade.

A consumer research report conducted by Capital One forecasts that pet spending will climb at a 5% compound annual growth rate (CAGR) over the next five years, reaching $200 billion by 2030.

These kinds of estimates vary by source. But regardless, it’s a hefty sum. For perspective, the amount spent on dog/cat food alone is equivalent to 1.4 million new cars.

And let’s not forget about all those pets that don’t sleep on the furniture. Approximately 4 million households have a fish tank (no word on how many are named Nemo). There are 2.3 million pet reptiles, and 2.1 million exotic birds. Other families have pet hamsters. Or rabbits. Or horses.

This particular spending category is near and dear to my family. Aside from two dogs and four cats (all rescues) we also have a few backyard ducks that are almost as needy as our inside pets.

Most owners consider their pets to be nothing short of full-fledged family members. In fact, polls suggest that pets are a key factor when it comes to first-time home purchases. Remarkably, more than 90% of owners report buying their pets Christmas gifts. And pet health insurance is a growing field.

So it’s no surprise that we splurge on fancy kennels, scratching posts, automatic food dispensers, and all kinds of other items. Believe it or not, pet apparel is the fastest-growing category, with sales racing at a triple-digit pace in recent years.

Yet, unlike most other retail categories, ecommerce has been slower to catch on. Before Covid, digital sales channels accounted for just 10% of the pet care market. But that share has since doubled to 20% and is expected to reach 30% within the next five years.

With more pet owners (especially Millennials and Gen-Zers) taking their business to the internet, pet care e-commerce is projected to expand at a healthy 14% annual clip – doubling from $30 billion today to $60 billion in 2030.

That’s $30 billion in incremental annual revenues up for grabs. And while there are hundreds of smaller players, one dominant leader continues to consolidate the field. It’s no coincidence that I’ve got both the company’s investor relations page and shopping tabs open in separate browsers.

Yes, I’m referring to Chewy (NSDQ: CHWY).

Launched in 2011, Chewy has come a long way from its humble beginning as an unknown start-up with a small handful of customers and a smattering of inventory. Today, it has grown into an online super-store with over 100,000 different products.

Naturally, you’ll find food… and not just for dogs and cats, but specially blended nutrition for ferrets, hedgehogs, hermit crabs, and even alpacas. The site is fully-stocked with toys, crates, harnesses, and just about everything else you can think of – even beef-flavored dog toothpaste. Chewy also operates a full-service pharmacy for prescriptions.

It carries two thousand different brands, including premium names such as Blue Buffalo, Advantage, Nutro, and NexGard. Prices are generally competitive. And the highly efficient distribution and fulfillment network can deliver overnight to 80% of the U.S. population — and everyone else in two days.

Free shipping is standard on most orders over $49.

Whether it’s the vast selection, reasonable prices, or the simple convenience of front-door delivery, Chewy has won the business of more than 20 million regular customers. And net sales per active customer (NSPAC) have climbed to $583 per year.

Some simple math puts annual revenues at nearly $12 billion.

Once hooked, most of these shoppers keep coming back for more. After all, food bins must be replenished; bedding material must be changed; and heartworm treatments need to be renewed regularly. That’s why Chewy has migrated to a subscription model where pre-selected products are automatically delivered at a chosen frequency (bi-weekly, monthly, etc).

This “autoship” program provides additional discounts, carries zero fees, and can be changed or canceled at any time. Shoppers love it. And so do investors, considering this platform now generates more than three-fourths of the company’s overall sales.

First quarter 2025 sales rose 8.3% to $3.12 billion. Net profit margins are thin, leaving adjusted earnings at $0.35 per share. But keep in mind that Chewy routinely offers deep promotions for first-time orders. I view this customer acquisition cost as short-term pain, long-term gain. A new customer that spends $580 this year could potentially place $5,800 in orders over the next decade.

That assumes zero growth. But average spending per customer has risen sharply from $430 just 36 months ago. Yet, at $38, the stock is cheaper now than it was then and remains well below former peaks above $100.

The market will nitpick over basket size, re-order rates, and other such metrics from quarter to quarter. But don’t lose sight of the bigger picture. Americans are spending more on their pets each year, and online penetration rates in this non-cyclical (recession-resistant) space are rising briskly.

Chewy sits at the intersection of these two macro trends. The company has invested heavily to amass a huge base of shoppers. Retention rates (the best measure of loyalty) remain stout. I am also encouraged by the strong uptake for its private-label brands, which generally carry higher margins. And all this is finally beginning to pay off in the free cash flow department.

Chewy is also opening veterinary clinics, a new growth catalyst that could potentially unlock $300+ million in high-margin revenues.