Chewy, Inc. (NYSE: CHWY) Q1 2025 Earnings Call | 06/11/2025

Here's a summary of Chewy's First Quarter Fiscal Year 2025 Earnings Call:

Chewy Q1 FY25 Earnings Call Summary

Chewy delivered a strong start to fiscal year 2025, exceeding top-line expectations, achieving continued active customer growth, and solid profitability. The company highlighted its ongoing market share gains in a resilient pet category and progress across strategic initiatives like Chewy VetCare and sponsored ads.

Key Financial Highlights (Q1 FY25 vs. Q1 FY24):

• Net Sales: $3.12 billion, up 8.3% year-over-year, exceeding the high end of guidance.
• Active Customers: 20.8 million, reflecting 3.8% year-over-year growth and a sequential increase of 240,000.
• Autoship Sales: $2.56 billion, up 14.8% year-over-year, representing 82% of net sales (a new record high).
• Hard Goods Growth: Grew 12.3% year-over-year, attributed to refreshed assortment and improved experience.
• Gross Margin: 29.6%. Adjusted for ~70 basis points of one-time benefits in Q1 FY24, gross margin expanded by ~60 basis points year-over-year.
• Adjusted EBITDA: $192.7 million, representing a 6.2% adjusted EBITDA margin (up ~50 basis points year-over-year). Adjusted for Q1 FY24's one-time benefits, margin increased ~120 basis points.
• Adjusted Diluted EPS: $0.35, at the high end of guidance.
• Free Cash Flow: Nearly $50 million generated.
• Share Repurchases: Deployed $23.2 million towards share repurchases.
• Cash & Liquidity: Ended with $616 million in cash and cash equivalents and no debt, with total liquidity of $1.4 billion.

Strategic Initiatives & Progress:

• Chewy VetCare (CVC): Opened 3 additional practices, bringing the total to 11 locations across four states. Clinics are outperforming expectations in demand generation and ecosystem benefits, driving strong new customer acquisition, with about half of new clinic customers making a subsequent purchase on Chewy.com. On track to open 8-10 new clinics in FY25.
• Sponsored Ads: Continued strong performance, growing sequentially. Successful migration to a 1P platform enabled expansion of ad products and content capabilities, including offsite ads on search and social, with demand exceeding expectations. This remains a significant gross margin driver.
• Chewy Plus Membership Program: Successfully transitioned out of beta phase. Early results show strong membership growth, higher active sessions, increased orders and frequency, and improved cross-category penetration.
• Assortment & Customer Experience: Ongoing efforts to refresh assortment (added over 150 new brands in the last two quarters), improve inventory management (reduced onboarding time for SKUs by 40-50%), and enhance the overall digital shopping experience are driving sales.

Market & Outlook:

• Pet Industry: Remains resilient. Industry growth is estimated at 3-4%, and Chewy's guidance implies a share-gaining plan, growing at roughly twice the market rate. Minimal impact from tariffs is expected in FY25 as the majority of the portfolio is consumables with domestic input.
• FY25 Guidance (Reaffirmed):
  • Net Sales: $12.3 billion to $12.45 billion (6-7% Y/Y growth adjusted for 53rd week in FY24). Q1 results and Q2 guidance indicate trending towards the upper half of this range.
  • Adjusted EBITDA Margin: 5.4% to 5.7%. Expected to see modest sequential declines throughout the year due to seasonality and investment timing.
• Q2 FY25 Outlook:
  • Net Sales: $3.06 billion to $3.09 billion (7-8% Y/Y growth).
  • Adjusted Diluted EPS: $0.30 to $0.35.
• Long-Term Confidence: Strong and growing confidence in delivering on the strategic roadmap and long-term financial model outlined at Capital Markets Day, including an adjusted EBITDA margin target of 10%.
• CFO Transition: Dave Reeder will be leaving Chewy to pursue a CEO role; a smooth transition is being ensured.