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01/09 19:25
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Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
Chewy's earnings call reveals strong financial performance with an 8% increase in net sales, a 15% rise in Autoship sales, and a 3.8% growth in active customers. The Q&A session highlights positive sentiment from analysts, with management expressing confidence in customer growth and market share gains. The guidance indicates continued growth, and the share repurchase plan supports stock price stability. Overall, the earnings report and management's outlook suggest a positive stock price movement over the next two weeks.
Net Sales $3.12 billion, an increase of over 8% year-over-year, driven by strong participation from new and existing customers and a favorable mix of core consumables and health and wellness categories.
Autoship Customer Sales $2.56 billion, representing approximately 82% of Q1 net sales, with a year-over-year increase of nearly 15%, driven by customer loyalty and predictability in the business.
Active Customers 20.8 million, reflecting a year-over-year growth of 3.8%, driven by strength in gross additions and improvement in gross churn.
Gross Margin 29.6%, with an adjusted year-over-year increase of approximately 60 basis points, excluding onetime benefits from the prior year.
Adjusted EBITDA $192.7 million, representing a 6.2% adjusted EBITDA margin, with a year-over-year increase of approximately 50 basis points, driven by strong gross margin performance and operational discipline.
Free Cash Flow $48.7 million, reflecting $86.4 million of net cash provided by operating activities and $37.7 million of capital expenditures.
Adjusted Net Income $148.9 million, representing an 8.6% increase year-over-year, with adjusted diluted earnings per share of $0.35.
SG&A Expenses $575.1 million, or 18.5% of net sales, with expectations for modest SG&A leverage driven by fixed cost infrastructure and efficiency.
Advertising and Marketing Expense $193.8 million, or 6.2% of net sales, with modest leverage benefit due to the timing of marketing campaigns.
Cash and Cash Equivalents Approximately $616 million, with a total liquidity position of approximately $1.4 billion, remaining debt-free.
Share Repurchases $23.2 million spent on repurchasing approximately 665,000 shares, with $383.5 million remaining under the share repurchase program.
New Product Offerings: Chewy has transitioned the Chewy+ membership program out of beta phase following a successful testing period, aiming to drive stronger customer loyalty.
Market Expansion: Chewy Vet Care has opened 3 additional practices, bringing the total to 11 locations across 4 states, with plans to open 8 to 10 new clinics in fiscal year 2025.
Operational Efficiency: Gross margin improved to 29.6%, with a year-over-year expansion of approximately 60 basis points, driven by strong Autoship sales and a favorable product mix.
Free Cash Flow: Chewy generated nearly $50 million in free cash flow during Q1 2025.
Strategic Shift: Chewy's sponsored ads business has grown sequentially, with successful migration to a 1P platform, expanding ad products and capabilities.
Competitive Pressures: Chewy faces ongoing competitive pressures in the pet industry, which could impact market share and pricing strategies.
Regulatory Issues: The company acknowledges potential regulatory challenges that may arise, particularly concerning compliance and operational practices.
Supply Chain Challenges: There are risks associated with supply chain disruptions that could affect product availability and operational efficiency.
Economic Factors: Economic fluctuations, including inflation and consumer spending trends, may pose risks to Chewy's sales and profitability.
Leadership Transition: The departure of CFO David Reeder introduces uncertainty regarding financial strategy and leadership continuity.
Market Volatility: The company is subject to market volatility that could affect stock performance and investor confidence.
Chewy Vet Care Expansion: Opened 3 additional Chewy Vet Care practices, bringing total to 11 locations across 4 states. On track to open 8 to 10 new clinics in fiscal year 2025.
Sponsored Ads Growth: Continued strong performance in the sponsored ads business, with successful migration to 1P platform enabling broader ad product offerings.
Chewy+ Membership Program: Transitioned Chewy+ membership program out of beta phase, aiming to drive stronger customer loyalty.
Q2 2025 Net Sales Outlook: Expected net sales between $3.06 billion and $3.09 billion, representing 7% to 8% year-over-year growth.
Full Year 2025 Net Sales Outlook: Maintaining net sales outlook of $12.3 billion to $12.45 billion, approximately 6% to 7% year-over-year growth.
Full Year 2025 Adjusted EBITDA Margin Outlook: Adjusted EBITDA margin expected between 5.4% and 5.7%, indicating approximately 75 basis points of year-over-year margin expansion.
Q2 2025 Adjusted Diluted EPS Guidance: Expected adjusted diluted earnings per share in the range of $0.30 to $0.35.
Free Cash Flow Conversion: Approximately 80% of adjusted EBITDA expected to convert into free cash flow.
CapEx Guidance: CapEx expected at the low end of the range of 1.5% to 2% of net sales for fiscal year 2025.
Share Repurchase Program: In Q1 2025, Chewy repurchased approximately 665,000 shares for a total of $23.2 million under the existing share repurchase program. The company has a remaining capacity of approximately $383.5 million for future repurchases under the $500 million authorization announced last year.
The earnings call summary presents a mixed picture. The financial performance and shareholder return plans are average, with no major surprises. Market strategy and product development updates show potential but lack immediate impact. The Q&A section reveals some uncertainties, particularly regarding settlement payments and management's vague responses. While there are positive aspects like private label progress, the overall sentiment remains cautious, leading to a neutral rating. Without specific market cap data, the stock reaction is expected to be mild.
Chewy's earnings call highlights strong financial performance, with significant growth in adjusted net income and a solid cash position. The strategic focus on programs like Autoship and Chewy+ enhances customer retention and profitability, while marketing efficiency improvements are sustainable. Despite some concerns about Q4 margin decline, the overall guidance and strategic initiatives like CVC indicate optimism. The Q&A session reveals positive analyst sentiment, though some guidance specifics were withheld. Given these factors, the stock is likely to see a positive reaction, with potential gains in the 2% to 8% range.
Chewy's earnings call presents a positive outlook with strong financial performance, including a 59.6% YoY increase in adjusted net income and EPS near the high end of guidance. The Q&A highlights successful growth strategies, market share gains, and efficient marketing. Despite some management vagueness on 2026 specifics, the guidance for 2025 appears solid with margin expansion and strategic initiatives like Chewy+ and CVC. No major negative catalysts were identified, and the overall sentiment is positive, suggesting a stock price increase of 2% to 8% over the next two weeks.
The earnings call highlights several positive aspects: a strong financial performance with expected margin expansion, successful product development with Chewy+ and Get Real, and a strategic focus on high-margin verticals. The Q&A section indicates confidence in growth, especially in advertising and Autoship. Despite some uncertainties in SG&A costs, the overall sentiment is optimistic, supported by guidance reflecting growth and expansion. The absence of any major negative factors and the emphasis on strategic growth initiatives suggest a positive stock price movement in the near term.
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