Chewy's Q1 Earnings Beat Estimates, Active Customer Sales Increase Y/Y

Chewy (CHWY) reported Q1 fiscal 2025 results exceeding expectations, with net sales up 8.3% year-over-year to $3.12 billion and adjusted EPS at $0.35, driven by a 3.8% increase in active customers and a 14.8% rise in Autoship sales, which now represent 82.2% of total revenue. The company is expanding its Chewy Vet Care initiative with plans to open 8-10 new clinics in fiscal 2025. Chewy projects Q2 net sales between $3.06 billion and $3.09 billion and maintains its full-year net sales guidance of $12.3 billion to $12.5 billion, expecting approximately 60% of adjusted EBITDA margin expansion to come from gross margin improvements.

Analysis

Chewy, Inc. (CHWY) reported a robust first quarter for fiscal 2025, exceeding both top and bottom-line Zacks Consensus Estimates and its own net sales guidance. Net sales reached $3.116 billion, an 8.3% year-over-year increase, driven by a 3.8% rise in active customers to 20.8 million and a significant 14.8% growth in Autoship customer sales, which now constitute a record 82.2% of total net sales. Adjusted earnings per share advanced 12.9% to $0.35, surpassing the $0.34 consensus. The company's strategic initiatives, including the expansion of its Chewy Vet Care clinics to 11 locations with plans for 8-10 more in fiscal 2025, and strong performance in hardgoods (up 12.3% YoY) contributed to these results. Net sales per active customer also grew 3.7% to $583. While the gross margin saw a slight 10 basis point contraction to 29.6% YoY, the adjusted EBITDA margin expanded by 50 basis points to 6.2%, with adjusted EBITDA increasing 18.3% to $192.7 million. Chewy maintains a strong financial position, ending the quarter debt-free with $616.4 million in cash and equivalents and $48.7 million in free cash flow. The company repurchased $23.2 million worth of shares, with $383.5 million remaining under authorization. For Q2 fiscal 2025, Chewy anticipates net sales between $3.06 billion and $3.09 billion (7-8% YoY growth) and reaffirmed its full-year fiscal 2025 net sales guidance of $12.3 billion to $12.5 billion, projecting an adjusted EBITDA margin between 5.4% and 5.7%, with approximately 80% FCF conversion from adjusted EBITDA.

Key Decisions for Investors

• Investors should note the sustained momentum in active customer acquisition and the increasing penetration of the Autoship program, which underscore the resilience and predictability of Chewy's revenue model.
• The ongoing expansion of Chewy Vet Care clinics presents a notable long-term growth avenue; its successful execution and impact on customer retention and overall ecosystem engagement warrant close monitoring.
• Considering the strong Q1 performance, robust full-year guidance including significant free cash flow generation, and active share repurchase program, investors may find the current fundamentals supportive, while also factoring in the stock's recent 25.6% appreciation over the past three months and its Zacks Rank #3 (Hold) status.