Chewy Q1 2025 slides: revenue up 8.3%, EBITDA margin expands to 6.2%

Chewy (CHWY) reported Q1 2025 net sales of $3.12 billion, an 8.3% year-over-year increase, with adjusted EBITDA reaching $192.7 million (6.2% margin), up from 5.7% in Q1 2024; Autoship sales grew 14.8% to $2.56 billion, representing 82.2% of net sales. Despite these positive results and the addition of 240,000 net new active customers, shares fell 8.17% in premarket trading, possibly driven by investor concerns over forward guidance projecting 6-7% sales growth for FY25, a slight deceleration from Q1's performance.

Analysis

Chewy (CHWY) reported robust Q1 fiscal 2025 results, characterized by an 8.3% year-over-year increase in net sales to $3.12 billion and an expansion in adjusted EBITDA margin to 6.2% ($192.7 million), a 50 basis point improvement. This sales growth accelerated from Q1 2024's 3.1%, and the company added 240,000 net sequential active customers, reaching 20.8 million. The Autoship program remains a key strength, with its sales growing 14.8% year-over-year to $2.56 billion, representing 82.2% of total net sales, and net sales per active customer (NSPAC) rose 3.7% to $583. Despite these positive operational metrics, stable gross margins at 29.6%, and $23.2 million returned to shareholders, Chewy's shares declined 8.17% in premarket trading. This market reaction appears linked to the company's forward guidance, which forecasts Q2 2025 net sales growth of approximately 7-8% and full fiscal year 2025 net sales growth of 6-7% (to $12.30-$12.45 billion) with an adjusted EBITDA margin of 5.4-5.7%. While indicating continued growth and profitability, this full-year sales guidance implies a deceleration from Q1 2025's performance and Q4 2024's 14.9% growth, likely heightening investor concerns regarding the future growth trajectory, even as the company holds a $616 million cash balance.

Key Decisions for Investors

• Evaluate Chewy's fundamental strengths, evidenced by strong Q1 sales growth of 8.3% and a 6.2% adjusted EBITDA margin, against the market's concern over guided FY25 sales growth slowing to 6-7%.
• Investors should closely monitor future active customer acquisition rates and net sales per active customer (NSPAC) trends as key indicators of Chewy's ability to navigate a potentially moderating growth environment and meet or exceed guidance.
• Consider whether the post-earnings share price decline offers a favorable entry point, balancing the robust Autoship model and improving profitability against the risks associated with decelerating top-line growth.
• Assess the sustainability of margin expansion, with FY25 adjusted EBITDA margin guided at 5.4-5.7%, as a critical factor for earnings growth if revenue increases at a more modest pace.