To The Moon

Chewy's 2024 Q1 Earnings Summary

$Chewy, Inc.(CHWY)$ reported strong financial results for the first quarter of 2024, surpassing market expectations and announcing a significant stock buyback plan. Here are the key highlights:

• Sales and Revenue: Chewy recorded sales of $2.88 billion, a 3.1% increase from the previous year.

• Adjusted EBITDA: The adjusted EBITDA surged by 47% year-over-year to $162.9 million.

• Gross Margin: Improved slightly to 28.2% of sales, up from 28.1% in the same period last year.

• Net Income: Net income for the quarter was $66.9 million, a substantial increase from $22.9 million in the corresponding quarter of 2021.

• Adjusted EPS: The adjusted earnings per share (EPS) was $0.31, up from $0.20 in the previous year, significantly beating the consensus estimate of $0.16.

• Free Cash Flow: Reported free cash flow was $52.6 million, a decrease from $127.1 million in the same quarter last year.

Guidance for Full Year and Next Quarter

• Full Year 2025 Sales Forecast: Chewy maintains its sales growth forecast for 2025, with an anticipated range of $11.6 billion to $11.8 billion.

• Adjusted EBITDA Margin: The company projects an adjusted EBITDA margin rate between 4.1% and 4.3%, an improvement from the previous outlook of 3.8%.

• Stock Buyback Plan: Chewy announced a stock repurchase program of up to $500 million, covering both Class A and Class B common stocks.

senior management's stance

1. The Company is off to a strong start in fiscal year 2024, delivering strong net sales and record adjusted EBITDA in the first quarter," said CEO Singh.

2. He emphasized that the company has reached an "exciting inflection point," with significant free cash flow generation and a strong balance sheet that provides the company with the flexibility to deploy capital.

3. Continuing to drive sales growth: The company maintained its sales forecast for fiscal 2025, targeting a range of $11.6 billion to $11.8 billion, demonstrating Singh's confidence in the company's continued growth.

4. Improving profitability: The company has adjusted its EBITDA margin forecast to 4.1%-4.3% from 3.8% previously, showing its focus on improving profitability.

5. Repurchase Program: Announced a share repurchase program of up to $500 million, covering both Class A and Class B common stock, demonstrating the Company's commitment to creating value for shareholders

Market Focus

1. Customer Acquisition and Retention.

   • The company believes that the number of both new customer acquisitions and reactivated customers increased moderately, exceeding internal expectations.

2. Chewy Plus Membership Program.

   • What is the initial performance and expectations of Chewy Plus?

   • Response: The program has just been launched, and the company will take a test-and-learn approach to evaluate its impact on product discovery, wallet share and customer unit price.

3. Gross margin improvement.

   • What are the drivers of gross margin improvement? Is it sustainable?

   • Response:Growth in the sponsorship advertising business, a higher share of the healthcare business and a reasonable promotional environment were the main drivers. Some one-time factors also contributed.

4. Pet Industry Trends.

• What are the overall trends in the pet industry?

• The industry is still in the process of normalization, and the trend of pet household formation is improving, but not yet fully recovered. The company is cautiously optimistic about the industry's prospects.