Financial Data and Key Metrics Changes - Q2 net sales grew by nearly 9% year over year to $3.1 billion, exceeding the high end of guidance range [5][17] - Gross margin reached 30.4%, expanding by nearly 80 and 90 basis points sequentially and year-over-year, respectively [7][17] - Adjusted net income was $141.1 million, representing a 34.8% increase year over year, with adjusted diluted earnings per share of $0.33 [18][23] - Free cash flow for Q2 was nearly $106 million, with a robust liquidity position of approximately $1.4 billion [8][20] Business Line Data and Key Metrics Changes - Autoship customer sales reached $2.58 billion, representing 83% of Q2 net sales and growing nearly 15% year over year [5][6] - Hardgoods business grew over 15% in Q2, driven by structural volume growth [6] - Chewy Plus program showed strong growth, with approximately 3% of total monthly sales attributed to members [10][74] Market Data and Key Metrics Changes - Active customers increased to 20.9 million, reflecting 4.5% year-over-year growth [7] - NESPAC (Net Effective Sales Per Active Customer) reached $591, representing 4.6% year-over-year growth [7] - The overall pet industry is expected to grow in low single-digit to mid-single-digit range, while Chewy is growing at a rate of 7% to 8% [61][63] Company Strategy and Development Direction - Chewy is focusing on expanding its Chewy Vet Care network and plans to open 8 to 10 new practices in fiscal year 2025 [9] - The company is investing in its Chewy Plus membership program and private brands, including the launch of a new fresh dog food line called Get Real [11][12] - Chewy aims to mitigate tariff-related costs and enhance customer experience through strategic pricing and inventory management [15] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in Chewy's ability to gain market share and deliver strong growth despite macroeconomic pressures [15][22] - The company expects to maintain adjusted EBITDA margin expansion driven by improvements in gross margin [22] - Management anticipates continued growth in active customers and NESPAC, with a focus on enhancing customer engagement through programs like Autoship and Chewy Plus [63][78] Other Important Information - The company repurchased approximately 3 million shares for a total of approximately $125 million in Q2 [19] - Chewy remains debt-free with a strong cash position, allowing for continued investment in growth initiatives [20] Q&A Session Summary Question: Investments required in the back half and increasing awareness of new offerings - Management indicated that they are focusing on existing members for Chewy Plus and have not spent additional marketing dollars externally, relying on organic growth from existing customers [26] Question: SG&A deleverage and expectations for the back half - Management expects SG&A leverage to improve in the back half of the year, driven by the ramp-up of fulfillment centers and structural growth [34][39] Question: Drivers of gross margin expansion and advertising environment - Management highlighted that gross margin expansion is driven by product mix, increasing Autoship penetration, and a rational promotional environment [44][64] Question: Quality of customer cohorts and growth in Autoship - Management noted that the quality of cohorts is improving due to better retention in programs like Autoship and Chewy Plus, leading to higher NESPAC [78]

Financial Data and Key Metrics Changes - Q2 net sales grew by nearly 9% year over year to $3.1 billion, exceeding the high end of guidance range [5][17] - Gross margin reached 30.4%, expanding by nearly 80 and 90 basis points sequentially and year-over-year, respectively [6][17] - Adjusted net income for Q2 was $141.1 million, representing a 34.8% increase year over year [18] - Free cash flow for Q2 was nearly $106 million, with a robust liquidity position of approximately $1.4 billion [7][20] Business Line Data and Key Metrics Changes - Autoship customer sales reached $2.58 billion, representing 83% of Q2 net sales and a nearly 15% increase [5][6] - Hardgoods business grew over 15% in Q2, driven by structural volume growth [5] - Chewy Plus program showed strong growth, with approximately 3% of total monthly sales attributed to members [9][10] Market Data and Key Metrics Changes - Active customers increased to 20.9 million, reflecting a 4.5% year-over-year growth [6] - NESPAC (Net Effective Sales Per Active Customer) reached $591, representing a 4.6% year-over-year growth [6] - The overall industry growth is in the low to mid-single digits, while Chewy is growing at a 7% to 8% rate [61] Company Strategy and Development Direction - Chewy is focusing on expanding its Chewy Plus membership and private brands, with a new product line "Get Real" launched in August [10][12] - The company plans to open 8 to 10 new Chewy Vet Care practices in fiscal year 2025 [8] - Chewy aims to mitigate tariff-related costs and invest in growth initiatives to enhance market share [15] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in Chewy's ability to navigate macroeconomic pressures and continue gaining market share [15][21] - The second half of 2025 is expected to be dynamic, with plans to invest in growth while maintaining profitability [15][21] - Management anticipates continued gross margin expansion and a strong performance from the Chewy Plus program [21][22] Other Important Information - The company repurchased approximately 3 million shares for about $125 million in Q2 [19] - Chewy remains debt-free with a strong cash position, allowing for strategic investments [20] Q&A Session All Questions and Answers Question: Can you talk more about the investments required in the back half and into 2026? - Management indicated that investments will focus on enhancing customer discoverability and increasing awareness of new offerings like Chewy Plus and Get Real, primarily through existing customer engagement rather than external marketing [25][26] Question: How should we think about the leverage path into the back half? - Management expects SG&A leverage to improve in the back half of the year, driven by the ramp-up of fulfillment centers and structural growth [34][39] Question: Can you unpack the Q2 gross margin improvement and the drivers for Q3 and Q4? - Management noted that gross margin expansion is driven by product mix, increasing Autoship penetration, and a rational promotional environment, with expectations for continued growth [42][44] Question: How big do you think the fresh and frozen business can go over time? - Management estimates the total addressable market for the fresh and frozen category to grow from $3 billion to $4 billion currently to between $8 billion and $12 billion in the coming years [51][52] Question: What are your expectations regarding the advertising environment? - Management reported high competitive intensity in the advertising market but noted strong metrics in net traffic and mobile app engagement [57][62] Question: What are the competitive advantages Chewy has over retail giants? - Management emphasized Chewy's unique value proposition that combines e-commerce efficiency with personalized service, allowing for a strong position in the pet care market [67][70]

Core Insights - Chewy Inc. reported adjusted earnings of 33 cents per share for Q2 2025, surpassing both consensus estimates of 14 cents and management guidance of 30-35 cents [1] - The company's sales reached $3.10 billion, reflecting an 8.6% year-over-year increase, exceeding the consensus of $3.08 billion and management guidance of $3.06 billion-$3.09 billion [1] Sales Performance - Autoship customer sales amounted to $2.58 billion, marking a 14.9% increase [2] - Autoship sales represented 83% of net sales during the quarter [3] - Net sales per active customer rose by 4.6% to $591 [3] Profitability Metrics - Gross margin improved by 90 basis points year-over-year to 30.4% [3] - Adjusted EBITDA increased by 26.5% to $183.3 million, with an adjusted EBITDA margin of 5.9%, up 80 basis points year-over-year [3] - Net income decreased from $299.1 million a year ago to $62 million, while adjusted net income rose from $104.7 million to $141.1 million [4] Customer Growth and Outlook - Active customers grew by 4.5% year-over-year to 20.906 million [3] - Chewy anticipates Q3 adjusted earnings of 28-33 cents per share, compared to the consensus of 23 cents [5] - The company raised its fiscal 2025 sales guidance to $12.5 billion-$12.6 billion, slightly below the consensus of $12.58 billion [5]

Core Insights - Earnings from the pet-supplies retailer fell short of expectations after traders had heavily invested in the shares prior to the earnings update [1] Group 1 - The company's earnings did not meet market expectations [1] - There was significant trading activity in the company's shares leading up to the earnings report [1]

Core Viewpoint - Chewy's shares experienced a decline of up to 10% in premarket trading despite better-than-expected second quarter sales and an improved guidance for FY25, primarily due to disappointing bottom-line results that included a significant drop in profits [3]. Group 1 - Chewy reported second quarter sales that exceeded expectations [3]. - The company raised its guidance for fiscal year 2025 [3]. - The decline in shares was attributed to a lackluster bottom line performance [3].

Group 1 - The company is responsible for the development of transcript-related projects [1] - The company publishes thousands of quarterly earnings calls per quarter [1] - The company is continuing to grow and expand its coverage [1]

Group 1 - The core viewpoint of the article highlights that Chewy's stock experienced a significant drop of over 8% in pre-market trading due to disappointing financial results [1] - The company's Q2 net profit was reported at $62 million, which represents a substantial decline compared to $299.1 million in the same period last year [1]

Financial Performance - Net sales for the full year reached $12345 million, representing a 9.2% year-over-year growth[12] - Q2 2025 net sales were $3104 million, an 8.6% year-over-year increase[14] - Autoship customer sales for the full year totaled $10058 million, a 14.9% year-over-year increase[16] - Q2 2025 Autoship customer sales were $2577 million, up 14.9% year-over-year[18] - Net sales per active customer reached $591 in Q2 2025[10, 21] - Adjusted EBITDA for Q2 2025 was $183.3 million, with a 5.9% margin[10] - Free cash flow for Q2 2025 was $105.9 million[33] Customer Metrics - The company added 150,000 net new active customers sequentially[8] - Autoship customer sales accounted for 83.0% of net sales[10] - The company has 20.9 million active customers[21] Guidance - The company projects net sales of $3.07 billion to $3.10 billion for the third fiscal quarter of 2025, representing approximately 7% to 8% year-over-year growth[35] - The company anticipates adjusted diluted EPS of $0.28 to $0.33 for the third fiscal quarter of 2025[35] - The company forecasts net sales of $12.5 billion to $12.6 billion for the full fiscal year 2025[35] - The company expects an adjusted EBITDA margin of 5.4% to 5.7% for the full fiscal year 2025[35]

Company Overview - Chewy is the largest pet e-tailer in the U.S., offering approximately 130,000 products and partnering with around 3,200 trusted brands in the pet industry[90]. Customer Growth and Retention - Active customers have been growing over time, indicating successful customer acquisition and retention strategies[94]. - Net sales are primarily driven by the growth of new customers and active customers, as well as the frequency of purchases through the Autoship subscription program[99]. - Autoship customer sales are a key driver of recurring net sales, reflecting customer retention and purchasing behavior[97]. - Active customers increased by 4.5% to 20.906 million compared to 20.002 million in the prior year[114]. - Autoship customer sales increased by 14.9% to $2,576.9 million for the 13 weeks ended August 3, 2025, compared to $2,242.2 million in the prior year[114]. Financial Performance - Net sales for the 13 weeks ended August 3, 2025, reached $3,104.2 million, an increase of 8.6% compared to $2,858.6 million for the same period in 2024[114]. - Net income decreased by 79.3% to $62.0 million for the 13 weeks ended August 3, 2025, down from $299.1 million in the prior year[114]. - Adjusted EBITDA for the 13 weeks ended August 3, 2025, was $183.3 million, reflecting a 26.5% increase from $144.9 million in the same period last year[115]. - Adjusted net income for the 13 weeks ended August 3, 2025, was $141.1 million, a 34.8% increase from $104.7 million in the prior year[117]. - Earnings per share (diluted) decreased by 79.4% to $0.14 for the 13 weeks ended August 3, 2025, compared to $0.68 in the same period last year[117]. - Net sales for the twenty-six weeks ended August 3, 2025 increased by $483.9 million, or 8.4%, to $6.2 billion compared to $5.7 billion for the same period in 2024, driven by a 14.8% growth in autoship customer sales to $5.1 billion[122]. - Gross profit for the thirteen weeks ended August 3, 2025 increased by $98.4 million, or 11.7%, to $942.2 million, with a gross margin of 30.4%, an increase of 90 basis points from 29.5% in the prior year[125]. - Gross margin for the twenty-six weeks ended August 3, 2025 was 30.0%, an increase of 40 basis points from 29.6% in the prior year, supported by growth in sponsored ads and autoship customer sales[126]. Expenses and Cash Flow - Selling, general, and administrative expenses encompass fulfillment costs, payroll, and other corporate expenses[102]. - Selling, general and administrative expenses for the thirteen weeks ended August 3, 2025 rose by $50.7 million, or 8.2%, to $671.9 million, primarily due to increased fulfillment costs and operational expansion[127]. - Advertising and marketing expenses for the thirteen weeks ended August 3, 2025 increased by $10.1 million, or 5.3%, to $200.6 million, reflecting investments in customer acquisition and retention[130]. - Free cash flow for the 13 weeks ended August 3, 2025, was $105.9 million, up 15.7% from $91.5 million in the same period in 2024[118]. - Net cash provided by operating activities was $133.9 million for the 13 weeks ended August 3, 2025, an increase of 8.5% from $123.4 million in the prior year[118]. - Net cash provided by operating activities was $220.3 million for the twenty-six weeks ended August 3, 2025, compared to $205.3 million for the same period in 2024, reflecting an increase of approximately 7.3%[139][140]. - Net cash used in investing activities was $70.9 million for the twenty-six weeks ended August 3, 2025, primarily for capital expenditures of $65.7 million related to expanding operations[142]. - Net cash used in financing activities was $154.0 million for the twenty-six weeks ended August 3, 2025, significantly lower than $590.0 million used in the same period in 2024[146][147]. Economic Conditions - Macroeconomic conditions, including inflation and high interest rates, are being closely monitored as they impact consumer shopping behavior[91]. Future Plans and Investments - The company plans to continue investing in its infrastructure, including veterinary clinics and pharmacy facilities, to support future growth[142]. - The company is modernizing its finance information technology architecture to enhance scalability, visibility, and analytical capabilities, with completion expected by the end of the 2025 fiscal year[129]. Shareholder Actions - The company authorized a share repurchase program of up to $500 million, with $359.8 million remaining available for repurchases as of August 3, 2025[149][152]. - During the twenty-six weeks ended August 3, 2025, the company repurchased 1,294,475 shares of Class A common stock for a total cost of $46.9 million[152]. Credit Facilities - The company has a senior secured asset-based credit facility with a borrowing capacity of $782.8 million as of August 3, 2025, with no outstanding borrowings[148]. Working Capital - The company experienced working capital changes of $121.6 million, primarily driven by increases in accounts receivable and inventories[140]. - The company has the option to raise additional funds through equity or debt financing arrangements as needed for working capital and strategic investments[138].

Financial Performance - Chewy, Inc. reported net sales of $3.10 billion for the second quarter of fiscal year 2025, reflecting an increase of 8.6 percent year over year [1] - The gross margin for the quarter was 30.4 percent, which represents an increase of 90 basis points compared to the previous year [1] - The company achieved a net income of $62.0 million, which includes share-based compensation expense and related taxes amounting to $79.1 million [1]