Core Insights - Chewy Inc reported a first-quarter earnings miss despite beating revenue expectations, leading to a lackluster full-year outlook [1] - The stock is experiencing its third consecutive loss and its worst day since August 2023, trading down 11.3% to $40.63 [1][2] - Short interest in the stock has increased by 17.7% over the last two reporting periods, with 14.80 million shares sold short, representing 7.8% of the available float [2] Stock Performance - The stock is pulling back from a two-year high of $48.62 reached on June 6, 2023, but may find support at the 40-day moving average [2] - Despite recent losses, the stock still has a 21% lead for 2025 [2] Options Market Activity - Options traders are leaning bearish, as indicated by a 10-day put/call volume ratio of 1.50, ranking in the 98th percentile of annual readings [3] - Options volume is significantly higher than average, with 13,000 calls and 19,000 puts traded, indicating increased trading activity [4] - The most popular options contracts include the weekly 6/13 40-strike put and the 47-strike put, with new positions being opened at the latter [4]

Core Insights - Chewy reported $1.52 billion in revenue for the quarter ended April 2025, reflecting a year-over-year decline of 47.1% [1] - The EPS for the same period was $0.95, compared to $0.31 a year ago, indicating significant improvement [1] - The reported revenue exceeded the Zacks Consensus Estimate of $1.5 billion, resulting in a surprise of +1.29% [1] - The company delivered an EPS surprise of +14.46%, with the consensus EPS estimate being $0.83 [1] Financial Performance Metrics - Active Customers reached 20,756, surpassing the eight-analyst average estimate of 20,566 [4] - Net sales per active customer were $583, slightly below the $585.93 average estimate based on seven analysts [4] - Net Sales in Consumables amounted to $2.18 billion, exceeding the three-analyst average estimate of $2.16 billion [4] - Net Sales in Other categories were $595.90 million, compared to the $597.47 million average estimate based on three analysts [4] - Net Sales in Hardgoods reached $342.20 million, above the $323.18 million average estimate based on three analysts [4] Stock Performance - Chewy's shares have returned +16% over the past month, outperforming the Zacks S&P 500 composite's +6.9% change [3] - The stock currently holds a Zacks Rank 3 (Hold), suggesting it may perform in line with the broader market in the near term [3]

Group 1 - Chewy reported quarterly earnings of $0.95 per share, exceeding the Zacks Consensus Estimate of $0.83 per share, and showing significant growth from $0.31 per share a year ago, resulting in an earnings surprise of 14.46% [1] - The company achieved revenues of $1.52 billion for the quarter ended April 2025, surpassing the Zacks Consensus Estimate by 1.29%, although this represents a decline from $2.88 billion in the same quarter last year [2] - Chewy's stock has increased approximately 36.7% since the beginning of the year, significantly outperforming the S&P 500's gain of 2.7% [3] Group 2 - The future performance of Chewy's stock will largely depend on management's commentary during the earnings call and the company's earnings outlook, which includes current consensus earnings expectations for upcoming quarters [4] - The current consensus EPS estimate for the next quarter is $0.31 on revenues of $3.04 billion, and for the current fiscal year, it is $1.23 on revenues of $12.41 billion [7] - The Internet - Commerce industry, to which Chewy belongs, is currently ranked in the top 31% of over 250 Zacks industries, indicating a favorable outlook compared to the bottom 50% [8]

Financial Data and Key Metrics Changes - Q1 net sales increased by over 8% to $3,120,000,000, exceeding the high end of guidance [9][20] - Gross margin for Q1 was 29.6%, with a year-over-year expansion of approximately 60 basis points when adjusted for one-time benefits from the previous year [10][21] - Adjusted EBITDA for Q1 was $192,700,000, representing a 6.2% adjusted EBITDA margin, with a year-over-year increase of approximately 50 basis points [11][24] - Free cash flow generated in Q1 was nearly $50,000,000 [12][24] Business Line Data and Key Metrics Changes - Autoship customer sales reached $2,560,000,000, representing approximately 82% of Q1 net sales and a growth of nearly 15% year-over-year [9][10] - Hardgoods category saw a 12.3% year-over-year growth [9] - Active customers increased to 20,800,000, reflecting a 3.8% year-over-year growth [10][20] Market Data and Key Metrics Changes - The overall pet industry is estimated to grow at 3% to 4% this year, with the company expecting to grow at roughly two times that rate [38] - The company is capturing approximately $0.50 of every dollar moving online in the pet market, indicating a gain in market share [78] Company Strategy and Development Direction - The company is focused on expanding its Chewy Vet Care (CVC) initiative, with plans to open 8 to 10 new clinics in fiscal year 2025 [12][13] - The transition of the Chewy Plus membership program out of beta is expected to drive stronger customer loyalty [14] - The company aims for a long-term adjusted EBITDA margin target of 10% [16] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's ability to deliver on its strategic roadmap and long-term financial model [15][29] - The company anticipates that approximately 80% of adjusted EBITDA will convert into free cash flow for the full year [25][28] - Management noted that the competitive landscape remains favorable, with continued strength in customer acquisition and retention [32][52] Other Important Information - The CFO announced plans to leave the company for a CEO role in the semiconductor industry, with a smooth transition expected [17][30] - The company ended the quarter with approximately $616,000,000 in cash and cash equivalents and remains debt-free [27][26] Q&A Session Summary Question: Customer growth expectations for the full year - Management indicated that low single-digit growth remains a reasonable framework for customer count growth, with current momentum exceeding expectations [32][34] Question: Industry growth outlook - Management estimates a 3% to 4% growth for the industry, with Chewy's guidance reflecting a share-gaining plan [38] Question: Advertising investments and opportunities - Management expressed optimism about the sponsored ads business, highlighting successful platform migration and increased demand for off-site advertising [42][45] Question: Sustainability of active customer growth - Management noted improvements in customer retention and acquisition strategies, contributing to sustainable active customer growth [50][52] Question: Autoship customer sales growth - Management detailed the path new customers take to become Autoship customers, emphasizing the importance of assortment and personalized experiences [66][68] Question: Gross margin changes - Management clarified that gross margin expanded year-over-year, driven by sponsored ads and product mix improvements [84][86] Question: Chewy Vet Care expansion opportunities - Management highlighted the potential of the CVC initiative, with strong performance metrics and plans for gradual expansion [94][96]

Financial Data and Key Metrics Changes - Q1 net sales increased by over 8% year over year to $3,120,000,000, exceeding the high end of guidance [7][18] - Adjusted net income for Q1 was $148,900,000, representing an 8.6% increase year over year [22] - Gross margin for Q1 was 29.6%, with a year-over-year expansion of approximately 60 basis points when adjusted for one-time items [19][20] - Adjusted EBITDA for Q1 was $192,700,000, reflecting a 6.2% adjusted EBITDA margin, which is a year-over-year increase of approximately 50 basis points [10][22] - Free cash flow generated in Q1 was nearly $50,000,000 [11] Business Line Data and Key Metrics Changes - Autoship customer sales reached $2,560,000,000, representing approximately 82% of total Q1 net sales, with a growth of nearly 15% year over year [7][18] - Hardgoods experienced a notable year-over-year growth of 12.3% [7] - Active customers increased to 20,800,000, reflecting a 3.8% year-over-year growth [8][18] Market Data and Key Metrics Changes - The pet industry is estimated to grow at approximately 3% to 4% this year, with Chewy's guidance indicating a plan to grow at roughly two times the market growth [36] - Chewy is capturing approximately $0.50 of every dollar moving online in the pet market, indicating an increase in market share compared to previous quarters [75] Company Strategy and Development Direction - Chewy is focused on expanding its Chewy Vet Care (CVC) initiative, with plans to open 8 to 10 new clinics in fiscal year 2025 [12] - The company is transitioning the Chewy Plus membership program out of beta, aiming to enhance customer loyalty and engagement [13] - Chewy's long-term adjusted EBITDA margin target is set at 10%, with a strong emphasis on strategic growth initiatives [14] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's ability to deliver on its strategic roadmap and long-term financial model [14] - The company anticipates that approximately 80% of adjusted EBITDA will convert into free cash flow for the full year 2025 [23] - Management noted that the active customer growth is driven by improved retention and acquisition strategies [50] Other Important Information - The CFO, David Reeder, will be leaving the company to pursue a CEO role in the semiconductor industry, with a smooth transition planned [15] - Chewy remains debt-free with a liquidity position of approximately $1,400,000,000 [24] Q&A Session Summary Question: Customer growth expectations for the full year - Management indicated that low single-digit growth remains a reasonable framework for customer count growth, with current momentum exceeding expectations [30][31] Question: Industry growth outlook - The industry is expected to normalize, with household formation remaining flat and overall market growth estimated at 3% to 4% [35][36] Question: Advertising investments and opportunities - Management highlighted strong progress in sponsored ads and the successful migration to a new platform, enabling off-site advertising [40][41] Question: Sustainability of active customer growth - Management expressed confidence in the sustainability of active customer growth, driven by improved marketing strategies and product offerings [49] Question: Chewy Plus program adoption rates - The Chewy Plus program has shown strong membership growth and positive customer feedback, with higher engagement metrics compared to non-members [56][57] Question: Autoship customer growth and hardgoods performance - Autoship customer sales have increased significantly, and hardgoods growth is attributed to improved assortment and customer experience [64][70]

Group 1 - Proactive provides fast, accessible, informative, and actionable business and finance news content to a global investment audience [2] - The news team covers medium and small-cap markets, as well as blue-chip companies, commodities, and broader investment stories [3] - Proactive's content includes insights across various sectors such as biotech, pharma, mining, natural resources, battery metals, oil and gas, crypto, and emerging technologies [3] Group 2 - Proactive is committed to adopting technology to enhance workflows and content production [4] - The company utilizes automation and software tools, including generative AI, while ensuring all content is edited and authored by humans [5]

Financial Performance - Net sales for Q1 2025 reached $3.116 billion, representing an 8.3% year-over-year growth[14] - Autoship customer sales for Q1 2025 were $2.563 billion, a 14.8% increase year-over-year[18] - Net sales per active customer in Q1 2025 was $583[10] - Adjusted EBITDA for Q1 2025 was $192.7 million, with a margin of 6.2%[10] - The company returned $23.2 million to shareholders through share repurchases in Q1 2025[8] - Free cash flow for Q1 2025 was $48.7 million[50] Customer Metrics - The company added 240,000 net sequential active customers[8] - Autoship customer sales accounted for 82.2% of net sales[10] Guidance - The company projects net sales of $3.06 billion - $3.09 billion for Fiscal Second Quarter 2025, representing approximately 7 to 8% YoY growth[35] - The company anticipates adjusted diluted EPS of $0.30 - $0.35 for Fiscal Second Quarter 2025[35] - The company forecasts net sales of $12.30 billion - $12.45 billion for Fiscal Year 2025, representing approximately 6 to 7% YoY growth[35] - The company expects adjusted EBITDA margin of 5.4% - 5.7% for Fiscal Year 2025[35]

Financial Performance - Net sales for the 13 weeks ended May 4, 2025, were $3,116.0 million, an increase of 8.3% compared to $2,877.7 million for the same period in 2024[90]. - Net income decreased to $62.4 million, down 6.7% from $66.9 million in the prior year, resulting in a net margin of 2.0%[90]. - Adjusted EBITDA rose to $192.7 million, reflecting an 18.3% increase from $162.9 million in the previous year, with an adjusted EBITDA margin of 6.2%[90]. - Adjusted net income for the quarter was $148.9 million, an 8.6% increase from $137.1 million in the prior year[99]. - Adjusted basic earnings per share increased by 12.5% to $0.36, while adjusted diluted earnings per share rose by 12.9% to $0.35[99]. Customer Metrics - Active customers increased by 3.8% to 20.756 million, compared to 19.988 million in the prior year[90]. - Net sales per active customer grew by 3.7% to $583, up from $562 in the same period last year[90]. - Autoship customer sales reached $2,562.7 million, a 14.8% increase from $2,232.9 million, representing 82.2% of net sales[90]. - Active customers increased by 3.8% to 20.8 million, contributing to net sales growth of 8.3%, reaching $3.1 billion compared to $2.9 billion in the prior year[119]. - Net sales per active customer rose by $21 to $583, driven by growth in healthcare, specialty, and hardgoods businesses[119]. Expenses and Costs - Cost of goods sold increased by 8.3% to $2.2 billion, consistent with the increase in net sales, reflecting higher product and shipping supply costs[120]. - Gross profit for the period was $923.8 million, an increase of 8.2%, with a gross margin of 29.6%, slightly down from 29.7% in the previous year[121]. - Selling, general and administrative expenses rose by 8.4% to $653.1 million, primarily due to expansion costs in fulfillment operations and pharmacy networks[122]. - Advertising and marketing expenses increased by 3.7% to $193.8 million, with expectations for these expenses to be approximately 6.7 to 6.8 percent of net sales for the fiscal year[124]. Cash Flow and Investments - Free cash flow decreased to $48.7 million, down 7.4% from $52.6 million in the previous year[90]. - Free cash flow for the thirteen weeks ended May 4, 2025, was $48.7 million, a decrease from $52.6 million for the same period in 2024, with net cash provided by operating activities at $86.4 million[104]. - Net cash provided by operating activities for the thirteen weeks ended May 4, 2025, was $86.4 million, an increase from $81.9 million for the same period in 2024[129][130]. - Net cash used in investing activities was $41.2 million for the thirteen weeks ended May 4, 2025, primarily for capital expenditures of $37.7 million related to expanding operations[132]. - Net cash used in financing activities was $25.0 million for the thirteen weeks ended May 4, 2025, mainly for repurchases of common stock totaling $23.1 million[134]. Financial Position - Cash and cash equivalents totaled $616.4 million as of May 4, 2025, reflecting an increase of $20.6 million from February 2, 2025[127]. - The company has a senior secured asset-based credit facility with a borrowing capacity of $782.8 million as of May 4, 2025, with no outstanding borrowings[136]. - The Board of Directors authorized a share repurchase program of up to $500 million, with $383.5 million remaining available for repurchase as of May 4, 2025[137][138]. - The ABL Credit Facility matures on April 1, 2030, and allows for incremental commitments of up to $250 million[136]. Operational Adjustments - The company continues to adapt its logistics and supply chain processes in response to evolving macroeconomic conditions, including inflation and high interest rates[86]. - The company is modernizing its finance information technology architecture to enhance scalability and analytical capabilities, expected to conclude by the end of the 2025 fiscal year[123]. - Non-cash adjustments in operating activities included share-based compensation expense of $74.5 million and depreciation and amortization expense of $30.0 million for the thirteen weeks ended May 4, 2025[130]. - Working capital changes for the thirteen weeks ended May 4, 2025, resulted in a cash decrease of $88.8 million, primarily due to a decrease in accrued expenses and an increase in accounts receivable[130]. Previous Year Comparison - The company reported a net income of $62.4 million for the thirteen weeks ended May 4, 2025, compared to $66.9 million for the same period in 2024[130][131]. - Interest income decreased by $11.3 million to $3.2 million, attributed to lower income from marketable securities[125]. - The company experienced a significant cash inflow of $505.7 million from investing activities for the thirteen weeks ended April 28, 2024, primarily from the maturities of marketable securities[133].

Financial Performance - Net sales for Q1 2025 reached $3.12 billion, an increase of 8.3% year-over-year[7] - Gross margin was 29.6%, a decrease of 10 basis points year-over-year[7] - Net income amounted to $62.4 million, with a net margin of 2.0%, down 30 basis points year-over-year[7] - Adjusted EBITDA was $192.7 million, reflecting an increase of $29.8 million year-over-year, with an adjusted EBITDA margin of 6.2%, up 50 basis points[7] - Net sales for the 13 weeks ended May 4, 2025, were $3,116.0 million, an increase of 8.3% compared to $2,877.7 million for the same period in 2024[18] - Net income decreased to $62.4 million, down 6.7% from $66.9 million year-over-year[18] - Adjusted EBITDA rose to $192.7 million, reflecting an 18.3% increase from $162.9 million in the prior year[18] - Adjusted net income increased to $148.9 million, an 8.6% rise from $137.1 million year-over-year[27] Customer Metrics - Active customer growth was reported, contributing to the overall sales momentum[4] - Active customers increased by 3.8% to 20.756 million, up from 19.988 million in the previous year[18] - Autoship customer sales reached $2,562.7 million, a 14.8% increase compared to $2,232.9 million in the previous year[18] Cash Flow and Liquidity - Cash and cash equivalents increased to $616.4 million from $595.8 million as of February 2, 2025[12] - Cash and cash equivalents at the end of the period were $616.4 million, down from $1,134.6 million at the end of the same period last year[16] - Free cash flow for the period was $48.7 million, a decrease of 7.4% from $52.6 million in the same quarter last year[18] - Free cash flow for the 13 weeks ended May 4, 2025, was $48.7 million, down from $52.6 million for the same period in 2024, reflecting a decrease of approximately 7.4%[31] - Net cash provided by operating activities was $86.4 million, representing a 5.5% increase from $81.9 million in the prior year[18] - Net cash provided by operating activities increased to $86.4 million for the 13 weeks ended May 4, 2025, compared to $81.9 million for the same period in 2024, representing an increase of about 5.5%[31] Assets and Liabilities - Total assets rose to $3,060.3 million, compared to $3,014.5 million as of February 2, 2025[12] - Total liabilities decreased slightly to $2,684.7 million from $2,753.0 million[12] Strategic Initiatives - The company aims to continue expanding its market share in the pet category, leveraging its value proposition[4] - The company plans to introduce new products and services while expanding into new jurisdictions[9] - The company is investing in new fulfillment centers, pharmacy facilities, veterinary clinics, and customer service infrastructure, which may affect future cash flow[31] - Capital expenditures for the 13 weeks ended May 4, 2025, were $37.7 million, up from $29.3 million in the same period in 2024, indicating an increase of approximately 28.5%[31] - The company anticipates that free cash flow may be impacted by the timing of capital investments, fluctuations in growth, and changes in working capital[31]

Core Viewpoint - Chewy, Inc. is positioned for growth in its topline and margin expansion due to its extensive range of over 130,000 pet products and services offered on its online platform [1] Company Overview - Chewy, Inc. operates as an online platform specializing in pet products, supplies, and prescriptions [1] - The company offers a diverse selection of more than 130,000 products and services [1] Growth Potential - The anticipated growth in Chewy's topline is driven by the expanding market for pet products and services [1] - Margin expansion is also expected as the company continues to leverage its extensive product offerings [1]