Core Insights - Chewy reported quarterly earnings of $0.32 per share, exceeding the Zacks Consensus Estimate of $0.30 per share, and showing an increase from $0.20 per share a year ago, resulting in an earnings surprise of +6.67% [1] - The company achieved revenues of $3.12 billion for the quarter ended October 2025, surpassing the Zacks Consensus Estimate by 0.59% and up from $2.88 billion year-over-year [2] - Chewy has outperformed consensus EPS estimates three times over the last four quarters and has topped revenue estimates four times in the same period [2] Future Outlook - The sustainability of Chewy's stock price movement will largely depend on management's commentary during the earnings call and future earnings expectations [3] - Current consensus EPS estimate for the upcoming quarter is $0.29 on revenues of $3.28 billion, and for the current fiscal year, it is $1.27 on revenues of $12.59 billion [7] - The Zacks Rank for Chewy is currently 3 (Hold), indicating expected performance in line with the market in the near future [6] Industry Context - The Internet - Commerce industry, to which Chewy belongs, is currently ranked in the top 39% of over 250 Zacks industries, suggesting a favorable outlook compared to lower-ranked industries [8] - Empirical research indicates a strong correlation between near-term stock movements and trends in earnings estimate revisions, which can be tracked by investors [5]

Financial Data and Key Metrics Changes - Q3 net sales grew over 8% year-over-year to $3.12 billion, primarily driven by unit volume growth, not price [7][12] - Gross margin expanded roughly 50 basis points year-over-year to 29.8%, driven by sponsored ads growth and a strong auto ship baseline [9][12] - Adjusted EBITDA reached $181 million, up 30% year-over-year, with an adjusted EBITDA margin of 5.8%, representing a 100 basis points year-over-year expansion [9][14] - Free cash flow for the quarter was approximately $176 million, up nearly $70 million sequentially [9][14] Business Line Data and Key Metrics Changes - Autoship customer sales increased 13.6% to $2.61 billion, outpacing total company growth [7] - Active customers reached 21.2 million, up nearly 5% year-over-year, with improvements across every part of the active customer funnel [8] - Net sales per active customer reached $595, up nearly 5% year-over-year [8] Market Data and Key Metrics Changes - The company continues to outperform the pet category and expand market share, with profits growing faster than sales [6] - Marketing efficiency continues to strengthen, attracting high-quality customers and improving LTV to CAC ratios [8] Company Strategy and Development Direction - The company aims for a long-term objective of a 10% adjusted EBITDA margin, with ongoing investments in automation and health services [6][21] - Chewy Vet Care (CVC) is driving strong utilization and customer loyalty through high-margin services, with plans to open additional clinics [10] - The acquisition of Smart Equine is expected to enhance Chewy's premium health and nutraceutical assortment [10][11] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the ability to deliver consistent, durable EBITDA expansion over the next several years [20][21] - The company expects to continue taking market share while maintaining disciplined, customer-centric growth [20][21] - For 2026, management anticipates a structural unit volume growth year, with pricing benefits expected to be slightly larger than in 2025 [43][45] Other Important Information - The company repurchased approximately 1.5 million shares for $55 million during the quarter [15] - The company ended Q3 with approximately $675 million in cash and cash equivalents, remaining debt-free [15] Q&A Session Summary Question: How does the team continue to evolve learnings about the lifetime value of customers? - Management discussed the strong intersection between Autoship, Chewy Plus, and CVC, emphasizing their complementary nature in driving customer retention and profitability [26][27] Question: Can you talk about the drivers of active customer growth? - Active customer growth was driven by improvements in customer acquisition and retention, with better experiences on platforms leading to higher conversion rates [33][34] Question: What is the preliminary outlook for demand in 2026? - Management views 2026 similarly to 2025, expecting low single-digit growth in the industry and a focus on share-taking [43][44] Question: Can you discuss trends in gross margins and expectations for 2026? - Management expects continued gross margin expansion driven by various levers, including premium category mixes and the health ecosystem [61][62] Question: How has the Chewy Plus program performed after the price increase? - Conversion rates have remained strong post-price increase, and the program is expected to deliver gross margins in line with the overall enterprise [70][71]

Financial Data and Key Metrics Changes - Q3 net sales grew over 8% year-over-year to $3.12 billion, primarily driven by unit volume growth, not price [7][12] - Gross margin expanded roughly 50 basis points year-over-year to 29.8% [9][12] - Adjusted EBITDA reached $181 million, up 30% year-over-year, with an adjusted EBITDA margin of 5.8%, representing a 100 basis points year-over-year expansion [9][14] - Free cash flow for the quarter was approximately $176 million, up nearly $70 million sequentially [9][14] Business Line Data and Key Metrics Changes - Autoship customer sales increased 13.6% to $2.61 billion, outpacing total company growth [7] - Active customers reached 21.2 million, up nearly 5% year-over-year, with improvements across every part of the active customer funnel [8] - Net sales per active customer reached $595, up nearly 5% year-over-year [8] Market Data and Key Metrics Changes - The company continues to outperform the pet category and expand market share, with profits growing faster than sales [6] - Marketing efficiency continues to strengthen, attracting high-quality customers and improving LTV to CAC ratios [8] Company Strategy and Development Direction - The company aims for a long-term objective of a 10% adjusted EBITDA margin, with ongoing investments in automation and health services [6][21] - Chewy Vet Care (CVC) is driving strong utilization and customer loyalty through high-margin services, with plans to open 8-10 locations this fiscal year [10] - The acquisition of Smart Equine is expected to enhance Chewy's premium health and nutraceutical assortment and strengthen its position in high-value wellness categories [10][11] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's ability to deliver consistent, durable EBITDA expansion over the next several years, with a focus on disciplined, customer-centric growth [20][21] - The company expects 2026 to be characterized by structural unit volume growth, with potential pricing benefits slightly larger than in 2025 [43][45] Other Important Information - The company repurchased approximately 1.5 million shares for $55 million during the quarter [15] - The company ended Q3 with approximately $675 million in cash and cash equivalents, remaining debt-free [15] Q&A Session Summary Question: How does the team continue to evolve learnings about the lifetime value of customers? - Management discussed the strong intersection between Autoship, Chewy Plus, and CVC, emphasizing their complementary nature in driving customer retention and profitability [26][27] Question: Can you talk about the drivers of active customer growth? - Management noted that active customer growth was driven by improvements in customer acquisition and retention, with higher direct traffic and better conversion rates [33][34] Question: What is the outlook for demand in 2026? - Management views 2026 similarly to 2025, expecting low single-digit industry growth and stable pricing dynamics [43][44] Question: How should we think about gross margins going forward? - Management indicated that gross margin expansion opportunities remain, with several levers expected to contribute to growth [61][62] Question: What changes have been observed in retention after raising the Chewy Plus fee? - Management reported that conversion has remained strong post-price increase, with paid Chewy Plus members delivering gross margins in line with the overall enterprise [70][71]

Financial Data and Key Metrics Changes - Q3 net sales grew over 8% year-over-year to $3.12 billion, driven primarily by unit volume growth rather than price increases [5][10] - Gross margin expanded approximately 50 basis points year-over-year to 29.8%, supported by growth in sponsored ads and a favorable category mix [7][10] - Adjusted EBITDA reached $181 million, up 30% year-over-year, with an adjusted EBITDA margin of 5.8%, representing a 100 basis points year-over-year expansion [7][11] - Free cash flow for the quarter was approximately $176 million, up nearly $70 million sequentially [7][11] Business Line Data and Key Metrics Changes - Autoship customer sales increased 13.6% year-over-year to $2.61 billion, outpacing total company growth [5] - Active customers reached 21.2 million, up nearly 5% year-over-year, with improvements across the customer funnel [6] - Net sales per active customer reached $595, up nearly 5% year-over-year [6] Market Data and Key Metrics Changes - The company continues to outperform the pet category and expand market share, with profits growing faster than sales [5] - Marketing efficiency has improved, with enhanced mobile app functionality lifting direct traffic and increasing app customers and orders by approximately 15% year-over-year [6] Company Strategy and Development Direction - The company aims for a long-term objective of a 10% adjusted EBITDA margin, with ongoing investments in automation and health services [5][19] - Chewy's health offerings, including Chewy Vet Care, are driving strong utilization and customer loyalty, with plans to open additional clinics [8] - The acquisition of Smart Equine is expected to enhance Chewy's premium health and nutraceutical assortment, strengthening its position in high-value wellness categories [9] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's ability to deliver consistent, durable EBITDA expansion over the next several years, supported by a unique operating model [18] - The company anticipates a structural unit volume growth year in 2026, with expectations for pricing improvements to be slightly larger than in 2025 [40][42] - Management noted that the active customer growth reflects both improved acquisition and retention strategies, with a focus on deepening customer engagement [32] Other Important Information - The company repurchased approximately 1.5 million shares for $55 million during the quarter, ending with $304.9 million of remaining authorization under its repurchase program [13] - The company remains debt-free with total liquidity of approximately $1.5 billion [13] Q&A Session Summary Question: How does the team continue to evolve learnings about customer lifetime value? - Management discussed the strong intersection between Autoship, Chewy Plus, and Chewy Vet Care, emphasizing their complementary nature in driving customer retention and profitability [22][24] Question: What are the drivers behind the strong active customer growth? - Management attributed the growth to higher direct traffic, increased engagement in the mobile app, and improved conversion rates across platforms [30][32] Question: What is the outlook for demand in 2026? - Management expects 2026 to resemble 2025, with low single-digit industry growth and a focus on share-taking strategies [40] Question: How should gross margins be viewed going forward? - Management indicated that approximately half of the long-term EBITDA margin expansion will come from gross margin improvements, with several levers available for growth [58] Question: What changes have been observed in retention after raising the Chewy Plus fee? - Management reported that conversion rates remained strong after the price increase, exceeding internal expectations [65]

Core Viewpoint - Chewy, an online pet retailer, reported third-quarter earnings that exceeded analyst expectations in both revenue and adjusted earnings per share [1] Financial Performance - Revenue for the third quarter was $3.12 billion, surpassing analyst expectations of $3.11 billion [1] - Adjusted earnings per share were $0.32, also exceeding the expected $0.30 [1] Future Guidance - The company projects net sales for fiscal year 2025 to be between $12.58 billion and $12.6 billion, an increase from the previous estimate of $12.5 billion to $12.6 billion [1] - However, the new guidance remains below analyst expectations of $12.65 billion [1]

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Financial Highlights - Net sequential active customer additions reached 250,000[8] - The company returned $55 million to shareholders through share repurchases in Q3 2025[8] - Net sales per active customer were $595[10] - Autoship customer sales accounted for 84% of net sales[10] - Q3 2025 Adjusted EBITDA was $181 million, representing a 58% margin[10] Revenue Performance - Full year net sales reached $12584 billion, a 64% year-over-year growth[12] - Q3 2025 net sales were $3117 billion, an 83% year-over-year growth[14] - Full year Autoship customer sales reached $10371 billion, a 106% year-over-year growth[16] - Q3 2025 Autoship customer sales were $2614 billion, a 136% year-over-year growth[18] Profitability and Cash Flow - Full year gross profit was $3720 billion, with a gross margin of 296%[24] - Full year Adjusted EBITDA reached $682 million, with a margin of 54%[28] - Full year Free Cash Flow reached $488 million[33] - Q3 FY25 cash balance was $675 million[34] Guidance - The company projects fiscal year 2025 net sales to be between $1258 billion and $1260 billion[37] - The company projects fiscal year 2025 Adjusted EBITDA margin to be between 56% and 57%[37] - The company projects fiscal fourth quarter 2025 net sales to be between $324 billion and $326 billion[37] - The company projects fiscal fourth quarter 2025 Adjusted Diluted EPS to be between $024 and $027[37]

Chewy logged higher profit and revenue in its latest quarter as it continued to grow its market share. ...

Business 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 [100]. - The company monitors macroeconomic conditions, including inflation and interest rates, which impact consumer behavior and business operations [101]. - Chewy's fiscal year 2025 ends on February 1, 2026, and is a 52-week year, while fiscal year 2024 was a 53-week year [103]. Customer Metrics - Active customers have increased over time, indicating growth in customer acquisition and retention [104]. - Active customers increased by 4.9% to 21.155 million compared to 20.160 million in the same quarter last year [125]. - Active customers grew by 4.9% to 21.2 million in the thirteen weeks ended November 2, 2025, contributing to higher net sales per active customer, which increased by $28 or 4.9% to $595 [132]. Sales and Revenue - Net sales for the 13 weeks ended November 2, 2025, reached $3,116.6 million, an increase of 8.3% compared to $2,877.6 million for the same period in 2024 [125]. - For the thirty-nine weeks ended November 2, 2025, net sales increased by $722.9 million, or 8.4%, to $9.3 billion compared to $8.6 billion in the prior year [133]. - Net sales for the thirteen weeks ended November 2, 2025 increased by $239.0 million, or 8.3%, to $3.1 billion compared to $2.9 billion for the same period in 2024, driven by a 13.6% increase in autoship customer sales to $2.6 billion [132]. Profitability - Adjusted EBITDA for the 13 weeks ended November 2, 2025, was $180.9 million, reflecting a 30.9% increase from $138.2 million in the prior year [127]. - Adjusted net income for the 13 weeks ended November 2, 2025, was $135.7 million, a 59.6% increase from $85.0 million in the same period of 2024 [128]. - Net income for the thirteen weeks ended November 2, 2025 was $59.2 million, compared to $3.9 million in the same period of 2024, indicating significant year-over-year growth [131]. - Net margin for the 13 weeks ended November 2, 2025, was 1.9%, up from 0.1% in the prior year [127]. Expenses - Cost of goods sold includes various expenses related to inventory and shipping, impacting overall profitability [111]. - Selling, general, and administrative expenses encompass fulfillment costs, payroll, and other corporate expenses, which are critical for operational efficiency [112]. - Selling, general and administrative expenses for the thirteen weeks ended November 2, 2025 increased by $38.6 million, or 6.2%, to $665.1 million, representing 21.3% of net sales, a decrease of 50 basis points from the previous year [138]. - Cost of goods sold for the thirteen weeks ended November 2, 2025 increased by $154.7 million, or 7.6%, to $2.2 billion, primarily due to higher sales and increased shipping costs [134]. Cash Flow and Investments - Free cash flow for the 13 weeks ended November 2, 2025, was $175.8 million, up 15.8% from $151.8 million in the previous year [129]. - Net cash provided by operating activities for the 39 weeks ended November 2, 2025, was $428.2 million, a 10.1% increase from $388.8 million in 2024 [129]. - Net cash used in investing activities was $127.9 million for the thirty-nine weeks ended November 2, 2025, primarily for capital expenditures related to expanding operations [156]. - Net cash used in financing activities was $221.0 million for the thirty-nine weeks ended November 2, 2025, primarily for repurchases of common stock [158]. Share Repurchase and Financing - The company authorized a share repurchase program of up to $500 million, with $304.9 million remaining available for repurchases as of November 2, 2025 [161][165]. - The ABL Credit Facility provides for non-amortizing revolving loans of up to $800 million, with a borrowing capacity of $783.1 million as of November 2, 2025 [160]. Tax and Adjustments - The effective tax rate for the thirty-nine weeks ended November 2, 2025 was lower than the U.S. federal statutory rate due to research and development credits and tax benefits from share-based compensation [147]. - The company incurred $355.2 million in non-cash adjustments, including share-based compensation and depreciation, for the thirty-nine weeks ended November 2, 2025 [153]. Technology and Operations - The company is modernizing its finance information technology architecture, aiming for completion by the end of fiscal year 2026, which will enhance data visibility and analytical capabilities without requiring significant capital investment [140].

Core Insights - The pet-food retailer has reported better-than-expected earnings and revenue for the third quarter [1] Financial Performance - The company achieved earnings that surpassed market expectations, indicating strong financial health [1] - Revenue figures for the third quarter also exceeded forecasts, reflecting robust sales performance [1]