Chewy(US:CHWY)2025-09-10 11:03markdown [Executive Summary & Business Overview](index=1&type=section&id=Executive%20Summary%20%26%20Business%20Overview) [Q2 FY2025 Financial Highlights](index=1&type=section&id=Q2%20FY2025%20Financial%20Highlights) Chewy reported strong Q2 FY2025 results, with net sales exceeding guidance and significant growth in Autoship customer sales and active customers. The company also saw improvements in gross margin and adjusted EBITDA margin Key Operating Metrics | Metric | Q2 FY2025 (13 Weeks) | Q2 FY2024 (13 Weeks) | YoY Change | | :-------------------------------- | :------------------- | :------------------- | :--------- | | Net Sales | $3.10 billion | $2.86 billion | +8.6% | | Autoship Customer Net Sales | $2.58 billion | $2.24 billion | +14.9% | | Autoship % of Total Net Sales | 83.0% | 78.4% | +4.6 pp | | Active Customers | 20.91 million | 20.00 million | +4.5% | | Net Sales Per Active Customer (NSPAC) | $591 | $565 | +4.6% | GAAP Profitability Metrics | Metric | Q2 FY2025 (13 Weeks) | Q2 FY2024 (13 Weeks) | YoY Change | | :-------------------------------- | :------------------- | :------------------- | :--------- | | Gross Margin | 30.4% | 29.5% | +90 bps | | Net Income | $62.0 million | $299.1 million | -79.3% | | Net Margin | 2.0% | 10.5% | -850 bps | | Basic EPS | $0.15 | $0.70 | -78.6% | | Diluted EPS | $0.14 | $0.68 | -79.4% | Adjusted Profitability Metrics | Metric | Q2 FY2025 (13 Weeks) | Q2 FY2024 (13 Weeks) | YoY Change | | :-------------------------------- | :------------------- | :------------------- | :--------- | | Adjusted EBITDA | $183.3 million | $144.9 million | +26.5% | | Adjusted EBITDA Margin | 5.9% | 5.1% | +80 bps | | Adjusted Net Income | $141.1 million | $104.7 million | +34.8% | | Adjusted Basic EPS | $0.34 | $0.24 | +41.7% | | Adjusted Diluted EPS | $0.33 | $0.24 | +37.5% | [About Chewy](index=1&type=section&id=About%20Chewy) Chewy's mission is to be the most trusted and convenient destination for pet parents, offering a broad selection of high-quality products and services, including prescriptions, from numerous brands and private labels, delivered with exceptional customer care - Mission: To be the most trusted and convenient destination for pet parents and partners everywhere[5](index=5&type=chunk) - Offerings: Approximately **130,000 products and services** from around **3,200 brands**, including private brands, available through websites and mobile applications[5](index=5&type=chunk) [Forward-Looking Statements & Risks](index=2&type=section&id=Forward-Looking%20Statements%20%26%20Risks) [Forward-Looking Statements Disclaimer](index=2&type=section&id=Forward-Looking%20Statements%20Disclaimer) This section contains a standard disclaimer regarding forward-looking statements, indicating that actual results may differ materially due to substantial risks and uncertainties. Investors are cautioned not to place undue reliance on these statements, which are based on current assumptions and projections - Forward-looking statements are not guarantees of performance or results, and actual outcomes could differ materially due to various factors[10](index=10&type=chunk) - Key risk factors include the ability to sustain growth, manage macroeconomic environments, acquire and retain customers, manage supply chain disruptions, maintain technology infrastructure, ensure cybersecurity, and comply with regulations[9](index=9&type=chunk) [Financial Statements](index=3&type=section&id=Financial%20Statements) [Condensed Consolidated Balance Sheets](index=3&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) The balance sheet provides a snapshot of Chewy's financial position, showing an increase in total assets and stockholders' equity, while total liabilities slightly decreased as of August 3, 2025, compared to February 2, 2025 Summary Balance Sheet | Metric (in millions) | As of August 3, 2025 | As of February 2, 2025 | | :------------------- | :------------------- | :--------------------- | | Total Assets | $3,118.8 | $3,014.5 | | Total Liabilities | $2,728.9 | $2,753.0 | | Total Stockholders' Equity | $389.9 | $261.5 | Current Assets | Current Assets (in millions) | As of August 3, 2025 | As of February 2, 2025 | | :--------------------------- | :------------------- | :--------------------- | | Cash and cash equivalents | $591.8 | $595.8 | | Accounts receivable | $221.2 | $169.0 | | Inventories | $874.6 | $836.7 | | Prepaid expenses and other current assets | $94.3 | $60.9 | | Total current assets | $1,781.9 | $1,662.4 | Current Liabilities | Current Liabilities (in millions) | As of August 3, 2025 | As of February 2, 2025 | | :-------------------------------- | :------------------- | :--------------------- | | Trade accounts payable | $1,226.0 | $1,175.9 | | Accrued expenses and other current liabilities | $967.2 | $1,030.8 | | Total current liabilities | $2,193.2 | $2,206.7 | [Condensed Consolidated Statements of Operations and Comprehensive Income](index=4&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations%20and%20Comprehensive%20Income) Chewy's statements of operations show continued net sales growth for both the 13 and 26-week periods ended August 3, 2025. While gross profit increased, net income significantly decreased year-over-year, primarily due to a large deferred tax benefit in the prior year 13 Weeks Ended Statements of Operations | Metric (in millions) | 13 Weeks Ended Aug 3, 2025 | 13 Weeks Ended Jul 28, 2024 | YoY Change | | :------------------- | :------------------------- | :------------------------- | :--------- | | Net sales | $3,104.2 | $2,858.6 | +8.6% | | Cost of goods sold | $2,162.0 | $2,014.8 | +7.3% | | Gross profit | $942.2 | $843.8 | +11.7% | | Income from operations | $69.7 | $32.1 | +117.1% | | Net income | $62.0 | $299.1 | -79.3% | | Basic EPS | $0.15 | $0.70 | -78.6% | | Diluted EPS | $0.14 | $0.68 | -79.4% | 26 Weeks Ended Statements of Operations | Metric (in millions) | 26 Weeks Ended Aug 3, 2025 | 26 Weeks Ended Jul 28, 2024 | YoY Change | | :------------------- | :------------------------- | :------------------------- | :--------- | | Net sales | $6,220.2 | $5,736.3 | +8.4% | | Cost of goods sold | $4,354.2 | $4,038.5 | +7.8% | | Gross profit | $1,866.0 | $1,697.8 | +9.9% | | Income from operations | $146.6 | $96.7 | +51.6% | | Net income | $124.4 | $366.0 | -66.0% | | Basic EPS | $0.30 | $0.85 | -64.7% | | Diluted EPS | $0.29 | $0.84 | -65.5% | - The significant year-over-year decrease in net income and EPS is primarily due to a **$275.7 million tax benefit** from the release of a valuation allowance on deferred tax assets in the prior year (Q2 FY2024)[7](index=7&type=chunk)[14](index=14&type=chunk) [Condensed Consolidated Statements of Cash Flows](index=5&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) For the 26 weeks ended August 3, 2025, Chewy generated increased cash from operating activities, while cash used in investing activities decreased significantly compared to the prior year, which included proceeds from marketable securities. Cash used in financing activities also decreased due to lower common stock repurchases Summary Cash Flow Activities | Cash Flow Activity (in millions) | 26 Weeks Ended Aug 3, 2025 | 26 Weeks Ended Jul 28, 2024 | | :------------------------------- | :------------------------- | :------------------------- | | Net cash provided by operating activities | $220.3 | $205.3 | | Net cash (used in) provided by investing activities | $(70.9) | $477.2 | | Net cash used in financing activities | $(154.0) | $(590.0) | | Net (decrease) increase in cash and cash equivalents | $(4.0) | $92.3 | | Cash and cash equivalents, end of period | $591.8 | $694.5 | - Investing activities in the prior year included **$538.4 million from maturities of marketable securities**, which was not present in the current period[16](index=16&type=chunk) - Repurchases of common stock decreased to **$152.6 million** in the current period from **$532.0 million** in the prior year, contributing to lower cash used in financing activities[16](index=16&type=chunk) [Non-GAAP Financial Measures](index=6&type=section&id=Non-GAAP%20Financial%20Measures) [Definition and Rationale](index=6&type=section&id=Definition%20and%20Rationale) Chewy utilizes several non-GAAP financial measures, including Adjusted EBITDA, Adjusted EBITDA margin, Adjusted net income, Adjusted basic/diluted EPS, and Free cash flow, to provide additional insights into its operating performance, liquidity, and capital allocation decisions, as these metrics are key for management evaluation - Non-GAAP metrics are used by management and the board of directors to evaluate operating performance, generate future operating plans, assess liquidity, and make strategic capital allocation decisions[17](index=17&type=chunk) - Adjustments typically exclude non-cash items (depreciation, amortization, share-based compensation), non-operating items (interest, income tax), and non-recurring items (transaction costs, severance, fair value changes of equity warrants, deferred tax asset valuation allowance releases)[18](index=18&type=chunk)[20](index=20&type=chunk) [Limitations of Non-GAAP Measures](index=6&type=section&id=Limitations%20of%20Non-GAAP%20Measures) Chewy acknowledges that its non-GAAP financial measures have limitations and should not be considered in isolation or as substitutes for GAAP results. These measures may not fully reflect capital expenditure needs, working capital changes, or recurring share-based compensation, and their comparability across companies may vary - Non-GAAP measures do not reflect capital expenditure requirements for asset replacement, interest income/expense, or changes in working capital[21](index=21&type=chunk) - Adjusted EBITDA and adjusted net income exclude share-based compensation, which is a recurring and important part of the company's compensation strategy[21](index=21&type=chunk) - Other companies may calculate these non-GAAP measures differently, reducing their usefulness for comparative analysis[19](index=19&type=chunk) [Key Financial and Operating Data & Reconciliations](index=7&type=section&id=Key%20Financial%20and%20Operating%20Data%20%26%20Reconciliations) [Financial and Operating Metrics](index=7&type=section&id=Financial%20and%20Operating%20Metrics) This section presents a comprehensive table of key financial and operating metrics, including both GAAP and non-GAAP measures, along with operational indicators like active customers and Autoship sales, for the 13 and 26-week periods, highlighting year-over-year changes Key Financial and Operating Data | Metric (in millions, except percentages) | 13 Weeks Ended Aug 3, 2025 | 13 Weeks Ended Jul 28, 2024 | % Change | | :--------------------------------------- | :------------------------- | :------------------------- | :------- | | Net sales | $3,104.2 | $2,858.6 | 8.6% | | Net income | $62.0 | $299.1 | (79.3)% | | Net margin | 2.0% | 10.5% | | | Adjusted EBITDA | $183.3 | $144.9 | 26.5% | | Adjusted EBITDA margin | 5.9% | 5.1% | | | Adjusted net income | $141.1 | $104.7 | 34.8% | | Basic EPS | $0.15 | $0.70 | (78.6)% | | Diluted EPS | $0.14 | $0.68 | (79.4)% | | Adjusted basic EPS | $0.34 | $0.24 | 41.7% | | Adjusted diluted EPS | $0.33 | $0.24 | 37.5% | | Net cash provided by operating activities | $133.9 | $123.4 | 8.5% | | Free cash flow | $105.9 | $91.5 | 15.7% | | Active customers (in thousands) | 20,906 | 20,002 | 4.5% | | Net sales per active customer | $591 | $565 | 4.6% | | Autoship customer sales | $2,576.9 | $2,242.2 | 14.9% | | Autoship customer sales as a percentage of net sales | 83.0% | 78.4% | | [Reconciliation of Non-GAAP Measures](index=7&type=section&id=Reconciliation%20of%20Non-GAAP%20Measures) This section provides detailed reconciliations of GAAP net income and net cash provided by operating activities to their respective non-GAAP counterparts: Adjusted EBITDA, Adjusted Net Income, and Free Cash Flow, for both the 13 and 26-week periods [Adjusted EBITDA Reconciliation](index=7&type=section&id=Adjusted%20EBITDA%20Reconciliation) Adjusted EBITDA Reconciliation (13 Weeks) | (in millions, except percentages) | 13 Weeks Ended Aug 3, 2025 | 13 Weeks Ended Jul 28, 2024 | | :-------------------------------- | :------------------------- | :------------------------- | | Net income | $62.0 | $299.1 | | Add (deduct): | | | | Depreciation and amortization | $32.1 | $28.5 | | Share-based compensation expense and related taxes | $79.1 | $82.5 | | Interest income, net | $(3.9) | $(12.9) | | Change in fair value of equity warrants | — | $(1.2) | | Income tax provision (benefit) | $12.0 | $(252.6) | | Severance costs | — | — | | Transaction related costs | $0.6 | $0.5 | | Other | $1.4 | $1.0 | | **Adjusted EBITDA** | **$183.3** | **$144.9** | | Net sales | $3,104.2 | $2,858.6 | | Net margin | 2.0% | 10.5% | | Adjusted EBITDA margin | 5.9% | 5.1% | [Adjusted Net Income and EPS Reconciliation](index=8&type=section&id=Adjusted%20Net%20Income%20and%20EPS%20Reconciliation) Adjusted Net Income and EPS Reconciliation (13 Weeks) | (in millions, except per share data) | 13 Weeks Ended Aug 3, 2025 | 13 Weeks Ended Jul 28, 2024 | | :----------------------------------- | :------------------------- | :------------------------- | | Net income | $62.0 | $299.1 | | Add (deduct): | | | | Share-based compensation expense and related taxes | $79.1 | $82.5 | | Change in fair value of unvested equity warrants | — | $(1.2) | | Deferred tax asset valuation allowance release | — | $(275.7) | | Severance costs | — | — | | **Adjusted net income** | **$141.1** | **$104.7** | | Basic EPS | $0.15 | $0.70 | | Diluted EPS | $0.14 | $0.68 | | Adjusted basic EPS | $0.34 | $0.24 | | Adjusted diluted EPS | $0.33 | $0.24 | Weighted-Average Common Shares (13 Weeks) | Weighted-average common shares | 13 Weeks Ended Aug 3, 2025 | 13 Weeks Ended Jul 28, 2024 | | :----------------------------- | :------------------------- | :------------------------- | | Basic | 414.2 | 429.4 | | Dilutive share-based awards | 14.2 | 8.5 | | Diluted | 428.4 | 437.9 | [Free Cash Flow Reconciliation](index=8&type=section&id=Free%20Cash%20Flow%20Reconciliation) Free Cash Flow Reconciliation (13 Weeks) | (in millions) | 13 Weeks Ended Aug 3, 2025 | 13 Weeks Ended Jul 28, 2024 | | :------------ | :------------------------- | :------------------------- | | Net cash provided by operating activities | $133.9 | $123.4 | | Deduct: Capital expenditures | $(28.0) | $(31.9) | | **Free Cash Flow** | **$105.9** | **$91.5** | - Free cash flow can be influenced by the timing of capital investments (e.g., new fulfillment centers, veterinary clinics), growth fluctuations affecting working capital, and changes in the cash conversion cycle[26](index=26&type=chunk) [Investor Relations](index=8&type=section&id=Investor%20Relations) [Contact Information](index=8&type=section&id=Contact%20Information) This section provides contact details for investor and media inquiries - Investor Contact: **ir@chewy.com**[27](index=27&type=chunk) - Media Contact: **Diane Pelkey, dpelkey@chewy.com**[27](index=27&type=chunk)