Chewy(US:CHWY)2025-06-11 13:00Financial 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]