Chewy(US:CHWY)2025-06-11 13:02Financial 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]