Chewy (CHWY, Financial) experienced a tug-of-war between buyers and sellers following its positive Q4 report and Q1 guidance. The company achieved its fifth consecutive quarter of exceeding earnings expectations, driven by significant top-line growth. Chewy projects Q1 earnings and revenue to surpass consensus estimates.
- In Q4, Chewy's revenue grew by 15% year-over-year to $3.25 billion, exceeding its forecast of $3.18-3.20 billion. This marks a return to double-digit growth, supported by increased active customer numbers, a rebound in hard goods, and strong Autoship customer loyalty.
- Autoship, a key revenue stream for Chewy, accounted for 80.6% of total sales, with a 21% year-over-year growth, outpacing overall revenue growth.
- Active customer growth contributed to surpassing revenue estimates, with Chewy ending FY25 with 20.5 million active customers, marking its first year of year-over-year growth since FY23. CEO Sumit Singh expects continued growth in 2025.
- Chewy's adjusted EPS of $0.28 was its best since early FY25, driven by high-end adjusted EBITDA margins of 4.6-4.8%. The sponsored ads business, contributing around 1% of net sales, plays a significant role in maintaining healthy margins.
- For Q1, Chewy targets adjusted EPS of $0.30-0.35 and revenue of $3.06-3.09 billion. The company expects sales growth from active customer increases and minimal price inflation, with margins following last year's pattern of modest sequential declines due to seasonality and investment timing.
Despite muted stock price action today, Chewy's Q4 report highlights its ability to achieve substantial growth amid economic challenges, thanks to the price inelasticity of pet food. While demand for hard goods may remain subdued, Chewy's strong performance and margin improvements position it well for future growth.
