Chewy Inc ((CHWY)) has held its Q4 earnings call. Read on for the main highlights of the call.
Chewy Inc. has reported a robust performance for fiscal year 2024, as reflected in its recent earnings call. The company showcased significant growth in key areas such as revenue, customer base, and profitability. Innovations and expansions, particularly in the Autoship program and Vet Care Clinics, were highlighted as major contributors to this success. Despite these achievements, there are concerns regarding the minimal impact of pricing on growth and the reliance on external factors for the growth of hard goods.
Strong Revenue Growth
Chewy reported a remarkable increase in its fourth-quarter net sales, which rose by approximately 15% year-over-year to $3.25 billion. This contributed to full-year net sales of $11.86 billion, marking a 6% year-over-year growth. This strong revenue performance underscores Chewy’s ability to capture market share and drive sales.
Autoship Program Success
The Autoship program has been a significant driver of Chewy’s sales, representing 80.6% of Q4 net sales. The program’s sales increased by 21% in the fourth quarter and nearly 11% for the full year 2024. This reflects the program’s growing popularity and its role in ensuring customer retention and consistent revenue streams.
Active Customer Growth
Chewy ended fiscal year 2024 with 20.5 million active customers, marking year-over-year growth for the first time in eight quarters. This resurgence in customer growth highlights the effectiveness of Chewy’s strategies in attracting and retaining customers.
Adjusted EBITDA Margin Improvement
The company’s adjusted EBITDA margin for fiscal year 2024 reached 4.8%, reflecting a year-over-year expansion of approximately 150 basis points. This improvement indicates Chewy’s enhanced operational efficiency and profitability.
Record Free Cash Flow
Chewy generated a record $452.5 million of free cash flow in fiscal year 2024, converting approximately 80% of adjusted EBITDA to free cash flow. This strong cash flow performance provides Chewy with the financial flexibility to invest in future growth initiatives.
Sponsored Ads Business Growth
Chewy’s sponsored ads business scaled to approximately 1% of net sales for the full year 2024, contributing to year-over-year gross margin improvement. This growth in the ads business highlights Chewy’s ability to diversify its revenue streams.
Chewy Vet Care Clinics Expansion
The company successfully opened eight Chewy Vet Care Clinics, reaching the upper end of its target range. Plans are in place to open eight to 10 new clinics in fiscal year 2025, underscoring Chewy’s commitment to expanding its service offerings.
Minimal Pricing Impact Expected
Chewy’s guidance for 2025 anticipates minimal price inflation, which may impact revenue growth potential. This cautious outlook reflects the company’s awareness of market conditions and its strategic pricing approach.
Hard Goods Growth Dependency
While hard goods outperformed consumables in Q4, their growth is dependent on factors such as new pet adoptions and market trends. This reliance on external factors poses a challenge for sustained growth in this category.
Forward-Looking Guidance
Chewy’s forward-looking guidance for 2025 projects continued growth, with net sales expected to range between $12.3 billion and $12.45 billion, reflecting a 6% to 7% year-over-year increase. The company also anticipates further adjusted EBITDA margin expansion to between 5.4% and 5.7%, indicating ongoing improvements in profitability.
In summary, Chewy Inc.’s earnings call paints a positive picture of the company’s performance in fiscal year 2024, with strong growth across various metrics. The company’s strategic initiatives, such as the Autoship program and Vet Care Clinics, have been instrumental in driving success. Looking ahead, Chewy remains optimistic about its growth prospects, although it acknowledges potential challenges related to pricing and external dependencies. Overall, the call reflects a confident outlook for Chewy’s future.