- Net Sales: Increased by approximately 5% to $2.88 billion.
- Autoship Customer Sales: Reached $2.3 billion, representing 80% of Q3 net sales and a year-over-year increase of approximately 9%.
- Active Customers: Ended the quarter with approximately 20.2 million, up 160,000 sequentially.
- Adjusted EBITDA: $138 million, representing a 4.8% margin and approximately 180 basis points of margin expansion year-over-year.
- Gross Margin: 29.3%, representing 80 basis points of margin expansion year over year.
- SG&A Expenses: $546 million, or 19% of net sales, representing 90 basis points of improvement year-over-year.
- Advertising and Marketing Expense: $191.8 million, or 6.7% of net sales.
- Adjusted Net Income: $84.9 million, representing a 34% increase year over year.
- Net Income: $3.9 million, translating into $0.01 earnings per share.
- Free Cash Flow: $151.8 million, with $183.5 million of net cash provided by operating activities and $31.7 million of capital expenditures.
- Share Repurchase: Repurchased approximately 10.2 million shares for $300 million and an additional 1.6 million shares for $42.4 million.
- Cash and Equivalents: Approximately $508 million, with an overall liquidity position of approximately $1.3 billion.
- Q4 Net Sales Guidance: Between $3.18 billion and $3.20 billion, approximately 13% year-over-year growth.
- Full-Year 2024 Net Sales Outlook: Between $11.79 billion and $11.81 billion, approximately 6% year-over-year growth.
- Full-Year 2024 Adjusted EBITDA Margin Guidance: Raised to a range of 4.6% to 4.8%.
Release Date: December 04, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Chewy Inc (CHWY, Financial) reported a 5% increase in Q3 net sales to $2.88 billion, exceeding the high end of their guidance range.
- The autoship program continues to drive customer loyalty, with autoship customer sales reaching $2.3 billion, representing 80% of Q3 net sales and a 9% year-over-year increase.
- Chewy Inc (CHWY) achieved a sequential increase in active customers, ending the quarter with approximately 20.2 million active customers, up 160,000 sequentially.
- The company reported $138 million of adjusted EBITDA in Q3, representing a 4.8% margin and approximately 180 basis points of margin expansion year-over-year.
- Chewy Inc (CHWY) continues to generate robust free cash flow, reporting $151.8 million in Q3, demonstrating their ability to invest in growth initiatives and return capital to shareholders.
Negative Points
- Despite growth, the Canadian business remains relatively small and immaterial to the overall scale of Chewy Inc (CHWY).
- The company anticipates a sequential decline in Q4 adjusted EBITDA margin due to typical seasonality and the timing of certain investments.
- Chewy Inc (CHWY) expects advertising and marketing expenses to be at the high end of their 6% to 7% of net sales range for the full year, indicating increased spending.
- The company is still in the early stages of its Chewy Plus membership program, with contribution to the overall enterprise remaining immaterial.
- Chewy Inc (CHWY) faces challenges in fully benefiting from improvements in hard goods performance until there is a more fulsome recovery in discretionary purchasing.
Q & A Highlights
Q: Can you elaborate on the factors driving active customer growth and expectations for 2025?
A: Sumit Singh, CEO, explained that the growth is largely due to Chewy's own efforts, such as enhancing onsite and mobile experiences, expanding assortment, and improving CRM strategies. The industry is normalizing, which is a stabilizing factor. For 2025, Chewy plans to continue leveraging these strategies to drive growth, focusing on connecting marketing funnels to expanded audiences and improving conversion rates.
Q: Could you provide more details on the increased advertising and marketing spend in Q4?
A: David Reeder, CFO, noted that the increase is due to the holiday season and the timing of certain campaigns. Chewy sees an opportunity to invest in the fourth quarter to build on industry improvements and continue growth into 2025. The full-year advertising and marketing expense is expected to be at the high end of the 6% to 7% range of net sales.
Q: What have you learned from the vet clinics, and how does this inform your 2025 expansion plans?
A: David Reeder, CFO, stated that the vet clinics have shown positive trends, such as high operational utilization and customer engagement. More than half of new customers from vet clinics also shop on Chewy.com. The company is encouraged by these results and plans to continue expanding in this space, tapping into the $25 billion vet services market.
Q: How is the mobile app performing, and what impact does it have on the P&L?
A: Sumit Singh, CEO, mentioned that the app is a priority, with efforts to increase its share of revenue to market standard rates of about 40-45%. The app provides a closed-loop ecosystem, allowing for better customer engagement and higher autoship adoption rates. The benefits of the app will be sized out in 2025.
Q: What are the trends in pricing, and how do you see this evolving in 2025?
A: David Reeder, CFO, indicated that there was no material impact from pricing in Q3, and similar trends are expected in Q4. The pricing environment remains rational, with no significant inflation or deflation expected. For 2025, Chewy anticipates a continuation of these trends, with structural growth being a key driver.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
