Chewy Q1 Sales Rise AutoShip Hits Record

Chewy, Inc. (NYSE:CHWY) reported its Q1 FY2025 earnings on June 11th, delivering net sales of $3.12 billion (+8.3% year-over-year), adjusted EBITDA of $192.7 million (6.2% adjusted EBITDA margin), and 20.8 million active customers (+3.8% year-over-year).

The company exceeded internal forecasts on both growth and profitability, continued disciplined share repurchases, and announced strong incremental progress across core initiatives including AutoShip, Chewy Plus, advertising, and veterinary clinic expansion. The following summary highlights specific drivers of competitive strength, tangible progress on high-impact initiatives, and management's data-rich outlook for the remainder of fiscal 2025.

AutoShip Penetration and Revenue Concentration Reaches New Heights

The AutoShip subscription model accounted for 82.2% of total net sales, up from the mid-60% range at IPO, and AutoShip revenue grew 14.8% year-over-year, significantly outpacing total company growth. The attach-rate acceleration reflects not only higher customer engagement, but also the effectiveness of product ecosystem development and compounding cross-sell into recurring categories.

"First quarter AutoShip customer sales of $2.56 billion represented approximately 82% of Q1 net sales, reaching a record high for the company. Growth in AutoShip customer sales once again outpaced overall top-line growth, increasing by nearly 15% in the first quarter."
— Sumit Singh, CEO

This high and growing AutoShip mix is linked to customer loyalty.

Sustained Market Share Gains in a Stable Industry Environment

The overall U.S. pet industry is currently expanding at an annual rate of roughly 3%-4%, with online purchasing penetration estimated in the low-30% range. Management’s market sizing implies Chewy is now capturing more than 50 cents of every dollar shifting to online channels, based on management commentary for FY2025, compared to approximately 40-42 cents in recent prior years.

"If you consider a penetration of somewhere in the 30% to 35% online, and do the math on Chewy's revenue, you would find that we're picking up roughly fifty cents of every dollar that is moving online, which is higher than in the past when we've talked about forty to forty-two cents of every dollar that's moving online. So there's clearly a share gain plan built in, and we are pleased with the way the team is executing."
— Sumit Singh, CEO

Accelerating Sponsored Ads Platform Drives Gross Margin Gains and Expands Monetization

Management identified sponsored ads, and specifically its migration to a proprietary first-party platform, as the primary driver of 60 basis points of year-over-year gross margin expansion (adjusted for prior-year one-time items).

The new system enables advertisers to scale campaigns across both on-site and off-site inventory with enhanced analytics and video capability, creating a highly leverageable, high-margin revenue stream approaching the 1%-3% of net sales target range identified at the 2023 Capital Markets Day.

"The successful migration to our one P platform that I spoke about last quarter has enabled us to broaden our suite of ad products and content capabilities, including the expansion of off-site ads. We are thoughtfully ramping off-site across search and social, with demand exceeding internal expectations. We continue to be excited about our sponsored ads business."
— Sumit Singh, CEO

The rapid ramp of high-contribution sponsored ads augments gross margins and profit conversion.

Looking Ahead

Management reiterated FY2025 full-year net sales guidance of $12.3 billion–$12.45 billion (6%-7% growth, excluding 53rd week), with first-half momentum indicating a glide path toward the upper half of this range.

Adjusted EBITDA margin guidance remains at 5.4%-5.7% for FY2025 (midpoint +75 basis points year-over-year), with an anticipated 80% EBITDA-to-free-cash-flow conversion (about $550 million FCF projected). Chewy expects to open 8–10 new Vetcare clinics, reach the low end of 1.5%-2% of net sales for CapEx, and maintain 6%-7% of revenue in advertising and marketing. No additional explicit long-term guidance or milestones were introduced on this call.

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This article was created using Large Language Models (LLMs) based on The Motley Fool's insights and investing approach. It has been reviewed by our AI quality control systems. Since LLMs cannot (currently) own stocks, it has no positions in any of the stocks mentioned. The Motley Fool has positions in and recommends Chewy. The Motley Fool has a disclosure policy.