Chewy Beats on "Strong" Customer Growth
Here's our initial take on Chewy's (NYSE: CHWY) fiscal 2024 fourth-quarter financial report.
Key Metrics
| Metric | Q4 2023 | Q4 2024 | Change | vs. Expectations |
|---|---|---|---|---|
| Revenue | $2.8 billion | $3.3 billion | 17% | Beat |
| Earnings per share | $0.18 | $0.28 | 56% | Beat |
| Active customers | 20.1 million | 20.5 million | 2% | n/a |
| Net sales per active customer (TTM) | $555 | $578 | 4% | n/a |
Chewy Returns to Growth
Chewy posted earnings and revenue numbers for the quarter that topped Wall Street expectations. Perhaps as importantly, the online pet supply retailer provided clear evidence that fears it had maxed out its customer base were overstated.
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Active customers grew 2% year over year to 20.5 million after falling in the previous quarter. Chewy has had success getting those customers to increase their spending on the platform over time: Net sales per active customer grew by 4% to $578 over the past 12 months, and planned Autoship sales grew to 80.6% of total revenue.
"Our performance was underpinned by strong active customer growth and compelling Autoship customer loyalty," CEO Sumit Singh said in prepared remarks.
Adjusted EBITDA for the quarter was $124.5 million, up 44% year over year, and EBITDA margin improved by 70 basis points to 3.8%. The company also nearly tripled its free cash flow from a year ago to $156.6 million, from $67.2 million in the same quarter of 2023.
Immediate Market Reaction
Investors seemed pleased with the results. Shares of Chewy were up about 5% in premarket trading following the release.
What to Watch
While 2% customer growth is an improvement over a decline, growth-focused investors will likely want to see more in the quarters to come. Investors will also want to listen closely to management's outlook for 2025, especially given signs of falling consumer confidence in recent weeks.
Chewy's guidance for what is to come provided some reason for optimism, forecasting fiscal 2025 first-quarter adjusted earnings of $0.30 to $0.35 per share. Wall Street was expecting $0.20 per share.
For the full year, the company forecasts sales of between $12.3 billion and $12.45 billion, which at the midpoint suggests some downside risk to the $12.4 billion consensus. At the high end of the guidance, Chewy is forecasting revenue growth of about 5% compared to 2024's $11.8 billion.
Helpful Resources
- Full earnings report
- Investor relations page
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Lou Whiteman has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Chewy. The Motley Fool has a disclosure policy.
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