Chewy's Q4 2024: Navigating Contradictions in Customer Growth, Pricing, and Automation Strategies

These are the key contradictions discussed in Chewy's latest 2024Q4 earnings call, specifically including: Customer Acquisition and Growth Strategies, Pricing Trends, Gross Margin Expectations, and Automation and Sponsored Ads Expansion:



Revenue and Customer Growth:
- Chewy, Inc. reported Q4 2024 net sales of $3.25 billion, representing a 15% increase year-over-year, and full year 2024 net sales of $11.86 billion, up 6% year-over-year.
- The growth was driven by strong active customer growth, a modest return to growth in hard goods merchandise, and strong Autoship customer loyalty across consumables and health and wellness categories.

Active Customer Growth:
- Chewy ended fiscal year 2024 with 20.5 million active customers, marking the first year-over-year growth in eight quarters.
- The increase in active customers was attributed to improvements in customer acquisition and retention strategies, including investments in marketing and product offerings.

Profitability and Adjusted EBITDA Margin:
- Chewy's adjusted EBITDA margin for fiscal year 2024 reached 4.8%, reflecting a year-over-year expansion of approximately 150 basis points.
- This improvement was driven by strong gross margin and operating expense leverage, allowing the company to convert approximately 80% of its adjusted EBITDA to free cash flow.

Autoship and Sponsored Ads Contribution:
- Autoship customer sales increased by 21.2% to $2.62 billion in Q4 and by 10.6% to $9.39 billion for the year.
- Sponsored ads contributed significantly to gross margin improvement in 2024, reaching approximately 1% of net sales for the full year.