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Chewy (CHWY) Q2 FY25 Earnings call transcript Aug 28, 2024

AInvestWednesday, Aug 28, 2024 8:15 pm ET
1min read

Chewy, a leading e-commerce player in the pet care industry, reported a strong second quarter performance, with net sales growing by approximately 3% to $2.86 billion. The company's financial results highlight its strategic initiatives and operational efficiencies, setting the stage for a promising future.

Strategic Initiatives Shine

Chewy's focus on strategic initiatives, such as Chewy Vet Care and sponsored ads, has paid off handsomely. Chewy Vet Care, which has seen the addition of two new clinics in Denver, Colorado, and South Florida, is serving as an acquisition funnel, with net new customers acquired through the clinics exceeding expectations. The program is also driving engagement and increasing customer spending across various categories.

Similarly, the company's sponsored ads business is on track to reach the low end of its long-term target of 1% to 3% of net sales, reflecting a thoughtful expansion of inventory, advertiser demand growth, and increasing kick-through rates. The implementation of a new 1P technology stack is expected to further improve supplier experience and lower costs.

Operational Excellence and Financial Performance

Chewy's operational excellence is evident in its financial performance, with gross margin coming in at 29.5% and adjusted EBITDA of $145 million, representing a 5.1% adjusted EBITDA margin. The company's focus on managing operating expenses and driving operational efficiencies, such as the use of automation and proprietary supply chain software, has led to lower fulfillment costs and an improved customer experience.

Strategic Investments and Cash Flow Generation

Chewy's strong balance sheet and free cash flow generation have enabled strategic investments in growth-oriented initiatives while returning capital to shareholders through share repurchases. The company ended the quarter with $695 million in cash, cash equivalents, and marketable securities, underscoring its financial strength and strategic foresight.

Looking Ahead

Chewy's outlook for the third quarter and full year 2024 is positive, with expectations of approximately 3% to 4% year-over-year growth in net sales and a 4.5% to 4.7% adjusted EBITDA margin. These projections are a testament to the company's strategic focus, operational efficiency, and ability to adapt to market dynamics.

Conclusion

Chewy's strong second quarter performance is a testament to its strategic initiatives, operational excellence, and financial discipline. With a focus on growth opportunities and strategic investments, the company is well-positioned to capitalize on the evolving pet care market and continue its trajectory of growth and profitability.

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