Chewy's Q3 2024 Earnings: A Deep Dive into Growth Drivers

Chewy, Inc. (CHWY) recently announced its third-quarter 2024 earnings, revealing robust growth driven by strategic initiatives and operational efficiency. The pet products retailer reported net sales of $2.88 billion, up 4.8% year-over-year, marking a strong performance compared to the previous quarter's 3.1% growth. This article delves into the key factors contributing to Chewy's success and the implications for future growth.

One of the primary drivers behind Chewy's revenue growth was its expanding active customer base. The company reported an increase of 0.5% in active customers sequentially, reaching 20.2 million. This growth, coupled with a 0% change in net sales per active customer (NSPAC) sequentially, indicates a stable customer base with consistent spending habits.

Chewy's gross margin and adjusted EBITDA margin also saw improvements in Q3 2024. Gross margin rose to 29.3%, up 80 basis points from the previous quarter, driven by increased sales of higher-margin private label products and improved operational efficiency. Adjusted EBITDA margin expanded to 4.8%, a 180 basis points increase from Q2, reflecting cost savings and improved sales productivity.

The company's share repurchase program and free cash flow performance also demonstrated Chewy's commitment to shareholder value. Chewy repurchased $875 million of its shares in Q3, marking a significant increase from the $567 million in Q2. Free cash flow (FCF) in Q3 was $152 million, a sequential increase from Q2's $119 million, signaling Chewy's strong financial position and ability to generate cash.

Chewy's expansion into new markets and product offerings, coupled with its focus on customer experience and loyalty programs, contributed to the increase in active customers and net sales per active customer. The company's inclusion of Chewy Pharmacy KY, LLC since 2021 contributed to a 3.7% year-over-year growth in LTM net sales. The focus on Autoship subscription programs and private brand offerings likely attracted new customers and increased customer loyalty, as indicated by the 5.8% year-over-year growth in Autoship customer sales in Q3 2024. Moreover, Chewy's Q3 2024 NSPAC of $567, a 6.4% year-over-year increase, suggests that expansion into new markets and product offerings has successfully enhanced customer engagement and spending.



In conclusion, Chewy's Q3 2024 earnings demonstrated strong performance driven by increased demand for Autoship customer sales, better cost management, and operational efficiency. These factors contributed to higher net sales per active customer and improved profitability. As Chewy continues to focus on customer experience, loyalty programs, and strategic initiatives, investors can expect the company to maintain its competitive edge in the pet industry. However, it is crucial for investors to monitor Chewy's progress and adapt to any changes in market conditions to capitalize on its growth potential.