Release Date: August 28, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Chewy Inc (CHWY, Financial) reported Q2 net sales growth of approximately 3% to $2.86 billion, reaching the high end of their guidance range.
- Autoship customer sales grew by approximately 6%, representing 78% of net sales, highlighting the program's convenience and value.
- The company achieved a new record in net sales per active customer (NSPAC) at $565, growing over 6% in the quarter.
- Chewy Inc (CHWY) generated $145 million of adjusted EBITDA, representing a 5.1% adjusted EBITDA margin and a year-over-year increase of approximately 190 basis points.
- The company reported strong free cash flow generation of approximately $91 million and ended the quarter with $695 million in cash, cash equivalents, and marketable securities.
Negative Points
- Active customer growth was modest, with the company maintaining a flat outlook for active customers for the year.
- Despite improvements, the overall pet household year-over-year growth remains relatively flat.
- The company noted that gross margin will fluctuate on a quarterly basis, indicating potential variability in profitability.
- Chewy Inc (CHWY) continues to face a competitive environment, particularly in the hard goods segment.
- The company is not planning any significant incremental investment in Canada, which may limit growth opportunities in that market.
Q & A Highlights
Q: Can you provide an update on pet adoption trends and expectations for fiscal '25 growth?
A: Sumit Singh, CEO, noted that pet adoptions continue to exceed relinquishments, with adoptions up in the low teens year-over-year and relinquishments down in the low to mid-single digits. For fiscal '25, Chewy hopes for balanced growth between active customers and Net Sales Per Active Customer (NSPAC), driven by their value propositions and strategic initiatives.
Q: How sustainable is the current SG&A cost structure, and what are your plans for international markets, particularly Canada?
A: David Reeder, CFO, explained that Chewy's at-scale revenue model allows for significant leverage in SG&A, which is expected to remain relatively flat. Regarding Canada, Sumit Singh mentioned that the market is performing as expected, with strong customer engagement and no plans for significant additional investment in the near term.
Q: How has the consumer journey evolved post-COVID, and what are you seeing in the competitive environment?
A: Sumit Singh highlighted that the shift to e-commerce has continued post-COVID, with increased traffic and conversion efficiency. Chewy's innovations, such as Autoship improvements and the Chewy Plus membership, are resonating well, and the competitive environment remains stable with a focus on core strengths.
Q: Can you discuss the improvements in the mobile app experience and its impact on the business?
A: Sumit Singh stated that Chewy has been investing in the mobile ecosystem, with less than 20% of orders currently transacting through the app. The goal is to increase this significantly, as app users show higher Average Order Value (AOV) and Autoship penetration, enhancing customer retention and personalization.
Q: What are the monthly sales trends, and how is hard goods growth performing?
A: David Reeder noted that monthly sales trends are consistent with expectations, driven by the predictable nature of Autoship. Hard goods have stabilized, indicating a normalizing market, with expectations for continued stability and potential growth as the industry returns to normal.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
