Q4 2025 Earnings Summary
- Market share gains in a growing industry: Chewy is outperforming the broader pet market significantly. Management stated they're growing at "6% to 7%" compared to the overall market growth expectation of "2.5% to 4.5%", meaning they're growing at approximately "2x what the market expectation is" and continuing to capture incremental market share.
- Return to active customer growth with improved marketing efficiency: Chewy has returned to year-over-year active customer growth for "the first time in 8 quarters" with 20.5 million active customers. Their marketing investment increased by "approximately 15% higher in Q4" while cost per gross adds increased "less than 2%" - demonstrating remarkable efficiency in customer acquisition. They added "over 400,000 customers in Q4" and expect this momentum to continue through 2025.
- Multiple growth initiatives beyond core business: Chewy has several promising growth vectors including their Vet Care Clinics (planning "8 to 10 new clinics" in 2025), their sponsored ads business which contributed significantly to margin improvement and has a "long-term entitlement" of "up to 3% of total enterprise net sales", and their mobile app where "app installs in Q4 grew 20% year-over-year" and "customers making their first app purchase grew by 34%".
- Pet adoption trends remain relatively flat, particularly for dogs, with Sumit Singh noting that "Dog seems to be more flat and cat seems to be up" while acknowledging they're taking a "wait-and-watch approach" to how these trends evolve. This suggests limited organic growth potential in the pet industry, potentially constraining Chewy's long-term growth opportunities.
- Chewy's strong Q4 performance was significantly enhanced by seasonal factors, with management acknowledging they "leaned in and took benefit of Q4 seasonality" for customer acquisition. This raises questions about the sustainability of their customer growth momentum throughout 2025, especially as they expect only "low single-digit" active customer growth.
- The company has only achieved 40-50% automation of their fulfillment network , well short of their 70-80% long-term goal. This indicates significant capital investments will still be needed, potentially pressuring margins and free cash flow, with CapEx expected to grow "upwards of 30% year-on-year" according to analyst estimates.
| Metric | YoY Change | Reason |
|---|---|---|
Total Revenue | +14% YoY (Q4 2025: $3,247.37M vs. Q4 2024: $2,846.65M) | Robust overall growth driven by strong customer engagement and category mix improvements, building on prior period strengths such as the Autoship program and resilient spending behaviors. This jump reflects Chewy’s successful leveraging of its core drivers and operational momentum from previous quarters. |
Consumables Revenue | +13% YoY (Q4 2025: $2,289.79M) | Increased customer spending and enhanced Autoship performance boosted consumables revenue, supported by growth in nondiscretionary consumables and health segments that built on past successes in customer loyalty and recurring purchase behavior. |
Hardgoods Revenue | +16% YoY (Q4 2025: $365.37M) | A marked recovery in discretionary spending assisted by strategic initiatives (such as expanding product assortment and improved marketing campaigns) contributed to the 16% growth, reversing earlier softness observed in Q3 and capitalizing on industry normalization trends. |
Other Revenue | +16% YoY (Q4 2025: $592.21M) | Strong growth in healthcare and specialty products combined with more frequent Autoship subscriptions led to increased spending in this segment, building from previous periods’ momentum in customer engagement and cross-category penetration. |
Stockholders’ Equity | +17% (Q4 2025: $261,459K vs. Q3 2025: $223,422K) | Enhanced by net income contributions and improved liquidity, this increase reflects disciplined cost management and effective capital allocation from prior periods, along with the positive impact of improved operating performance driving additional retained earnings. |
Operating Cash Flow | +13% YoY (Q4 2025: $207,516K vs. Q3 2025: $183,462K) | Improved working capital management and higher net income led to increased operating cash flow; non-cash adjustments and efficient liquidity management continued the positive trend seen in earlier periods. |
Net Income | Turnaround to $22,792K in Q4 2025 from very modest profit or loss in prior quarters | Gross margin expansion, SG&A efficiency, and disciplined cost management contributed to a strong turnaround in net income. Improvements in margins and revenue growth initiatives that began in Q3 (and earlier) resulted in this shift, underscoring the positive impact of prior period operational enhancements. |
| Metric | Period | Previous Guidance | Current Guidance | Change |
|---|---|---|---|---|
Fourth Quarter Net Sales | Q4 2024 | no prior guidance | $3.18B–$3.20B | no prior guidance |
Full Year 2024 Net Sales | FY 2024 | no prior guidance | $11.79B–$11.81B | no prior guidance |
Full Year 2024 Adjusted EBITDA Margin | FY 2024 | no prior guidance | 4.6%–4.8% | no prior guidance |
2024 Capital Expenditures | FY 2024 | no prior guidance | Low end of 1.5%–2% of net sales | no prior guidance |
Free Cash Flow Conversion | FY 2024 | no prior guidance | Above 80% for the full year | no prior guidance |
Basic Shares Outstanding | FY 2024 | no prior guidance | Approximately 415 million | no prior guidance |
Advertising and Marketing Expense | FY 2024 | no prior guidance | At high end of 6%–7% of net sales; above 7% in Q4 | no prior guidance |
| Topic | Previous Mentions | Current Period | Trend |
|---|---|---|---|
Active Customer Growth & Retention | Discussed across Q1–Q3 with mixed signals – Q1 saw a slight decline with early signals of normalization , Q2 reported modest sequential growth and new acquisition/re‐activation efforts , while Q3 emphasized continued net additions and improved churn. | Q4 highlights strong active customer growth driven by strategic marketing, enhanced app improvements, and retention programs like Autoship and Chewy+; signals continued momentum with an inflection point for durable returns. | Continued focus with evolving initiatives: The sentiment has shifted from a mix of modest and normalized growth in earlier periods to a more robust, inflection‐point narrative in Q4, signaling improved confidence in customer retention and growth. |
Mobile App Engagement & Penetration | Q1 mentioned strong year‐over‐year mobile app participation driven by CRM and ongoing testing ; Q2 noted increased app orders and higher AOVs with less than 20% penetration, leaving room for growth ; Q3 provided detailed metrics about increased unique users and revenue contribution from the app. | Q4 commentary focused on improvements in the mobile app experience as part of broader customer engagement, though no specific metrics were provided; overall, the app is seen as a key engagement driver. | Positive momentum and increasing importance: Consistent attention across periods shows a growing strategic focus on app enhancements to boost engagement and conversion, with Q4 emphasizing its role even in qualitative terms. |
Marketing Efficiency & Customer Acquisition Costs | Q1 emphasized a “full funnel” approach with improved segmentation and targeting ; Q2 reported efficient CAC due to brand awareness and effective website traffic conversion with stable spend ; Q3 highlighted optimization of the marketing funnel and stronger ROI guiding increased spend. | Q4 detailed improvements from refined marketing strategy, including stronger targeting, a rebuilt bidding model, and incremental customer growth with only marginally higher acquisition costs despite higher spend. | Ongoing efficiency gains: There is a consistent focus on improved marketing spend efficiency, with Q4 showing enhanced targeting methods and sustained low incremental CAC despite increased investment, indicating maturity in their acquisition strategy. |
Vet Care Clinics & Healthcare Vertical Expansion | In Q1, clinics were in early phases with four clinics launched and strong NPS and customer acquisition signals ; Q2 reported the addition of clinics with clear cross‐channel benefits ; Q3 noted high utilization, strong acquisition via clinics, and continued expansion into healthcare products. | Q4 shows further acceleration with 8 clinics opened in 2024 and plans to open 8–10 new clinics in 2025, along with increased capital focus on pharmacy and healthcare vertical improvements. | Accelerating expansion: Initially in a developmental stage, the clinic initiative has matured steadily with stronger performance metrics and is now a key pillar for growth in both vet services and healthcare verticals. |
Sponsored Ads Business & Margin Improvement | Q1 discussed sponsored ads as the largest driver of margin improvement with early positive ROI signals and a ramp up toward 1–3% of net sales ; Q2 highlighted growth in sponsored ads contributing to margins with technology upgrades ; Q3 reiterated their fundamental role in gross margin expansion. | Q4 emphasized that sponsored ads scaled significantly in 2024, driving an 80 bps gross margin expansion and transitioning to first‐party software to further boost margins and set up long‐term potential up to 3% of net sales. | Key margin lever with evolving tech: Sponsored ads consistently drive margin improvement across periods; with technology enhancements (first‐party software) in Q4, the narrative has evolved toward unlocking additional long-term profitability through ad innovation. |
Fulfillment Network Automation & Supply Chain Optimization | Q2 described early benefits from automation with over 40% volume capturing lower fulfillment costs ; Q3 provided detailed metrics on productivity gains, volume per square foot, and safety improvements from automation in selected centers ; Q1 had no mention. | Q4 notes that automated order volume is now north of 40% with plans to further ramp automation (targeting 70–80%) and highlights continued investments in supply chain improvements to enhance efficiency. | Progressive automation focus: Although not covered in Q1, the topic has grown steadily, with Q2 and Q3 evidencing tangible productivity gains and Q4 reinforcing ongoing investment in automation as a strategic advantage for cost reduction and efficiency improvement. |
Hard Goods/Discretionary Category Performance | Q1 noted a decline in hard goods offset by early green shoots and improved search intent ; Q2 described stabilization with organic growth and modest promotional activity ; Q3 reported two consecutive quarters of growth and a turnaround with private brands showing stability. | Q4 highlighted that enhanced site experiences, app improvements, and a new customer file drive strong performance across hard goods categories, with year-over-year improvements for subcategories like tech, beds, and toys. | Recovery and growth trajectory: The narrative shifted from a decline in Q1 to stabilization in Q2, a turnaround in Q3, and robust performance in Q4, showing an overall positive trend and strategic execution in recovering discretionary category performance. |
Pet Adoption Trends & Pet Household Formation | Q1 reported early positive signals and a balanced adoption-relinquishment narrative with hints of household formation normalization ; Q2 showed low-teens adoption growth and slight improvement in household formation ; Q3 indicated a healthy cycle with net positive adoption and stabilization. | Q4 commentary was more nuanced—dog adoptions flat while cat adoptions increased, with a “wait-and-watch” approach; no explicit mention of household formation but it is indirectly addressed through adoption trends. | Emerging normalization: Initially, signals were early and positive (Q1) and showed steady improvement (Q2, Q3); Q4 reflects a cautious but optimistic stance toward evolving pet adoption dynamics, suggesting a maturing market with potential for continued share gains. |
Profitability, Margins & Cash Generation | Q1 highlighted strong EBITDA margins, notable free cash flow generation, and margin expansion driven by sponsored ads and product mix improvements ; Q2 discussed increased net income, improved gross and EBITDA margins with robust free cash flow ; Q3 detailed margin expansions and record cash flow. | Q4 reports continued margin improvement with full-year adjusted EBITDA margin guidance of 5.4%–5.7%, robust free cash flow conversion (80% of EBITDA), and strong liquidity while maintaining disciplined cost control. | Consistent margin expansion and liquidity discipline: Across periods, Chewy shows steadily improving profitability metrics; Q4 consolidates this trend with strong guidance, solid cash conversion and ongoing margin expansion, establishing financial strength for future strategic investments. |
Seasonal Factors Impacting Q4 Performance | Q1 acknowledged seasonal EBITDA margin declines as normal ; Q3 detailed higher marketing spend, holiday-related pricing/discounting, and expected sequential margin decline ; Q2 did not offer specific details on seasonality. | Q4 discussed a strong Q4 performance driven by heightened seasonal shopping intent and effective promotional management, while noting that seasonal uplift remains subject to normal market patterns. | Stable seasonal influences: While seasonality has been recognized as impacting margins (especially in Q4) since Q1, the consistency in handling promotional and pricing dynamics, along with strategic marketing adjustments, indicates that Chewy’s seasonal approach remains steady with anticipated normal variances. |
Reliance on NSPAC for Growth | Q1 emphasized robust NSPAC growth (9.6% YoY to $562) fueling wallet share expansion ; Q2 highlighted NSPAC as a critical driver with a record of $565 and its role in revenue algorithms ; Q3 reiterated the two-pronged growth via active customers and NSPAC. | Q4 shows NSPAC at $578 (4.1% YoY increase) with an extra operational benefit from an additional week and expects continued NSPAC growth alongside customer additions in 2025. | Sustained role as a growth lever: Across all periods, NSPAC remains a central metric with consistent year-over-year improvement; Q4 reinforces its strategic significance as a driver of revenue and wallet share expansion despite modest incremental improvements. |
Capital Investment & Operational Expenditure Pressure | Q1 discussed a disciplined approach with a new share repurchase program and stable CapEx (1.5%–2% of net sales) amid controlled SG&A costs ; Q2 highlighted disciplined cost management, flat SG&A, and automation investments reducing operating expenses ; Q3 emphasized targeted CapEx in automation and vet clinics with improved SG&A efficiency. | Q4 reaffirmed the CapEx guidance (1.5%–2% of net sales) with further investments in healthcare and vet clinics, while operational expenses (SG&A and marketing spend) continued to be tightly managed with improvements in efficiency and cost discipline. | Consistent operational discipline with strategic investments: Chewy’s approach to capital allocation and cost control has remained steadfast across periods; Q4 continues this trajectory by balancing investments in growth initiatives with rigorous expense management to support margin expansion. |
Emerging Chewy+ Membership Program | Q1 introduced Chewy Plus in beta with an evolving test-and-learn approach and nested synergy with Autoship to encourage deeper engagement ; Q2 reported higher-than-expected acquisition and conversion rates ; Q3 showed that Chewy+ members exhibit higher order frequency, cross-category engagement, and Autoship adoption. | Q4 underscores Chewy+ as a key driver for customer acquisition and engagement with very high conversion rates from free trial to paid membership and a strong synergy with Autoship, bolstering the overall customer value proposition. | Growing strategic initiative: Starting as a beta program in Q1, Chewy Plus has evolved and demonstrated strong performance through improved customer engagement and conversion metrics over subsequent quarters, indicating its potential to significantly impact future growth. |
Chewy (CHWY) Q4 2025 Earnings Call Q&A Summary
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Customer Growth Inflection
Q: What drove the big sequential jump in net actives?
A: Chewy returned to year-over-year active customer growth for the first time in 8 quarters, with increases across new customers, reactivations, and improved churn. Management attributes this to marketing strategy improvements including a rebuilt internal bidding model, which allowed them to invest 15% more in Q4 marketing while increasing cost per gross adds by less than 2%. They added over 400,000 customers in Q4 alone. -
2025 Customer Outlook
Q: Will net adds be consistent throughout 2025?
A: Management expects low single-digit active customer growth in 2025 with net additions "broadly consistent throughout the course of the year." This implies around 600,000 adds for the year, though they avoided providing specific quarterly guidance. -
Gross Margin Performance
Q: Why were Q4 gross margins lighter than expected?
A: Q4 gross margin of 28.5% was up 30 basis points year-over-year but below some expectations. Management indicated this was "very much what we expected" with no surprises. For 2025, they expect similar contribution from gross margin as they saw in 2024, which drove about 60% of the 150 basis point EBITDA expansion. -
Pet Industry Landscape
Q: How are pet adoption trends affecting guidance?
A: Management hasn't seen significant changes in pet adoption trends, with net adoptions still up (cats trending up, dogs flat). They expect to continue taking market share in 2025, growing at 6-7% versus industry growth of 2.5-4.5%. There's minimal pricing inflation expected and no broad deflationary pressure. -
E-commerce Penetration
Q: Has online migration in pet industry normalized?
A: The migration to e-commerce has fully normalized, with approximately 28-30% of the pet industry now online (excluding buy-online-pickup-in-store). Chewy believes they're capturing roughly $0.40-$0.50 of every dollar moving online. They also saw the secular trend toward e-commerce pick up in Q4. -
Growth Investments
Q: What's driving customer growth - new customers or reactivations?
A: Management highlighted several growth drivers: Chewy Vet Care clinics bringing higher-than-forecasted new customers, specialty category growth, and app performance (app installs grew 20% year-over-year in Q4, with first-time app purchasers up 34%). Chewy+ membership is also seeing high conversion from free trials to paid memberships at $49/year. -
Automation Progress
Q: What's the status of fulfillment automation?
A: Over 50% of volume now flows through automated facilities when considering all automation initiatives. The company continues to ramp volume through its Houston facility while maintaining approximately 70-75% utilization across the network. They're making progress toward their long-term goal of 70-80% automation. -
CapEx Allocation
Q: What's driving the increased CapEx in 2025?
A: 2025 CapEx guidance of 1.5-2% of net sales represents up to 30% growth year-over-year. The incremental spend is primarily for healthcare initiatives, including pharmacy capacity and the planned 8-10 new vet clinics in 2025. Base fulfillment center CapEx remains relatively stable. -
Marketing Expenditure
Q: Will 2025 marketing spend remain at 6-7% of revenue?
A: Yes, marketing spend will remain in the 6-7% range for 2025, consistent with 2022-2024 levels (6.7% in 2023, 6.8% in 2024). While individual quarters may fluctuate slightly based on campaign timing, the annual ratio is expected to hold steady. -
Hard Goods Performance
Q: What drove hard goods outperforming consumables in Q4?
A: Hard goods growth was broad-based across categories (leashes, collars, tech, beds, toys) driven by improved site experiences, app usage facilitating easier attachment, and new customers who have higher propensity to purchase hard goods. Management described it as "pretty broad-based" improvement year-over-year.