Here's our initial take on Chewy's (CHWY 1.20%) fiscal 2025 first-quarter results.

Key Metrics

Metric Q1 FY24 Q1 FY25 Change vs. Expectations
Revenue $2.88 billion $3.12 billion +8.3% Beat
Earnings per share (GAAP) $0.15 $0.15 unch. Beat
Active customers 19.99 million 20.76 million +3.8% n/a
Net sales per active customer (TTM) $562 $583 +3.7% n/a

Chewy Keeps Adding Customers, and Average Spend Keeps Rising

Chewy's first quarter of fiscal 2025 (ended May 4, 2025) started off relatively well. While it may look like a big slowdown in sales growth from the fourth quarter, when revenue was up 15%, that was due to Q4 having an extra week of sales versus the prior year's quarter. Within that context, Chewy's Q1 revenue growth of 8.3% is pretty solid, and represents a nice acceleration from last year's 6.4% full-year revenue growth, which included that extra week.

Where we can really see Chewy's solid execution is in the active customer data. Active customers increased 3.8% from last year, with strong continued new customer acquisition during the quarter, and net sales per active customer of $583, up 3.7% from last year and about 1% higher than the prior quarter.

Gross margin also held up well, at 29.6%, slightly down from last year's 29.7%, but that was in part due to some non-recurring benefits to last year's Q1 margins. Nonetheless, Chewy's long-term trend of margin expansion continues, with gross margin of 29.2% over the past four quarters.

Higher expenses are weighing on the bottom line, however, with the company's GAAP net income down 6.7%, and earnings per share flat due to the company's ongoing share repurchasing. The company spent $23.1 million to repurchase shares in the quarter. Stock based compensation expense, along with higher sales and marketing expenses are two of the bigger drivers of higher expenses in the quarter, with stock-based compensation more than double what the company spent to repurchase stock.

On a cash-flow basis, Chewy did see some improvement. Cash from operations increased 5.5% to $86 million in the quarter, slower growth in this metric than the company's revenue growth. Not optimal, but also not bad considering the company is still growing, and spending to market and acquire new customers.

Immediate Market Reaction

In what feels like a "sell the news" story, Chewy share prices are down about 6% in pre-market trading after this morning's earnings release. Management's guidance is playing some role here, with expectations of 7.5% revenue growth at the midpoint of Q2 guidance, and full-year expectations of 6.5% revenue growth. This is a deceleration from Q1, and it is likely due, in part, to economic uncertainty and global trade.

What to Watch

Chewy is still in growth mode, finding more customers who value its selection and the convenience of its autoship program that drives the bulk of revenues. So look for Chewy continuing to spend on sales and marketing, and to leverage its strong balance sheet to take share from competitors and eventually start improving its operating leverage and driving even more of those sales to the bottom line.

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