Chewy Inc. (CHWY), the online pet-supply giant, reported first-quarter earnings that outpaced Wall Street expectations, underscoring continued strength in its e-commerce operations.
Adjusted earnings per share came in at 35 cents—comfortably above consensus estimates of 34 cents and well within the company’s own guidance of 30 to 35 cents. Net sales rose 8.3% year-over-year to $3.12 billion, exceeding both analyst expectations of $3.08 billion and Chewy’s upper range projection of $3.09 billion.
CEO Sumit Singh praised the results, citing growth in both customer count and spending per customer, as well as positive free cash flow and profitability. The retailer added nearly 800,000 customers over the past year, pushing its active customer base to over 20.7 million. These customers spent an average of $583 annually, about 4% more than the year before.
The company’s Autoship program—which lets pet owners schedule regular deliveries—was a major driver of performance. Autoship sales jumped nearly 15% from the prior year to $2.56 billion, now making up more than 80% of Chewy’s total revenue.
Autoship Drives Recurring Revenue While Expenses Tighten Margins
While Chewy’s topline performance was robust, the bottom line reflected increasing cost pressures. Net income declined slightly to $62.4 million, down from $66.9 million the prior year. Although earnings per share held steady at 15 cents under GAAP, margin pressures emerged with net margin falling to 2% from 2.3%.
Chewy’s gross margin dipped marginally to 29.6% from 29.7% a year ago. The decline was largely attributed to the absence of one-time benefits seen in the prior year. Still, the company’s longer-term trend toward gradual margin expansion appears intact.
Adjusted EBITDA rose to $192.7 million, up from $162.9 million, pushing the adjusted EBITDA margin up 50 basis points to 6.2%. Operating cash flow increased modestly to $86 million, and free cash flow came in at $48.7 million. Chewy ended the quarter with $616 million in cash and equivalents.
On the expense side, marketing and stock-based compensation contributed to rising operating costs. Notably, stock-based compensation more than doubled the amount the company spent on share repurchases during the quarter.
Investors React Cautiously Despite Optimistic Full-Year Outlook
Despite the strong quarterly beat, Chewy stock dropped sharply—down more than 11% by midday Wednesday—following the report. Investors appeared unsettled by the company's forward guidance, which pointed to a slowing growth rate.
For the full fiscal year, Chewy reaffirmed its sales forecast of $12.3 billion to $12.45 billion, reflecting about 6% to 7% growth. This marks a deceleration from the 8.3% increase logged in Q1 and may reflect broader macroeconomic pressures. Second-quarter guidance calls for net sales of $3.06 billion to $3.09 billion and adjusted earnings of 30 to 35 cents per share, both roughly in line with expectations.
Adding a layer of uncertainty, the company recently announced that CFO David Reeder will step down in the coming months to pursue a CEO role in the semiconductor industry. While Chewy stressed that Reeder will support a smooth transition, leadership changes can signal volatility to markets already concerned about tightening margins.
Conclusion
Chewy's first-quarter results highlight a company that continues to execute well operationally, growing both its customer base and recurring revenue. Yet, even strong earnings and steady guidance weren’t enough to calm investor nerves in the face of slowing growth projections and rising expenses. With more than 80% of sales now on autopilot through its Autoship program, Chewy remains a formidable player in the pet e-commerce space—but it will need to manage costs more tightly and reassure markets to maintain its momentum.
Considering a $1,000 investment in these companies?
Our team at Stock Investor carefully curated a list of top stocks with the potential for significant returns, suitable for beginners and seasoned investors alike who are eager to learn a trade and unearth the best stocks to buy. Though not featured in this article, these selected stocks could be game-changers in the future.For those seeking dynamic trading experiences, consider joining our Swing Trade Alerts, Option Income Alert, or our Trading Room. Take advantage of our special offer today, starting at just $1 in the first month.
Unlock the secrets of Smart Money
Explore how billionaires and institutions are influencing the market. Follow their every move with DarkOption Flow and stay updated on essential market insights. Begin your journey to informed investing today!
Education
And if you're a fan of Invest opedia, you'll appreciate what we offer at SharperTrades even more. Explore our comprehensive option trading course and technical trading course, where you can learn trading, analyze stocks, delve into chart patterns for stocks, and gain invaluable insights for making the best company investments.
Unlock Your Stock Market Edge with SharperTrades. Dive into powerful trading tools, learn a trade, and receive expert guidance. Stay up-to-date with regular market updates. Learn trading, basics of investing, and how to pick the best stocks to buy. Whether you're a beginner or seasoned investor and trader, we've got you covered. Get started for free, today!