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Chewy(CHWY) - 2024 Q3 - Earnings Call Transcript
CHWYChewy(CHWY)2024-12-04 16:26
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Financial Data and Key Metrics Changes - Q3 net sales increased by approximately 5% to 2.88billion,exceedingthehighendoftheguidancerange[10][26]−AdjustedEBITDAwas2.88 billion, exceeding the high end of the guidance range [10][26] - Adjusted EBITDA was 138 million, representing a 4.8% margin and approximately 180 basis points of margin expansion year-over-year [16][33] - Free cash flow for Q3 was 151.8million,reflectingstrongcashgenerationcapabilities[34][36]BusinessLineDataandKeyMetricsChanges−Autoshipcustomersalesreached151.8 million, reflecting strong cash generation capabilities [34][36] Business Line Data and Key Metrics Changes - Autoship customer sales reached 2.3 billion in Q3, representing 80% of total net sales and a year-over-year increase of approximately 9% [11][28] - Nondiscretionary categories, including consumables and healthcare products, accounted for 85% of Q3 net sales [12] - Net sales per active customer (NSPAC) reached 567,indicatinggrowthincustomerwalletshare[29]MarketDataandKeyMetricsChanges−Activecustomersincreasedtoapproximately20.2million,up160,000sequentially[15][27]−TheCanadianbusinessshowedimprovementacrosskeymetrics,includingAutoshippenetrationandnetsalesgrowth[22]CompanyStrategyandDevelopmentDirection−Thecompanyisfocusedonenhancingcustomerexperiencesthroughmobileappimprovementsandexpandingproductassortments[13][21]−ChewyVetCareclinicsarebeingexpanded,withsixclinicsopenedandplanstoreachthehighendofthetargetrangeoffourtoeightopeningsin2024[19][20]−Thecompanyaimstoleverageitsgrowingsponsoredadsbusiness,targeting1567, indicating growth in customer wallet share [29] Market Data and Key Metrics Changes - Active customers increased to approximately 20.2 million, up 160,000 sequentially [15][27] - The Canadian business showed improvement across key metrics, including Autoship penetration and net sales growth [22] Company Strategy and Development Direction - The company is focused on enhancing customer experiences through mobile app improvements and expanding product assortments [13][21] - Chewy Vet Care clinics are being expanded, with six clinics opened and plans to reach the high end of the target range of four to eight openings in 2024 [19][20] - The company aims to leverage its growing sponsored ads business, targeting 1% to 3% of net sales in fiscal 2024 [17] Management's Comments on Operating Environment and Future Outlook - Management noted a return to positive net adoptions in the pet industry, with year-over-year adoption growth in the high single-digit to low double-digit ranges [45][46] - The company expects to end fiscal 2024 with modest year-over-year active customer growth, driven by internal initiatives [15][106] - Management remains optimistic about the fourth quarter and the holiday season, with strong customer engagement observed [133] Other Important Information - Chewy was recently included in the S&P 400 Index, viewed as an endorsement of its performance and growth opportunities [24] - The company has repurchased approximately 10.2 million shares for 300 million, reducing the ownership position of its largest shareholder [35][36] Q&A Session Summary Question: Can you elaborate on overall pet ownership trends and customer growth expectations for 2025? - Management noted signs of industry normalization, with stable pricing and improved adoption trends, contributing to customer growth [44][46] Question: Can you discuss the increase in advertising and marketing spend for Q4? - Management explained that the increase is due to the holiday season and the need to invest in marketing to capture growth opportunities [56][58] Question: What are the trends observed in vet clinics and automation? - Management reported positive metrics from vet clinics, with high customer engagement and plans for further expansion [72][75] - Automation is trending upwards, with less than half of volume shipping through automated fulfillment centers [77][78] Question: How is the app performing and its impact on the P&L? - Management indicated that the app is a priority, with higher engagement rates and potential for increased revenue and profitability [86][88] Question: What is the competitive landscape like? - Management described the competitive intensity as moderate, with a rational pricing environment and ongoing differentiation efforts [118][123]