Chewy(CHWY)2025-03-26 14:46Financial Data and Key Metrics Changes - Q4 net sales increased approximately 15% year-over-year to 11.86 billion, representing 6% year-over-year growth [10][21] - Adjusted EBITDA margin for fiscal year 2024 reached 4.8%, reflecting year-over-year expansion of approximately 150 basis points [13][28] - Free cash flow for fiscal year 2024 was a record 25 billion vet services market [17] - The company aims to reach a long-term adjusted EBITDA margin target of 10% and expects to expand adjusted EBITDA margin in 2025 [19] - The focus on enhancing customer experience through app improvements and marketing strategies is expected to drive future growth [42][80] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's ability to deliver share-gaining growth and margin expansion in 2025, despite a normalizing pet industry [33][130] - The promotional environment in Q4 was managed effectively, with minimal inflationary pressure expected in 2025 [90][92] Other Important Information - The company repurchased approximately 32.8 million shares in 2024, reducing the ownership position of its largest shareholder [31][32] - The company ended the year with approximately 1.4 billion [32] Q&A Session Summary Question: What drove the significant increase in active customers from Q3 to Q4? - Management noted that the momentum from Q3 continued into Q4, resulting in year-over-year active customer growth for the first time in eight quarters, driven by improved marketing strategies and customer engagement [41][42] Question: Can you explain the gross margin performance in Q4? - Management indicated that the gross margin expansion was in line with expectations, driven by improvements in sponsored ads and product mix, with a projection for continued growth in 2025 [48][51] Question: What is the current status of automation in fulfillment? - The company reported that over 40% of volume is currently processed through automated facilities, with plans to increase this to 70-80% in the near to medium term [58][62] Question: How do you view the growth investments for 2025? - Management highlighted that investments in vet care clinics and improved app performance are expected to drive new customer growth and reactivations [75][80] Question: What are the expectations for marketing expenses in 2025? - The company anticipates marketing expenses to remain in the range of 6% to 7% of revenue, consistent with historical levels [100][102] Question: How did hard goods perform compared to consumables in Q4? - Management noted that hard goods outperformed due to improved site experiences and increased customer traffic, with broad-based growth across various categories [104][109]