CHWY — Chewy, Inc.

Chewy (CHWY) Q4 2025 Earnings Call Summary

1. Key Financial Results and Metrics

• Net Sales: Q4 2025 net sales reached $3.26 billion, with full-year sales of $12.6 billion, reflecting an 8.1% increase in Q4 and 8.3% for the full year.
• Active Customers: The company ended the year with 21.3 million active customers, a 4% year-over-year increase, adding over 810,000 customers in fiscal 2025.
• Autoship Sales: Autoship accounted for 84% of Q4 net sales, totaling over $2.7 billion, with a 13% year-over-year growth.
• Net Sales Per Active Customer (NSPAC): NSPAC reached $591 in Q4, a 4% increase year-over-year.
• Gross Margin: Q4 gross margin was 29.4%, with a full-year margin of 29.8%, showing a 90 basis points improvement in Q4 and 60 basis points for the full year.
• Adjusted EBITDA: Q4 adjusted EBITDA was $162 million (5.0% margin), with full-year adjusted EBITDA at $719 million (5.7% margin), reflecting a 26% year-over-year growth.
• Free Cash Flow: Record free cash flow of $232 million in Q4 and $562.4 million for the full year, highlighting improved earnings quality and capital efficiency.

2. Strategic Updates and Business Highlights

• Chewy Vet Care (CVC): Opened 10 new practices in 2025, bringing the total to 18 locations. CVC is seen as a key growth driver and customer engagement tool.
• AI Integration: Chewy is embedding AI across various business functions, including customer service and fulfillment, aiming for significant efficiency gains and cost reductions.
• Private Brands: Launched "Chewy Made," a new unified owned brand platform, set to expand offerings in dog and cat consumables throughout 2026.
• SmartEquine Acquisition: The recently closed acquisition is expected to contribute approximately $80 million in net sales for 2026, with a focus on stabilizing and enhancing the business.

3. Forward Guidance and Outlook

• 2026 Net Sales: Expected to be between $13.6 billion and $13.75 billion, representing an 8% to 9% year-over-year growth.
• Adjusted EBITDA Margin: Forecasted to be in the range of 6.6% to 6.8%, with an anticipated 100 basis points year-over-year expansion.
• Q1 2026 Expectations: Projected net sales of $3.33 billion to $3.36 billion, representing 7% to 8% year-over-year growth, expected to be the lowest point of the year.

4. Bad News, Challenges, or Points of Concern

• Industry Growth: Chewy does not anticipate a rebound in pet household formation, projecting low single-digit industry growth without pricing inflation.
• Competitive Pressures: The company is aware of potential competitive pressures from emerging demand channels, such as Agentic Commerce, but believes its strong customer relationships and service model provide insulation.
• Margin Expansion: While margins are expected to expand, the pace of gross margin improvement is anticipated to be more moderate compared to 2025.

5. Notable Q&A Insights

• A&M Leverage: Management expects continued advertising and marketing (A&M) leverage, with potential to maintain spending around 6% to 6.5% in the near term.
• Customer Cohorts: Newer customer cohorts from 2024 and 2025 are performing better than those from 2022 and 2023, with strong repeat purchase rates and NSPAC trends.
• Chewy+ Penetration: Chewy+ reached a low single-digit penetration by year-end 2025, with management cautious about providing future guidance until more data is available on customer retention and program effectiveness.
• AI Impact: AI applications are expected to drive efficiencies across customer service and fulfillment, with significant savings anticipated in the coming years.

Overall, Chewy demonstrated strong financial performance in 2025 with a solid outlook for 2026, despite facing industry headwinds and competitive challenges. The company remains focused on strategic initiatives to enhance growth and profitability.