Chewy's Growth Metrics Signal Positive Stock Outlook

Chewy stock rallies on impressive fourth-quarter results, marked by notable revenue growth and rising margins. Investors may find the pet retailer's solid performance attractive amidst economic uncertainties.

Date: 30-03-2025

AI Rating: 8

Chewy's recent performance paints a strong picture for investors. The company's stock has shown impressive appreciation, rising over 120% in the past year, significantly outpacing broader market trends. Recent fiscal fourth-quarter results indicate that Chewy's revenue growth is accelerating, driven largely by its Autoship service, which accounts for more than 80% of its total revenue. For the fourth quarter, Chewy reported revenue of $3.25 billion, marking a 15% year-over-year increase, exceeding company forecasts. This positive trend suggests robust demand resilience, likely appealing to a defensive investment strategy.

Chewy also reported an increase in gross margins, which improved by 30 basis points in the quarter to 28.5%. This uptick is attributed to a strategic shift towards higher-margin product lines, such as private label items and sponsored ads. Improved gross margins can positively influence profitability metrics, thereby enhancing investor sentiment.

In terms of earnings, Chewy's adjusted earnings per share (EPS) jumped 56% to $0.28, indicating a strong upward trajectory in profitability. The company also generated significant free cash flow of $452.5 million, underscoring its ability to maintain financial health and sustain shareholder returns through stock buybacks.

Looking ahead, Chewy provides optimistic guidance for fiscal Q1 2025, projecting revenue growth of 6% to 7% and an adjusted EPS range of $0.30 to $0.35, aligning with continuing growth factors such as customer acquisition and loyalty metrics. The CEO has pointed out an industry stabilization and less sensitivity to tariffs, reinforcing the company's recession-resilient business model.

Overall, Chewy's combination of revenue growth, rising profit margins, and strong free cash flow indicates a solid operational footing that should continue to attract investor interest in the near term. Given this backdrop, positioning in Chewy stock appears favorable amidst current market challenges.

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