Chewy's Growth Returns Amid Improved Profit Margins

Chewy (NYSE: CHWY) shows signs of recovery as customer counts rise again, boosted by improved profit margins and increasing sales per active customer. These developments may present a favorable investment opportunity.

Date: 02-04-2025

AI Rating: 7

Positive Financial Metrics
Chewy has demonstrated a commendable performance in recent times with its net sales reaching $11.9 billion in 2024. The company’s revenue growth is impressive, with average sales per active customer rising from $495 to $578 over two years. Additionally, Chewy's profit margins have improved, with gross margins experiencing over 20% growth since 2020, signaling enhanced operational efficiency.

Free Cash Flow and Profitability
Chewy is generating positive free cash flow, which reached $452 million in 2024. This positive cash flow allows the company to reinvest into its operations and return value to shareholders through stock buybacks totaling over $900 million. This is a strong indicator of financial health and suggests that Chewy is leveraging its profitability effectively.

Return of Customer Growth
Chewy struggled with customer count stagnation after a peak of 20.7 million active customers in 2021. However, recent reports indicate a reversal of this trend, with the company adding over 400,000 new customers in the latest quarter. This resurgence presents an attractive growth opportunity for the company as it taps into the large market of pet owners in the U.S.

Conclusion
Chewy's positive financial metrics, coupled with the recent customer growth, suggests an optimistic outlook for the stock. Many investors may view these factors as signifying a potential rebound in performance. The stock's reasonable valuation also adds to its attractiveness as an investment opportunity for those seeking a stake in the evolving pet e-commerce market.

Stocks: CHWY