Margins Expand as Chewy Sets New Free Cash Flow Record
Chewy’s freshly released Fiscal Year 2025 results point to growing efficiency and underlying business strength. The company reported net sales of $12.60 billion, a 6.2% increase year-over-year (8.3% normalized for the extra week last year). Gross margin rose 60 basis points to 29.8%, and adjusted EBITDA climbed 26% to $719.2 million. Most notably, Chewy’s free cash flow hit a new record of $562 million—a 24% improvement over 2024.
Active Customers and Subscription Sales Continue Upward Trend
Chewy’s customer-focused model continues to fuel loyalty and recurring revenue. Active customers reached 21.33 million, up 4% from last year. Autoship (subscription) sales—driven by convenience and strong customer retention—represented 83.3% of total net sales for the year, up from 79.2% a year earlier.
| Key Metric | 2025 | 2024 | Change (%) |
|---|---|---|---|
| Net Sales | $12.60B | $11.86B | 6.2 |
| Adjusted EBITDA | $719.2M | $570.5M | 26.1 |
| Free Cash Flow | $562.4M | $452.5M | 24.3 |
| Active Customers | 21.33M | 20.51M | 4.0 |
| Autoship Sales (% of Net Sales) | 83.3% | 79.2% | +4.1 pp |
Profitability Grows Despite Margin Pressures
On a GAAP basis, Chewy delivered net income of $222.8 million, although this figure fell versus the previous year due to a one-time tax benefit in 2024. Excluding such items, adjusted net income was up 21% to $540.5 million, and adjusted diluted EPS improved to $1.27. Adjusted EBITDA margin advanced to 5.7%—up 90 basis points—reflecting disciplined cost management and operational leverage.
Q4 Snapshot: Consistent Performance with Strength in Profit Margins
The company’s Q4 2025 results showed stability, with net sales up 0.5% year-over-year (8.1% normalized), and gross margin rising by 90 basis points to 29.4%. Adjusted EBITDA for the quarter increased 30% to $162.3 million, and adjusted EBITDA margin grew by 120 basis points to 5.0%, highlighting continued progress in profitability even as sales growth moderated.
Financial Position Strengthened with Ample Cash Reserves
Chewy exited the year with $860.1 million in cash and cash equivalents—up sharply from $595.8 million the prior year. This strong liquidity, paired with increased free cash flow, puts the company in a favorable position to invest in strategic growth and weather macro uncertainties.
Key Takeaway: Chewy Leverages Subscription Model for Sustainable Growth
Chewy’s 2025 results show a company focused on consistent operational discipline and deepening customer relationships. The durability of its subscription-based model and record free cash flow point to further opportunities for margin expansion and growth in the year ahead. For investors and industry watchers, this performance underlines Chewy’s ability to deliver both profitable growth and long-term customer loyalty.
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