Chewy's Q3 Net Income Soars, Acquires SmartPak Equine

TL;DR

**CHWY's Q3 profit surge and SmartPak acquisition make it a strong buy, signaling robust growth and market expansion.**

AI Summary

Chewy, Inc. reported strong financial performance for the thirteen weeks ended November 2, 2025, with net sales increasing to $3,116.6 million from $2,877.6 million in the prior year period, representing an 8.3% growth. Net income saw a significant jump to $59.2 million, up from $3.9 million in the comparable period of 2024. For the thirty-nine weeks ended November 2, 2025, net sales reached $9,336.8 million, an 8.4% increase from $8,613.9 million in the previous year, though net income for this longer period decreased to $183.6 million from $369.9 million, primarily due to a deferred income tax benefit in the prior year. The company's gross profit margin improved, reaching $928.2 million for the quarter compared to $843.9 million last year. Chewy announced the definitive agreement to acquire SmartPak Equine, LLC on October 28, 2025, expected to close in fiscal year 2025, which will strengthen its equine product offerings. Risks include sustaining growth rates, managing macroeconomic impacts, and effectively competing in the e-commerce pet products market. The strategic outlook focuses on expanding product offerings and maintaining customer satisfaction through its Autoship program and efficient operations.

Why It Matters

Chewy's substantial increase in quarterly net income to $59.2 million and the strategic acquisition of SmartPak Equine signal robust operational efficiency and a clear growth trajectory, particularly in the specialized equine market. This move could intensify competition with broader e-commerce retailers like Amazon and specialized pet supply chains, potentially expanding Chewy's market share beyond traditional pet categories. For investors, the improved profitability and strategic expansion suggest a more resilient business model, while employees and customers could benefit from a wider product selection and enhanced service offerings. The acquisition also highlights a trend of consolidation in the online pet retail space, impacting the broader market dynamics.

Risk Assessment

Risk Level: medium — While Chewy reported strong net income growth for the quarter, the 39-week net income decreased significantly from $369.9 million to $183.6 million, largely due to a non-recurring deferred income tax benefit of $275.7 million in the prior year. This indicates that while operational performance is improving, the year-over-year net income comparison is skewed by a one-time tax event, suggesting that underlying profitability growth, while present, is not as dramatic as the quarterly figures alone might imply. Additionally, the company faces ongoing risks related to sustaining growth rates and managing macroeconomic environments, as highlighted in its forward-looking statements.

Analyst Insight

Investors should consider Chewy's Q3 performance as a positive indicator of operational efficiency and strategic growth, particularly with the SmartPak acquisition. However, they should also scrutinize the full 39-week financial data to understand the impact of prior-year tax benefits on net income. A 'hold' or 'buy' position is warranted for long-term investors, focusing on continued market share gains and successful integration of new acquisitions.

Financial Highlights

debt To Equity

N/A

revenue

$9,336.8M

operating Margin

2.3%

total Assets

$3,294.6M

total Debt

N/A

net Income

$183.6M

eps

N/A

gross Margin

30.0%

cash Position

$675.4M

revenue Growth

+8.4%

Revenue Breakdown

Key Numbers

• $3,116.6M — Net sales for 13 weeks ended Nov 2, 2025 (Increased from $2,877.6M in prior year, an 8.3% growth.)
• $59.2M — Net income for 13 weeks ended Nov 2, 2025 (Significantly increased from $3.9M in prior year period.)
• $9,336.8M — Net sales for 39 weeks ended Nov 2, 2025 (Increased from $8,613.9M in prior year, an 8.4% growth.)
• $183.6M — Net income for 39 weeks ended Nov 2, 2025 (Decreased from $369.9M in prior year, largely due to a deferred income tax benefit in 2024.)
• $928.2M — Gross profit for 13 weeks ended Nov 2, 2025 (Increased from $843.9M in prior year, indicating improved margins.)
• $675.4M — Cash and cash equivalents as of Nov 2, 2025 (Increased from $595.8M as of Feb 2, 2025.)
• $207.5M — Repurchases of common stock for 39 weeks ended Nov 2, 2025 (Reduced from $875.2M in the prior year, indicating less aggressive share buybacks.)
• $428.2M — Net cash provided by operating activities for 39 weeks ended Nov 2, 2025 (Increased from $388.8M in the prior year, showing stronger operational cash generation.)
• $275.7M — Deferred income tax benefit in 39 weeks ended Oct 27, 2024 (Non-recurring benefit that significantly boosted prior year's net income.)
• 414.6M — Total common shares outstanding as of Nov 2, 2025 (Slightly increased from 413.6M as of Feb 2, 2025, despite repurchases.)

Key Players & Entities

• Chewy, Inc. (company) — registrant
• SmartPak Equine, LLC (company) — acquisition target
• BC Partners Advisors LP (company) — controlling shareholder
• New York Stock Exchange (regulator) — exchange where Class A Common Stock is registered
• Securities and Exchange Commission (regulator) — filing authority
• La Caisse de dpt et placement du Qubec (company) — Sponsor
• GIC Special Investments Pte Ltd (company) — Sponsor
• StepStone Group LP (company) — Sponsor
• Longview Asset Management, LLC (company) — Sponsor
• Chewy Pharmacy KY, LLC (company) — indirect wholly-owned subsidiary

FAQ

Risk Factors

• Sustaining Growth Rates [high — market]: Chewy faces the challenge of maintaining its recent growth trajectory, which is dependent on introducing new products, enhancing existing offerings, and potentially expanding into new markets. Failure to do so could impact future financial performance.
• Macroeconomic Environment [high — market]: Adverse impacts from the macroeconomic environment, including supply chain disruptions, workforce challenges, and customer spending shifts, pose a significant risk to Chewy's business operations and financial results.
• Customer Acquisition and Retention [medium — operational]: The ability to acquire and retain new customers cost-effectively is crucial for increasing net sales and maintaining profitability. Increased competition or changes in customer preferences could hinder these efforts.
• Supply Chain and Supplier Relationships [medium — operational]: Maintaining strong supplier relationships, sourcing additional suppliers, and negotiating favorable terms are critical. Disruptions or unfavorable pricing from suppliers could impact cost of goods sold and product availability.
• Fulfillment Center Operations [medium — operational]: Optimizing and managing the expansion of fulfillment center capacity is essential for efficient operations. Any inefficiencies or capacity constraints could affect delivery times and customer satisfaction.
• Competition in E-commerce Pet Products [high — market]: Chewy operates in a competitive e-commerce market for pet products. Effectively competing requires continuous innovation, competitive pricing, and superior customer service.
• Forecasting and Expense Planning [medium — financial]: Accurately forecasting net sales and planning expenses is vital for profitability. Inaccurate forecasts can lead to suboptimal resource allocation and impact financial performance.
• Online Payment Methods [low — legal]: Managing losses related to online payment methods and ensuring the security and reliability of these transactions is an ongoing operational and financial risk.

Industry Context

The pet product e-commerce market continues to show resilience, driven by increasing pet ownership and humanization trends. Chewy operates in a competitive landscape with both specialized online retailers and broader e-commerce platforms. Key industry trends include a growing demand for premium and specialized pet foods, health products, and subscription-based services.

Regulatory Implications

Chewy must comply with various regulations related to product safety, advertising, data privacy, and e-commerce operations. Changes in these regulations, particularly concerning online sales and consumer protection, could impact operational costs and business practices.

What Investors Should Do

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Key Dates

• 2025-11-02: End of the third quarter of fiscal year 2025 — Reporting period for the condensed consolidated financial statements, showing net sales of $3,116.6M and net income of $59.2M for the quarter.
• 2025-10-27: Prior year comparable period end — Used for year-over-year comparisons, showing net sales of $2,877.6M and net income of $3.9M for the thirteen weeks ended.
• 2025-10-28: Announcement of definitive agreement to acquire SmartPak Equine, LLC — Strategic acquisition expected to enhance Chewy's equine product offerings and market position.
• 2025-02-02: Balance sheet date for prior fiscal year end — Used for comparison of current assets and liabilities, with cash and cash equivalents at $595.8M.

Glossary

Autoship program

A subscription service where customers can schedule recurring deliveries of products, often with a discount. (Key driver of customer retention and predictable revenue for Chewy.)

Gross profit margin

The percentage of revenue that exceeds the cost of goods sold. (Indicates the company's efficiency in production and pricing power. Improved to 30.0% for the 39 weeks ended Nov 2, 2025.)

Deferred income tax benefit

A reduction in income tax expense recognized in the financial statements, often due to changes in tax laws or the valuation of deferred tax assets/liabilities. (Significantly impacted prior year net income ($275.7M benefit in 2024), explaining the year-over-year decrease in net income despite revenue growth.)

Operating lease right-of-use assets

An asset recognized under accounting standards for leases, representing the right to use an asset over the lease term. (Reflects Chewy's significant investment in leased facilities, such as fulfillment centers.)

Accumulated deficit

The cumulative net losses of a company since its inception, offset by any net profits. (Chewy has an accumulated deficit of $1,399.3M as of November 2, 2025, indicating historical unprofitability, though it has narrowed.)

Common shares outstanding

The total number of shares of a company's common stock that are held by all its shareholders. (Total common shares outstanding were 414.6M as of November 2, 2025, a slight increase from February 2, 2025.)

Year-Over-Year Comparison

Chewy demonstrated robust revenue growth, with net sales increasing by 8.3% for the quarter and 8.4% year-to-date, reaching $3,116.6M and $9,336.8M respectively. Net income saw a significant surge to $59.2M for the quarter, a substantial improvement from $3.9M in the prior year. However, year-to-date net income decreased to $183.6M from $369.9M, primarily due to a large deferred income tax benefit in the prior year. Gross profit margin improved, and cash from operations increased, indicating stronger underlying business performance despite the year-over-year net income comparison distortion.

Key Financial Figures

• $0.01 — stered Class A Common Stock, par value $0.01 per share CHWY New York Stock Exchange

Filing Documents

• chwy-20251102.htm (10-Q) — 1099KB
• exhibit311certificateofchi.htm (EX-31.1) — 11KB
• exhibit312certificateofchi.htm (EX-31.2) — 12KB
• exhibit321certificateofchi.htm (EX-32.1) — 6KB
• chwy-20251102_g1.jpg (GRAPHIC) — 82KB
• 0001766502-25-000059.txt ( ) — 6026KB
• chwy-20251102.xsd (EX-101.SCH) — 33KB
• chwy-20251102_cal.xml (EX-101.CAL) — 58KB
• chwy-20251102_def.xml (EX-101.DEF) — 209KB
• chwy-20251102_lab.xml (EX-101.LAB) — 526KB
• chwy-20251102_pre.xml (EX-101.PRE) — 369KB
• chwy-20251102_htm.xml (XML) — 719KB

FINANCIAL INFORMATION

PART I. FINANCIAL INFORMATION

Financial Statements (Unaudited)

Item 1. Financial Statements (Unaudited) 3 Condensed Consolidated Balance Sheets as of November 2, 2025 and February 2, 2025 3 Condensed Consolidated Statements of Operations and Comprehensive Income for the Thirteen and Thirty-Nine Weeks Ended November 2, 2025 and October 27, 2024 4 Condensed Consolidated Statements of Stockholders' Equity for the Thirteen and Thirty-Nine Weeks Ended November 2, 2025 and October 27, 2024 5 Condensed Consolidated Statements of Cash Flows for the Thirty-Nine Weeks Ended November 2, 2025 and October 27, 2024 6 Notes to Condensed Consolidated Financial Statements 7

Management's Discussion and Analysis of Financial Condition and Results of Operations

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 19

Quantitative and Qualitative Disclosures about Market Risk

Item 3. Quantitative and Qualitative Disclosures about Market Risk 28

Controls and Procedures

Item 4. Controls and Procedures 28

OTHER INFORMATION

PART II. OTHER INFORMATION

Legal Proceedings

Item 1. Legal Proceedings 29

Risk Factors

Item 1A. Risk Factors 29

Unregistered Sales of Equity Securities and Use of Proceeds

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 29

Other Information

Item 5. Other Information 29

Exhibits

Item 6. Exhibits 30

SIGNATURES

SIGNATURES 31

FINANCIAL INFORMATION

PART I. FINANCIAL INFORMATION CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS This Quarterly Report on Form 10-Q for the quarterly period ended November 2, 2025 contains forward-looking statements about us and our industry that involve substantial risks and uncertainties. All statements other than statements of historical facts contained in this Quarterly Report on Form 10-Q, including statements regarding our share repurchase program, our future results of operations or financial condition, business strategy and plans and objectives of management for future operations, are forward-looking statements. In some cases, you can identify forward-looking statements because they contain words such as "anticipate," "believe," "contemplate," "continue," "could," "estimate," "expect," "forecast," "intend," "may," "plan," "potential," "predict," "project," "seek," "should," "target," "will" or "would" or the negative of these words or other similar terms or expressions, although not all forward-looking statements contain these identifying words. Although we believe that the forward-looking statements contained in this Quarterly Report on Form 10-Q are based on reasonable assumptions, you should be aware that many factors could cause actual results to differ materially from those in such forward-looking statements, including but not limited to, our ability to: sustain our recent growth rates and successfully manage challenges to our future growth, including introducing new products or services, improving existing products and services, and expanding into new jurisdictions and offerings; successfully respond to business disruptions; successfully manage risks related to the macroeconomic environment, including any adverse impacts on our business operations, financial performance, supply chain, workforce, facilities, customer services and operations; acquire and retain new customers in a cost-effective manner and increase our net sales, improve margins and maintain

Financial Statements (Unaudited)

Item 1. Financial Statements (Unaudited) CHEWY, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (in millions, except share and per share data) As of November 2, 2025 February 2, 2025 Assets (Unaudited) Current assets: Cash and cash equivalents $ 675.4 $ 595.8 Marketable securities 26.1 0.9 Accounts receivable 216.0 169.0 Inventories 943.9 836.7 Prepaid expenses and other current assets 66.8 60.0 Total current assets 1,928.2 1,662.4 Property and equipment, net 554.3 562.2 Operating lease right-of-use assets 471.2 450.4 Goodwill 39.4 39.4 Deferred tax assets 257.5 257.5 Other non-current assets 44.0 42.6 Total assets $ 3,294.6 $ 3,014.5 Liabilities and stockholders' equity Current liabilities: Trade accounts payable $ 1,276.8 $ 1,175.9 Accrued expenses and other current liabilities 983.1 1,030.8 Total current liabilities 2,259.9 2,206.7 Operating lease liabilities 523.0 502.4 Other long-term liabilities 42.3 43.9 Total liabilities 2,825.2 2,753.0 Commitments and contingencies (Note 5) Stockholders' equity: Preferred stock, $ 0.01 par value per share, 5,000,000 shares authorized, no shares issued and outstanding as of November 2, 2025 and February 2, 2025 — — Class A common stock, $ 0.01 par value per share, 1,500,000,000 shares authorized, 238,160,495 and 193,892,875 shares issued and outstanding as of November 2, 2025 and February 2, 2025, respectively 2.4 1.9 Class B common stock, $ 0.01 par value per share, 395,000,000 shares authorized, 176,478,229 and 219,698,561 shares issued and outstanding as of November 2, 2025 and February 2, 2025, respectively 1.8 2.2 Additional paid-in capital 1,864.0 1,840.2 Accumulated deficit ( 1,399.3 ) ( 1,582.9 ) Accumulated other comprehensive income 0.5 0.1 Total stockholders' equity 469.4 261.5 Total liabilities and stockholders' equity $ 3,294.6 $ 3,014.5 See accompanying Notes to Condensed Consolidated Financial Statements. 3 CHEWY, INC. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS