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Chewy Earnings Were Better Than Expected. Why Its Stock Is Falling.

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Chewy said elevated out-of-stock levels were a headwind throughout the quarter and reduced sales by about $40 million.

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Chewy

shares were trading lower in late trading Thursday after the online pet products company posted better-than-expected results for the company’s fiscal first quarter.

For the quarter ended May 2, Chewy (ticker: CHWY) reported revenue of $2.14 billion, up 32% from a year ago, and slightly ahead of both the company’s guidance range of $2.11 billion to $2.13 billion and the Street consensus forecast of $2.13 billion. 

Net income was $38.7 million, or 9 cents a share, ahead of the Street consensus forecast of a loss of 3 cents a share. Adjusted Ebitda (earnings before interest, taxes, amortization, and depreciation) was $77.4 million, up from $3.4 million a year ago. 

Chewy said it now has 19.8 million active customers, up 32% from a year ago. Net sales per active customer over the past 12 months was $388, up 8.7% from a year ago.

Chewy said that while it was pleased with sales in the quarter, “elevated out-of-stock levels” were a headwind throughout the quarter and reduced sales by about $40 million. “These industrywide headwinds are supply-driven and we expect them to abate in the second half of the year as additional production capacity comes online,” the company said in a letter to shareholders. “Until then, we will keep actively managing our inventory and using our recommendation engines to help customers find attractive alternatives.”

For the fiscal second quarter, Chewy is projecting revenue of $2.15 billion to $2.17 billion, up 26% to 28%, and just ahead of the Street consensus at $2.13 billion. For the January 2022 fiscal year, Chewy now sees revenue of $8.9 billion to $9 billion, in line with the Street’s consensus forecast of $8.95 billion. Chewy’s previous guidance was for $8.85 billion to $8.95 billion. The company sees its full-year adjusted Ebitda margin expanding 80 to 120 basis points from fiscal 2021. (One basis point equals one-hundredth of a percentage point.)

In late trading, Chewy shares were down 2.3%, to $77.53.

Write to Eric J. Savitz at [email protected]

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