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Investors take a 10% bite off Chewy stock following earnings

By William Hoffman

21:54, 1 September 2021

Dog Food
Chewy delivers dog food - Photo Shutterstock

Online pet supplies retailer Chewy saw its stock price fall nearly 10% post market close after missing expectations for second quarter earnings.

Chewy reported net sales of $2.16bn for the quarter, which is a 26.8% rise over the comparable period a year ago, but slightly missed expectations of $2.2bn.

The company also recorded a loss of 4 cents per share, which was more than the 2 cent loss analysts expected.

Covid recovery

As the so-called Amazon of pet food, Chewy saw strong growth through the pandemic amid a surge in online sales.

That growth has largely continued through the recovery as it has built up $1.51bn of autoship customer sales, which is a more than 30% increase year-over-year in the all-important recurring revenues category.

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However, investors are seeing a slowdown in the growth quarter over quarter and are wondering if these customers that joined on during the pandemic will continue these shopping habits as they become more comfortable with going out to stores again.

Management did acknowledge they expect some drop off in the latter part of the year, but say by 2022 it will have worked through that cycle of one-time users.  

“The customers we are acquiring and retaining are spending more and more on the platform and that’s a very good sign,” management said on the earnings call. “That’s a good dynamic that leads to a growing top line and expanding gross margins, because repeat orders are more profitable than first orders and also lead to more efficiencies in the supply chain that are more profitable overall.”

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