Chewy Delivers In-Line Second Quarter Amid Weak Discretionary Spending Environment
Chewy's (CHWY) fiscal second-quarter results largely matched Wall Street's expectations even as the online pet store company faced pressure within the consumables and hard goods categories.Adjusted per-share earnings for the quarter ended Aug. 2 rose to $0.36 from $0.33 a year earlier, in line with the FactSet-polled consensus estimate. Sales rose 7.3% to $3.33 billion, while analysts expected $3.32 billion."Pressure on premiumization and discretionary spending materialized broadly in line with our expectations during the quarter affecting both the consumables and hard goods categories," Chief Financial Officer Chris Deppe said during an earnings conference call, according to a FactSet transcript. "In the second quarter, treat sales growth slowed more sharply than growth in core food, reflecting moderation in discretionary purchases and the broader macroeconomic pressures we have been describing."Shares of Chewy slid 7.7% in Wednesday trading. The stock has slid 35% so far this year.The company raised full-year sales guidance to a range of $13.46 billion to $13.57 billion from its previous $13.40 billion to $13.55 billion outlook. Analysts are looking for $13.48 billion.The company now expects core profitability margin between 6.7% to 6.8%, lifting the lower end of the range from 6.6%.For the ongoing quarter, Chewy is projecting sales of $3.323 billion to $3.358 billion, indicating 6.6% to 7.7% growth year over year. The Street expects $3.328 billion."The durability of our recurring revenue base, continued customer growth, and disciplined execution give us confidence to raise our full-year revenue and profitability outlook, while continuing to invest in compelling opportunities that deepen customer engagement and create long-term shareholder value," Chief Executive Sumit Singh said in a statement.Late last month, RBC Capital Markets expected Chewy's second-quarter results to demonstrate consistent market share gains. The brokerage had projected a 6.8% year-over-year sales gain and expected the company to affirm its full-year guidance, according to an Aug. 26 note."We continue to gain share, grow our recurring customer base and expand profitability through structural improvements across the organization," Deppe told analysts Wednesday. "Our updated outlook reflects increased visibility into the balance of the year and continued confidence in our ability to deliver profitable growth."Active customers improved 3.8% annually to 21.71 million in the second quarter.Last week, Chewy rival Petco Health & Wellness (WOOF) posted stronger-than-expected second-quarter earnings even as sales held steady, as analysts had projected. Last month, Freshpet (FRPT) delivered a second-quarter beat and raised its full-year outlook.Price: $21.20, Change: $-2.07, Percent Change: -8.90%
