Chewy Earnings: A Street-Beating Quarter

Pet-focused company reports a surprise net profit, revenue up year over year

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Mayank Marwah
Jun 11, 2021

Summary

  • Shares dropped 2.4% following the earnings announcement.
  • Chewy’s revenue was reduced by $40 million due to persistent inventory issues.
  • At the end of the quarter, the company had 19.8 million active customers.
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Chewy Inc. (

CHWY, Financial), a U.S. online retailer of pet food and related products, reported its first-quarter financial figures before the opening bell on June 10.

A rise in the number of active customers coupled with persistent “strength in purchasing behavior” drove the top and bottom lines above estimates.

The company’s shares declined 2.4% to $77.48 in premarket trading on Thursday following the announcement.

Bird’s-eye view

The company’s net profit for the quarter stood at $38.7 million, or 9 cents per share, up from a loss of $47.9 million, or 12 cents per share, reported in the year-ago quarter. Chewy attributed the growth to improved gross margin performance and lower share-based payments. Wall Street analysts had anticipated an adjusted loss per share of 3 cents. The company maintained a gross profit margin of 27.6% on sales, which reflected growth of 420 basis points year over year.

Likewise, Chewy’s revenue came in at $2.04 billion (up 31.7% from the year-ago period). The hard goods, proprietary brands, pharmacy and specialty divisions performed exceedingly well during the quarter, which helped drive the company’s top line. These segments combined grew sales by roughly 52%. Analysts had projected revenue to be $1.62 billion.

Despite achieving impressive year-over-year sales growth, Chewy’s said its sales were adversely impacted by $40 million on account of “elevated out-of-stock levels.” Going forward, this supply-driven inefficiency is expected to subside “as additional production capacity comes online.”

Consumables presently hold a substantial share of the company's revenue. In 2020, it contributed to around 70% of the top line. However, Chewy is attempting to push into health care services for pets. Last October, the company announced its plan to extend a telehealth service which would offer veterinarian care. This would mean entering into pharmacy, gift cards and personalized products.

CEO Sumit Singh had the following to say about Chewy’s performance:

“2021 is already turning out to be an exciting and busy year for Chewy. We continue to execute against our growth roadmap, expand our customer base, increase share of wallet, and grow our addressable market-expanding verticals. I am incredibly proud of the determination and focus of our teams and their ability to accelerate our pace of innovation on behalf of our customers, while consistently delivering strong top-line and bottom-line results for our shareholders.”

At the quarter’s end, the company had 19.8 million active customers, which reflected a 32% increase compared to last year. In addition, net sales per active customer jumped 8.7% to $388.

Guidance

The company has provided fiscal second-quarter guidance. Chewy projects revenue to fall within the $2.15 billion to $2.17 billion range, reflecting growth of around 26% to 28%. That compares with analysts’ outlook of $2.13 billion. For full-year 2021, revenue guidance ranges between $8.9 billion and $9 billion, translating to year-over-year growth of around 25% to 26%. Analysts are anticipating $8.95 billion in revenue.

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Disclosures

I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
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