Chewy (CHWY) Shares Drop 10% on Lowered Guidance, Analysts Cut Numbers

August 31, 2022 8:30 AM EDT
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Price: $41.20 -1.34%

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    18 Buy, 7 Hold, 1 Sell

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Shares of Chewy (NYSE: CHWY) are down over 10% in pre-open Wednesday after the company reported mixed results and slashed its full-year guidance.

Chewy reported revenue of $2.43 billion (up 12.8% year-over-year) and EPS of $0.05. This compares to the consensus of $2.45 billion in revenue and EPS of -$0.04.

“We are proud of our second quarter 2022 performance and ability to deliver double-digit topline growth and margin expansion in a rapidly evolving macro environment,” said Sumit Singh, CEO of Chewy.

For this quarter, the company sees net sales between $2.44 billion and $2.46 billion, lower than the estimate of $2.63 billion. Chewy also cut its full-year sales forecast to the range of $9.9 billion to $10 billion from the prior $10.2 billion to $10.4 billion. Analysts were looking for the guidance of $10.35 billion in full-year revenue.

“We believe that we will continue to see differences in demand patterns between discretionary and non-discretionary categories throughout the balance of the year. As such, we are revising our full-year top line expectations. At the same time, we are also raising our profitability outlook,” the company added.

JPMorgan analyst Doug Anmuth cut the price target by $1 to $55 on “mixed” results.

“We recognize N-T concerns around Active Customers & overall Revenue growth into 2023, but we believe CHWY’s strength in non-discretionary (food & healthcare) position the company to continue to take share in a tough operating environment,” Anmuth wrote in a client note.

RBC analyst Steven Shemesh said the Q2 results prove Chewy is “not totally immune from consumer weakness.” The analyst also cut the price target as he went to $56 from the prior $59.

“We think results were good enough and the after-hours move is likely overdone (keeping in mind that shares have outperformed the market by ~32% since 1Q reporting). We lower our FY’22 net customer adds estimate to +0.2M and our net sales growth estimate to +11.4%, though we raise our EBITDA margin estimate to 1.9%,” Shemesh said in the note.

By Senad Karaahmetovic

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