Piper Sandler analyst Peter Keith reiterated a Neutral rating and $45.00 price target on Chewy Inc. (NYSE: CHWY) after the company missed Q4 estimates and guided 2022 sales/EBITDA below consensus. At the time of this writing, the analyst had not spoken with management and will likely publish a followup but currently 4 key questions remain unanswered:

1) Product cost inflation? While the price increase lag to product cost inflation was the biggest headwind to GM in Q4, CHWY notes the gap is moderating. However, we are unclear on what impact, if any, is factored into 2022 from this price increase lag.
2) Inflation lift to Sales? CHWY noted pricing is a single digit lift to sales. What is the inflation lift to sales for
2022 factored into guidance?
3) Elevated churn continuing? This was called out as a headwind to Q4, but several factors impacting customer acquisition in Q4 2020 also played out in Q1 2021 (e.g. stimulus checks).
4) Q4 EBITDA margin below guidance? While sales missed slightly, we still aren't fully clear on why Q4 EBITDA margin missed implied margin guidance.

The analyst stated "Net adds in 2022 are expected to run below 2021 - due in part to elevated churn that started in Q4. Also, margin pressures are changing from Q4 to 2022, with outbound freight and DC labor costs as notable 2022 headwinds. We still have concerns product cost inflation could intensify in 2022 - particularly in pet food - and need more clarity on how this risk is factored in the 2022 outlook. CHWY introduced several interesting initiatives for 2023 (loyalty program and sponsored ads). All in, inflation is proving to be a challenge to CHWY's profitability and we currently aren't convinced all inflation headwinds are factored into the 2022 outlook."

For an analyst ratings summary and ratings history on Chewy Inc. click here. For more ratings news on Chewy Inc. click here.

Shares of Chewy Inc. closed at $51.00 yesterday.