Chewy shares jump following earnings beat

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By Sam Boughedda 

Chewy (NYSE:CHWY) shares jumped Friday morning after the company posted third quarter earnings after the close Thursday, topping consensus estimates and lifting its full-year adjusted EBITDA target.

The online pet products retailer reported earnings of $0.01, $0.10 better than the analyst estimate of a $0.09 loss per share, while revenue for the quarter came in at $2.53 billion, rising 14.5% year-over-year and coming in above the consensus estimate of $2.46B.

"Chewy's third-quarter results showed accelerating double-digit topline growth, sustained gross margin expansion, and solid free cash flow generation. The fact that we are simultaneously driving top line growth and expanding margins is yet another proof point of our ability to get big fast and get fit fast, regardless of the macro environment," commented Sumit Singh, Chief Executive Officer of Chewy.

Singh added that the results show "a clear indication of the resiliency of the pet category."

Looking forward, Chewy raised its full-year adjusted EBITDA. It now sees an adjusted EBITDA margin between 2.3% and 2.4%, while full-year net sales are seen from $10.02B and $10.04B.

Reacting to the results, Wolfe Research analyst Deepak Mathivanan said: "CHWY's F3Q came in ahead of expectations, driven by inflation pass through, stable demand, and solid execution. The company is making good progress on LT initiatives. We maintain our PP rating on valuation and MT growth concerns."

Morgan Stanley analysts told investors in a note: "Better 3Q revenue and adj. EBITDA results as anticipated with gross margin the standout. Profitability remains a bright spot as pricing, lower fuel costs, and fulfillment/logistics initiatives drove a 20% 3Q flow-through rate vs. 22% last quarter. 4Q guidance appears conservative on both top and bottom line (10-11% rev growth and implied ~1.2% margin) as 3P data suggests 4Q has not slowed vs. 3Q's +14% result."

Finally, UBS analysts said there was "not enough to chew on."

"We believe CHWY's 3Q results were better than many expected. Plus, its making notable productivity improvements driven by its automated FCs. Though, we question the sustainability of its NSPAC growth as discretionary demand continues to soften and inflation moderates. Thus, we think the stock will remain range-bound in the near term," wrote the analysts.

Chewy shares rose 5% at the start of Friday's session.