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Chewy (NYSE:CHWY) Tanks on Q2 Numbers
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Chewy (NYSE:CHWY) Tanks on Q2 Numbers

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Chewy has delivered an impressive double-digit topline growth in the second quarter. However, its margins are coming under pressure.

Chewy (NYSE:CHWY) shares are plummeting in the pre-market session today after the pet food and supplies provider posted its second-quarter numbers. Revenue rose 14.4% year-over-year to $2.78 billion, outperforming estimates by $20 million. EPS at $0.15 also landed past expectations by $0.06.

During the quarter, net sales per active customer increased by an impressive 14.7% to $530. While the gross margin improved by 20 basis points to 28.3%, the company’s net margin contracted by 20 basis points to a wafer-thin 0.7%. This points to pressure from higher operating expenses and increased promotional activity.

Chewy expects Autoship to continue to drive its growth on the back of a recurring revenue model. The company expects full-year revenue to hover between $11.15 billion and $11.35 billion. Additionally, it is looking to expand its footprint into Canada in the third quarter.

Overall, the Street has a consensus price target of $43.61 on Chewy, alongside a Moderate Buy consensus rating. This implies a mouth-watering 59.6% potential upside in the stock.

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