Chewy, Inc. (NYSE: CHWY) has delivered surprisingly better results for the first quarter of Fiscal 2022 (ended May 1, 2022). The company’s earnings were 200% above the consensus loss estimate in the quarter. Revenues surprise stood at 1.25%.
Better-than-expected results for the quarter lifted the market sentiments for this $9.9-billion pet food retailer. After declining 5.3% during the day, shares of Chewy jumped 18.8% in Wednesday’s extended trading session.
Financial Highlights
Chewy reported adjusted earnings of $0.11 per share in the quarter, compared with the consensus loss estimate of $0.11 per share. However, the bottom line declined 26.7% on a year-over-year basis, as the impact of higher sales was offset by higher costs and expenses.
Revenues of $2.43 billion surpassed the consensus estimate of $2.4 billion. The top line expanded 13.7% year-over-year, driven by a 16.7% increase in consumables sales and 23.1% growth in other sales, offset by an 8% decline in hardgoods sales.
The number of active customers grew 4.2% and net sales per active customer increased 14.9% year-over-year.
The cost of revenue in the quarter increased 13.9% year-over-year, while gross margin declined 10 basis points (bps). Total operating expenses grew 17.9% from the year-ago quarter. Adjusted earnings before interest, tax, depreciation, and amortization margin were down 110 bps.
Exiting the first quarter, Chewy had cash and cash equivalents of $604.8 million, up 0.3% from the previous quarter. Its total liabilities were $2,131.4 million, up 2.9% quarter-over-quarter.
Net cash flow from operating activities totaled $82.4 million, down 16.2% year-over-year. Capital expenditure was $76 million, up 95.5% from the year-ago quarter.
Management’s Take
The CEO of Chewy, Sumit Singh, said, “Chewy’s value proposition is as compelling as ever.” He added that the company continues “to innovate robustly, attract customers with high lifetime values, drive engagement, and capture greater share of wallet.”
Stock Rating
On June 1, Peter Keith of Piper Sandler maintained a Hold rating on CHWY while lowering the price target to $29 (23.46% upside potential) from $45.
Overall, Chewy has a Moderate Buy consensus rating based on 10 Buys and eight Holds. CHWY’s average price target of $53.76 suggests 128.86% upside potential from current levels. Over the past year, shares of Chewy have fallen 69.7%.
Bloggers’ Stance
As per TipRanks, financial bloggers are 76% Bullish on CHWY, compared with the sector average of 66%.
Conclusion
Chewy seems to be well-positioned to benefit from the growth in active customers as well as healthy consumables and other sales. However, the company has to work on keeping costs and expenses under control to protect its profitability.
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