Online pet product specialist Chewy (NYSE:CHWY) is set to report fiscal third-quarter earnings today after the close. Expectations are elevated given the stock is trading near all-time highs. Chewy is among many e-commerce companies that have benefited from the COVID-19 pandemic as consumers have shifted purchasing behavior to online platforms.

Here's what to expect from Chewy's release.

Assortment of various pet products, including toys, a food bowl, and a brush

Image source: Getty Images.

Guiding for 38% to 40% revenue growth

Chewy's guidance calls for revenue of $1.7 billion to $1.72 billion in the fiscal third quarter, which ended on Nov. 1, representing growth of 38% to 40%. Analysts are expecting the company to report sales at the high end of that outlook, with the consensus estimate currently perched at $1.72 billion. Wall Street is modeling for Chewy to lose $0.13 per share. Chewy only offers a top-line forecast.

At a time when many companies are declining to provide guidance due to the ongoing macroeconomic uncertainty related to the public health crisis, Chewy is able to give investors a detailed outlook thanks to the dominance of subscription sales. The company's Autoship program, which sends regular shipments of everything from food to prescription medicine, consistently represents nearly 70% of sales. That gives Chewy strong visibility into its revenue pipeline.

Net sales per active customer has been fairly steady throughout the year, so Chewy's growth is primarily coming from adding new customers as opposed to higher spending from existing ones. Chewy has added 3.1 million active customers so far this fiscal year, an increase of 23%.

Progress on other fronts

Beyond the numbers, investors will also want to hear any updates around other strategic initiatives. Chewy has been investing heavily in its fulfillment network in order to meet the booming demand. A new fulfillment center in Archibald, Pennsylvania was scheduled to open in mid-October.

That location is also notable since it is the company's first automated facility, which will yield operational efficiencies and help reduce costs: CFO Mario Marte recently estimated that automation could increase labor productivity by 50%, boost throughput capacity per square foot by 25%, and reduce fixed and variable fulfillment cost per unit by 30%.

Chewy has also been expanding its pharmacy business, including the recent additions of compounded medications and a new telehealth service for pets. Adding more complementary offerings like prescription medication, particularly within Autoship, strengthens the value proposition and boosts customer retention. By the end of this fiscal year, Chewy expects to have 11 fulfillment centers plus another three facilities focused primarily on pharmacy orders.

"Pharmacy continues to resonate with our customers, and we continue to be pleased with the results," CEO Sumit Singh said on the last earnings call. "As we've noted, pharmacy made positive contributions to the company's Q2 revenue and margin expansion goals, and we continue to benefit from the efficiencies provided by the expanded network of our Rx fulfillment centers that allows us to deliver an even sharper experience and faster delivery times."

More broadly, pet ownership has soared during the pandemic, especially for dogs as people looked for companionship while socially isolating. While some of the trends related to the outbreak may revert to normal once vaccines become available, people will still have those newly adopted pets for the long haul. Wedbush believes that Chewy is positioned to capitalize on the rising tide of pet ownership.

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