On Tuesday, March 30, online pet retailer Chewy (CHWY +1.66%) will put a cap on its fiscal year 2020 by reporting its fourth-quarter and full-year results. Like other e-commerce businesses, its sales have increased during the coronavirus pandemic as consumers look to reduce trips to stores. By the same token, Chewy is experiencing rising costs as it wrestles with challenges from operating in the presence of a deadly virus.
When Chewy releases its results for the fourth quarter, investors will hear more from management on developing trends. Investors will be asking questions like: Can Chewy pivot successfully as more folks get vaccinated and feel comfortable leaving their homes again?
Discussion on that topic and a couple of important metrics I will detail below will be crucial for investors who are looking to make a decision on Chewy stock.
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Can Chewy maintain robust revenue and customer growth?
When Chewy's fourth-quarter results are released, the first thing investors will want to look at is overall revenue growth. The company is guiding that it will deliver sales of between $1.94 billion and $1.96 billion. A majority of the company's sales come in the form of subscriptions, which helps its ability to forecast sales with such a narrow range. If it can hit that target, it would be a 44% increase from the prior year.
The next thing individuals will want to look at is total active customers, which increased by 39.8% from 2019 to reach a whopping 17.8 million as of Nov. 1, 2020. Folks looking for a safe and convenient shopping experience are finding Chewy.com checks both boxes. Importantly, customers typically ramp up spending on its site as time goes by, so new customer signups this quarter and this year could foretell increases in spending over the next several quarters.
Finally, and perhaps more qualitatively than the rest of the metrics already mentioned, investors will want to know how Chewy's business is evolving as people feel more comfortable leaving their homes. The number of people experiencing negative health outcomes because of COVID-19 is thankfully decreasing in the U.S. over the last several weeks. Additionally, as of this writing, 128 million doses of COVID-19 vaccines have been distributed to Americans. That trend has the potential to remove the tailwind for Chewy from folks avoiding shopping in-person.
What this means for investors
Analysts on Wall Street expect Chewy to report revenue of $1.96 billion and a loss per share of $0.10, which would be increases of 44.6% and 33%, respectively, from the same period last year. Because of Chewy's visibility into its sales, a large deviation away from expectations is not likely.
Still, Chewy's shares are down 21% over the last 30 days as investors could be anticipating the business consequences of the receding threat of the virus. For that reason, if Chewy reports revenue or earnings per share above expectations or even if it provides optimistic guidance for the fiscal year 2021, shares of this specialty retailer could pop in response.
