Chewy Earnings: The Key Highlights

Chewy (CHWY -0.64%) answered some big questions for investors in its latest earnings report. Growth trends held up as consumers spent freely on their pets during the third quarter, even if profits are still under pressure. 

In this video from "Beat & Raise," recorded on Dec. 10, Fool contributors Rachel Warren and Demitri Kalogeropoulos discuss the highlights from that earnings announcement. 

Rachel Warren: This is just a quick overview of how Chewy performed in the third quarter. We're going to go through the much more fun and colorful third-quarter shareholder letter here in a second. One thing that's interesting here, we've been talking about how Chewy has just totally tanked share price-wise in recent months. But if you actually look over the past few years since it became a publicly traded company, it has very slightly outperformed the S&P 500 total return. I thought that was interesting to note. In this most recent quarter, net sales totaled $2.2 billion.

That was right in line with what analysts were estimating. That was a 24% year-over-year jump. The company's gross margin for the three-month period, 26.4%. That represented a 90-basis-point hike on a year-over-year basis. Its net loss for the period totaled 32.2 million. When we get into the shareholder letter a little that we'll delve into a year-over-year comparison there. Net margin, slight improvement if memory serves from the previous year-ago period, an improvement of 30 basis points.

The company is not yet profitable. But part of the reason for this, it's investing a lot in its fulfillment infrastructure. It's investing a lot in building up that really well-processed supply chain and it's also just investing a lot in growing its business. Adjusted EBITDA was $6 million for the three-month period, which was a nice, nearly 10% jump year-over-year. That margin, however, was flat. Then net sales, I thought this was very interesting.

Compared to the same quarter two years ago, Q3, 2019, its net sales were up 86%. The thing that I think upsets some investors and is part of why the stock has gone down a bit in response to earnings was ongoing net losses, a slight lowering of its guidance which we'll look at here in a it. But there were still some really positive things as well. Go ahead.

Demitri Kalogeropoulos: Chime in on that gross number, that's just fantastic. Eighty-six percent since 2019, also we're talking pretty big numbers here. This isn't a very small business adding several billion dollars in sales over the last few years. Then that 24% is nothing to sneeze out either this quarter compared to a growing number last year. If there's any worries of slowing growth, it doesn't seem to be showing up right now.

Warren: That's a really great point, and yes, please feel free to jump in throughout because I want us to discuss this, not just being monologuing over here, but I think it's interesting and part of that is the trend we've been seeing.

We've talked with a lot of stocks that have a pretty solid quarter and the stock just tanks. I don't know if it's a combination of overall concern about the market right now among some investors, increased volatility from some of the more speculative types of investments we're seeing.

As well as maybe just expectations being a little too high as we transition to a new part of the pandemic. Commenting on that, the CEO said: "Our third-quarter profitability reflects the impact of ongoing supply chain disruptions, labor shortages, and higher inflation. Working through those uncertainties, we're focused on the long term and building an enduring franchise." Like I mentioned, its move to diversify its business most recently with that partnership with Trupanion is definitely evidence of that.