What happened
Shares of pet e-commerce company Chewy (CHWY 1.41%) skyrocketed on Thursday after the company reported its latest quarterly financial results. As of 10:15 a.m. ET, Chewy stock was up an impressive 24%.
So what
Starting with the top line, Chewy had net sales of $2.78 billion in its fiscal first quarter of 2023, ended in April. The quarter fared better than management expected, considering its guidance called for net sales of $2.74 billion, at best.
NYSE: CHWY
Key Data Points
The top line was better than expected for Chewy, but the bottom line blew away Wall Street's expectations, and it's likely the main reason the stock is up so much today. For example, the company had Q1 free cash flow of $127 million. For perspective, it had just $130 million in free cash flow in the last three full fiscal years combined.
With Chewy showing ongoing sales growth and improved profitability, the analyst community was raising its price targets for the stock. This can instill confidence in the investor community, and it contributed to today's gains.
Now what
Chewy's management raised its full-year guidance, but not by much. It had guided for full-year net sales of $11.1 billion to $11.3 billion, but now it expects full-year net sales of $11.15 billion to $11.35 billion.
Moreover, it had guided for its margin for adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) to potentially fall a little bit. But now it expects an adjusted EBITDA margin of 3% for 2023, which is the same as 2022.
Q1 results were certainly encouraging for Chewy's shareholders. However, its active customer count merely held steady at 20.4 million. With customer growth seemingly stalled out in the U.S., the company is now looking to international markets, with Canada becoming the first international market for the company later this year.
Ideally, you'd like to see ongoing growth in the U.S., and international expansion could be pricey. These things are worth watching, but they don't detract from Chewy's strong Q1 results.
