It's time to see if Chewy (CHWY +3.37%) shareholders will be given a treat for a job well done. The popular online retailer of pet supplies and other essentials reports its fiscal first-quarter results on Wednesday morning. There are a lot of mixed signals out there in the world of pet stocks.
Brick-and-mortar retailer Petco Health & Wellness saw its stock plummet 23% on Friday after offering up a disappointing financial report. The stock has shed nearly 85% of its value over the past year. Chewy's momentum is marching to a more upbeat drum. The shares may be just shy of where they were five years ago, but the e-tailer's stock has more than doubled over the past year.
Unlike Petco, expectations are high for Chewy this week. Let's take a closer took at what investors should expect heading into this telltale quarterly update.
NYSE: CHWY
Key Data Points
Let's take Chewy for a walk
Chewy came through with a blowout fiscal fourth quarter three months ago. Net sales soared 15% for the holiday quarter that ended on Feb. 2, its strongest year-over-year growth in three years. After six periods of single-digit top-line growth, it finally returned to double-digit growth. The strong showing was enough to lift full-year sales growth to 6%.
There's a catch, of course. Given the nuance of Chewy's fiscal year, there was an extra week in the fourth quarter as well as for the entire fiscal year. If you back that out -- the extra 8% more days for the quarter and 2% more for the year -- revenue would've climbed just 4% in fiscal 2024. The 15% quarterly jump would be pared back to the high single digits. It was still a strong beat, particularly on the bottom line where Chewy is earning its upticks.
The year ended on some positive notes. After its active customer count dipped in the two previous years, that audience widened to 20.5 million, tacking on 431,000 in net adds for the year. It's still lower than the 20.7 active accounts it was serving at the end of fiscal 2021, but a welcome reversal after sliding to 20.4 million and then 20.1 million in the two subsequent years.
Customers are also spending more. Net sales per active customer clocked in at $578, a decent step up from $555 in fiscal 2023 and $496 the year before that. Autoship -- the platform that allows customers to receive discounts on advance orders placed for regular intervals -- now accounts for 80.6% of total sales on the platform. Authoship sales rose 10% last year, well ahead of the overall growth rate of just above 6%.
Image source: Getty Images.
It's feeding time
Chewy's own guidance for the quarter in late March calls for $0.30 to $0.35 in earnings per share on $3.06 billion to $3.09 billion in net sales. Ahead of Wednesday's report before the market opens, analysts are perched near the high end of that range. The consensus estimates see Chewy's earnings per share rising 10% to $0.34 with the top line rising 7% to $3.08 billion.
A lot has happened since pet stocks initially soared early in the pandemic. Savvy investors caught on that folks sheltering in place and working from home would lead to a spike in pet and cat adoptions. In theory, the business should be booming as the puppies and kittens that folks took in five years ago are much larger and hungrier furry companions today.
Chewy has been aggressively buying back stock, a smart move in retrospect given the rising shares over the past year. The stock may not seem cheap at 39 times forward earnings -- and a still steep multiple of 32 if we look out to fiscal 2026 -- for a stock growing its business in the single digits. Thankfully it does seem to be turning the corner in terms of growing its active customer base again. It will still have to deliver a blowout performance with the shares soaring over the past year. All treats must be earned, after all.
