Chewy (CHWY 1.20%) stock tumbled 10% through 11:20 a.m. ET Wednesday despite beating analyst forecasts on both top and bottom lines.
Heading into the company's fiscal Q1 2025 report, analysts expected the online purveyor of pet supplies to report $0.34 per share in adjusted profit on just under $3.1 billion in quarterly sales. Chewy actually earned $0.35 per share, and its sales were just over $3.1 billion, however.
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Chewy's Q1 earnings
Chewy grew sales 8% year over year, although its gross profit margin on those sales inched lower, and its net profit margin declined 30 basis points to a slim 2%. That would probably be fine if Chewy had actually earned $0.35.
But as it turns out, the "$0.35" number was non-GAAP, and the company's actual earnings as calculated according to generally accepted accounting principles (GAAP) were less than half as good: only $0.15 per share.
That number was flat year over year, despite the sales growth. Worse, free cash flow for the quarter was $48.7 million, down 7% year over year and 22% below reported net income. Put another way, for every $1 in GAAP earnings the company reported (which were already less than half the adjusted number), Chewy actually generated only $0.78 in real cash profit.
Despite this disappointment, CEO Sumit Singh insisted Chewy has "momentum" and "fiscal year 2025 is off to a strong start."
Is Chewy stock a sell?
So you can see why investors are upset. Chewy stock costs 51 times trailing earnings, its sales are growing only in the single digits, its profits are flat, and its FCF is declining.
Call me a cynic if you will, but this doesn't give me much reason to want to buy Chewy stock at today's prices.
