Angela Palumbo
Chewy Inc. (CHWY) is not immune to the issues caused by supply chain disruptions, which have resulted in low stock on some of its most popular products.
Along with supply chain issues, labor shortages, inflation and a decline in pet adoptions have all impacted the company’s path in being a profitable business.
Chewy’s most recent quarter ended on October 31st. The company reported quarterly sales of $2.21 billion, up 24% year over year which is in line with Wall Street estimates. However, Chewy’s net loss was $32.2 million, not changing much from the previous quarter.
“We expect supply chain disruptions, labor shortages, and product and inbound freight cost inflation will continue to weigh on near-term profitability,” Mario Marte, Chewy’s chief financial officer said.
In recent months, Chewy customers have complained about shortages on products like wet dog food.
“Shortages of wet dog food persisted, while out-of-stock levels in areas like third-party and proprietary branded hard goods also increased,” said Marte.
“As a result of these, the negative impact of supply shortages in Q3 net sales was approximately $15 million more than our internal expectations.”
Chewy and its customers could see further effects of supply chain disruptions since the issue continues to persist.
Pet purchases and adoptions are also down in the last few months. Meanwhile, the number of people surrendering their pets is on the rise.
According to research done by PetPoint, a monthly report on pet data in the United States, cats returned by owners totaled 2,351, an increase of 7.9% from the previous year. Also, returns of dogs totaled 3,564, an increase of 10.6% from the previous year.
But even though these issues ensure profitability isn’t looking pawsitive for Chewy in the near future, the company reported it is proud of its growth in other areas.
Chewy’s net sales per active customer (NSPAC) increased 15% to $419, which reflects a year-over-year growth of $56. This shows that active customers are spending more money each year and can be attributed to Chewy’s unique Autoship customer sales, which were over 70% of the company’s net sales in the third quarter.
“Looking beyond these near-term challenges, there is plenty of reason for optimism,” Chewy CEO Summit Singh said.
But, even though the company is optimistic about its current performance and future prospects, shareholders are wary.
After Chewy released its quarterly earnings, its stock fell 8.1% on Friday. Chewy shares are down over 26% compared to last year. Senior research analysts Justin Kleber and Peter Benedict from Baird Equity Research think the company can bounce back thanks to customer growth, and investors should be mindful of that.
“With consumer engagement strengthening and valuation back to pre-pandemic levels, we think investors should start to take a fresh look,” said the analysts, who assigned a price target of $75 to the company.
For Chewy to keep investors interested, it needs to prove it is on track to be a profitable company. Singh said this is possible by focusing on their company internally in the face of larger myriad issues.
“Consumer engagement is high, business momentum is strong, and we believe the long-term positive trends of more pet ownership, higher per pet spending, and increased e-commerce penetration are as strong as ever,” Singh said.
Chewy Inc. (CHWY) is not immune to the issues caused by supply chain disruptions, which have caused low stock of some of its most popular products.
Along with supply chain issues, labor shortages, inflation and a decline in pet adoptions have all impacted the company’s path in being a profitable business.
Chewy’s most recent quarter ended on October 31st. The company reported quarterly sales of $2.21 billion, up 24% year over year which is in line with Wall Street estimates. However, Chewy’s net loss was $32.2 million, not changing much from the previous quarter.
“We expect supply chain disruptions, labor shortages, and product and inbound freight cost inflation will continue to weigh on near-term profitability,” Mario Marte, Chewy’s chief financial officer said.
In recent months, Chewy customers have complained about shortages on products like wet dog food.
Because of those shortages,“The negative impact of supply shortages in Q3 net sales was approximately $15 million more than our internal expectations,” said Marte.
Chewy and its customers could see further effects of supply chain disruptions since the issue continues to persist.
Pet purchases and adoptions are also down in the last few months. Meanwhile, the number of people surrendering their pets is on the rise.
According to research done by PetPoint, a monthly report on pet data in the United States, cats returned by owners totaled 2,351, an increase of 7.9% from the previous year. Also, returns of dogs totaled 3,564, an increase of 10.6% from the previous year.
But even though these issues ensure profitability isn’t looking pawsitive for Chewy in the near future, the company reported it is proud of its growth in other areas.
Chewy’s net sales per active customer (NSPAC) increased 15% to $419, which reflects a year-over-year growth of $56. This shows that active customers are spending more money each year and can be attributed to Chewy’s unique Autoship customer sales, which were over 70% of the company’s net sales in the third quarter.
“Looking beyond these near-term challenges, there is plenty of reason for optimism,” Chewy CEO Summit Singh said.
But, even though the company is optimistic about its current performance and future prospects, shareholders are wary.
Chewy Stock Movement – Yahoo Finance
After Chewy released its quarterly earnings, its stock fell 8.1% on Friday. Chewy shares are down over 26% compared to last year. Senior research analysts Justin Kleber and Peter Benedict from Baird Equity Research think the company can bounce back thanks to customer growth, and investors should be mindful of that.
“With consumer engagement strengthening and valuation back to pre-pandemic levels, we think investors should start to take a fresh look,” said the analysts, who assigned a price target of $75 to the company.
For Chewy to keep investors interested, it needs to prove it is on track to be a profitable company. Singh said this is possible by focusing on their company internally in the face of larger myriad issues.
“Consumer engagement is high, business momentum is strong, and we believe the long-term positive trends of more pet ownership, higher per pet spending, and increased e-commerce penetration are as strong as ever,” Singh said.