Why Chewy Stock Jumped After Today’s Earnings

What happened

Shares of Soft (NYSE:CHWY) were trading up 24% as of 1:08 p.m. ET Thursday. The leading pet e-commerce retailer reported better-than-expected sales, but management reiterated its previous full-year guidance.

The slowdown in sales growth over the past year can be attributed to the sharp decline in the share price. Even after the post-earnings pop, the stock is down 50% year-to-date, underperforming the S&P500drop of only 13%.

Data by YCharts

So what

Chewy’s stock performance shows how disadvantaged e-commerce stocks are in this environment. Tight supply chains present all sorts of challenges for retailers, but Chewy’s latest sales results show it’s on solid ground. Sales rose 14% year-over-year to $2.4 billion, while net loss fell to $18.5 million from $38.7 million in the year-ago quarter of dollars.

Another healthy indicator for the company was increased autoship sales, a popular feature for pet owners to get their favorite food on their doorstep each month. Autoship sales were 72% of net sales, down from 69% a year ago. These orders provide short-term visibility on sales which is very valuable in a difficult economic environment.

A cat lying upside down on a bed.

Image source: Getty Images.

Now what

Management maintained its previous full-year guidance, expecting net sales to increase 15% to 17% year-over-year. This translates to a range of $2.43 billion to $2.46 billion. While management didn’t raise the outlook, it’s a good sign that full-year sales growth is higher than last quarter’s growth rate. This indicates that the deceleration in sales that has recently weighed on the stock’s performance is lagging the company.

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John Ballard has no position in the stocks mentioned. The Motley Fool has posts and recommends Chewy, Inc. The Motley Fool has a Disclosure Policy.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


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