Key Takeaways
- Chewy shares moved lower in premarket trading Thursday after the e-tailer’s pet ownership outlook overshadowed its better-than-expected quarterly results.
- The company cautioned that it sees the pet industry growing at a slower-than-average pace this year due to pet household formation trends, before normalizing in 2025.
- Chewy said it expects to deliver continued adjusted EBITDA margin expansion and gain market share this year, regardless of the industry or macroeconomic conditions.
- A reversal in Chewy shares near the February swing low at $15.78 could act as a catalyst for a move back to the upside.
Shares in pet e-tailer Chewy (CHWY) were moving lower ahead of the opening bell Thursday after a warning over moderating pet ownership overshadowed quarterly results that came in ahead of analysts’ expectations.
The stock, which had initially jumped in after-hours trading Wednesday following the release of the company’s earnings report, was down 1.7% at $17.44 about two hours before Thursday’s opening bell.
In the fiscal-fourth quarter ended Jan. 28, the online pet food and accessories seller posted earnings of 7 cents per share, whereas analysts had expected the company to post a loss of 4 cents a share. Revenue in the period of $2.83 billion improved 4.2% from a year earlier and comfortably beat Wall Street’s forecast, boosted by the company’s consumables and health categories.
However, another closely-watched metric, active customers, fell 2% year-over-year (YOY) to 20.1 million and came in slightly below the consensus estimate of 20.2 million.
Looking ahead, Chewy guided current-quarter net sales of between $2.84 billion and $2.86 billion, with the higher end of that range falling short of the $2.89 billion analysts had expected. For full-year 2024, the company projects a net sales midpoint of $11.7 billion, above the average estimate of $11.12 billion.
In its quarterly letter to shareholders, the company cautioned that it sees the pet industry growing at a slower-than-average pace this year due to pet household formation trends, before normalizing in 2025. Pet adoptions boomed during the pandemic as people spent more time at home but that trend has cooled amid return-to-office mandates and inflation-driven price hikes for household essentials. Still, Chewy said it expects to deliver continued adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) margin expansion and gain market share this year, regardless of the industry or macroeconomic conditions.
Chewy shares have drifted mostly sideways since late September last year, but remain in a longer-term downtrend, with the 50-day moving average positioned below the 200-day moving average. More recently, the 50-moving average has acted as a line of resistance, pressing the price lower.
If selling accelerates after earnings, keep an eye on how the price responds to the February swing low at $15.78. Signs of a reversal at this level could mark a short-term bottom and act as a catalyst for a move back to the upside. However, any rally is likely to meet overhead resistance around $24 from a key horizontal line and the downward sloping 200-day moving average.
The comments, opinions, and analyzes expressed on Investopedia are for informational purposes only. Read our warranty and liability disclaimer for more information.
As of the date this article was written, the author does not own any of the above securities.