Chewy (CHWY, Financial) experienced a reversal of fortune, with shares dipping today after an initial post-earnings surge. The online pet retailer's Q4 (Jan) results revealed earnings and sales growth, aligning with FY25 (Jan) projections. However, concerns over sluggish industry demand this year tempered investor excitement.
CHWY predicts a year of subdued growth for the pet industry in 2024, expecting minimal unit growth due to lower pet household formations. Additionally, the company foresees no significant pricing advantages this year, indicating a continuation of mild industry growth.
Despite these challenges, CHWY remains optimistic about gaining more market share and returning to normal growth by 2025. The Q4 report also highlighted several positive developments:
- CHWY reported an unexpected Q4 profit with a GAAP EPS of $0.07, outperforming analyst expectations of a slight net loss and marking a significant improvement from the previous quarter's $(0.08) per share.
- Key to its surprise profit was robust demand for non-discretionary items and Autoship customer sales growth, which saw a 4.2% year-over-year increase to $2.83 billion. These segments, making up about 85% of FY24 revenue, along with an 8% year-over-year increase in Autoship sales, underscore CHWY's financial resilience.
- CHWY's expansion efforts include opening Chewy Vet Care clinics and growing its Canada operations. The company aims to open four to eight vet clinics in FY25, expanding its total addressable market by $25 billion, though the Canada venture is expected to have a minimal impact on FY25 finances.
Amid an inflationary climate affecting discretionary spending, CEO Sumit Singh anticipates a conservative FY25, with projected revenues between $11.6 and $11.8 billion. CHWY's cautious outlook reflects the broader challenges within the pet industry, potentially keeping its stock performance subdued throughout the year without a quicker recovery in discretionary demand.
