Chewy Posts Mixed Q3 Earnings Report: Autoship Sales Up, Stock Down

Popular pet supply retailer Chewy offered up a mixed earnings report for its third quarter on Dec. 4, one which elicited a somewhat negative reaction from investors.

According to Seeking Alpha, a decline in active customers (active customers to Chewy’s website tumbled by 0.5%) and soft profit margins contributed to a shaky Q3 earnings call. On the other hand, the company’s autoship program — something similar to Amazon’s subscribe and save program — saw sales jump 8.7% year-over-year.

Combined with the fact that the amount spent by active customers increased by 4.2%, there is something of a rosier snapshot of Chewy’s current situation: a clear indicator that its core customers are as loyal as the pets they serve.

“Our Autoship program enables high visibility and predictability in our business and drives customer stickiness,” said CEO Sumit Singh, per Investing.com.

“We are seeing higher autoship adoption rates from this early cohort of customers,” he added.

Chewy Stock Price Tumbles During Midday Trading

Despite raising its sales guidance to $11.79-$11.81 billion, or approximately a target of 6% growth, as Investing.com detailed, shares of Chewy didn’t fare as well upon the release of its latest earnings.

As of 11 a.m. ET on Dec. 4, shares of the company had fallen by 7.22% as compared to market opening, resting at $31.11.

This news comes even as Chewy indicated that revenue had grown by 5% year-over-year, to $2.88 billion, and stated expectations of continued growth in sales coming from active customers. Free cash flow weighed in at a healthy $151.8 million.

“We delivered top line growth exceeding the high end of our net sales guidance range, a sequential increase in active customers, continued adjusted EBITDA margin expansion, and robust free cash flow generation,” Singh continued.

Some Challenges Remain on the Table for Chewy

According to Investing.com, the sunnier news was counterbalanced by some potential challenges ahead for the pet care and pet supply retailer.

While the introduction of Chewy Vet Care clinics earlier this year has made some steady progress, it may be a service that is difficult to easily scale. Competition from other pet retailers is fierce, and larger economic concerns such as inflation are still curtailing consumer discretionary spending. Supply chain interruptions could also hamper operations.

Regardless of the somewhat neutral earnings report, it appears Chewy’s executives are laser-focused on driving growth moving into the new year.