Chewy (CHWY) Tumbles 14% on Wider-Than-Expected Q4 Loss
Shares of Chewy, Inc. CHWY have dropped 13.8% in after-hours trading hours on Mar 29, following CHWY’s report of a wider-than-expected loss per share for fourth-quarter fiscal 2021. Also, net sales lagged the Zacks Consensus Estimate. However, the metric increased year over year on higher demand and robust consumer engagement. Supply-chain disruptions and higher inbound freight costs mainly hurt the quarterly results.
This presently Zacks Rank #5 (Strong Sell) stock has decreased 32.5% over the past six months, wider than the industry’s 16.9% decline.
Q4 Highlights
Chewy reported a loss of 15 cents per share, wider than the Zacks Consensus Estimate of a loss of 7 cents.
Net sales amounted to $2,388.4 million, missing the Zacks Consensus Estimate of $2,432 million. The top line increased 17% year over year on strength in the pet category as well as gains from strategic efforts and the business model. Also, consumer demand was healthy in the quarter.
Chewy Price and Consensus
Chewy price-consensus-chart | Chewy Quote
Autoship customer sales as a rate of sales expanded 250 basis points (bps) to 70.7%. CHWY ended the reported quarter with 20.7 million customers, which mirrors year-over-year growth of 7.6%.
Gross profit increased 9.3% to $605.5 million in the reported quarter. Gross margin contracted 170 bps to 25.4% on cost inflation and elevated inbound freight costs.
Adjusted EBITDA loss summed $28.1 million against adjusted EBITDA of $60.8 million recorded in the comparable quarter of the prior fiscal year.
Financial Details
Chewy ended the quarter with cash and cash equivalents of $603.1 million, accounts receivable of $123.5 million and inventories worth $560.4 million. As of Jan 30, 2022, total stockholders’ equity was $14.7 million.
In the fiscal fourth quarter, CHWY’s free cash flow stood at a negative $113.4 million while capital expenditures were $47.5 million.
During fiscal 2021, net cash used by operating activities was $73.8 million compared with $92.5 million of net cash used by operating activities at the end of the prior fiscal year’s corresponding period.
Guidance
Management expects net sales for the first quarter of fiscal 2022 in the range of $2.40-$2.43 billion, indicating growth of 12-14% from the prior fiscal year’s quarterly figure.
For fiscal 2022, net sales are likely to come in the band of $10.2-$10.4 billion, indicating an increase of 15-17% from the last fiscal-year level. Adjusted EBITDA margin is projected between breakeven and 1%.
We note that the Zacks Consensus Estimate is currently pegged at $2.5 billion for the ongoing quarter and $10.7 billion for fiscal 2022.
Hot Stocks to Consider
Some better-ranked stocks are Flower Foods FLO, Nomad Foods NOMD and Tractor Supply TSCO.
Flower Foods, which produces packaged bakery foods, currently has a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The Zacks Consensus Estimate for FLO’s current financial-year sales and earnings per share (EPS) suggests growth of 7.2% and 4%, respectively, from the year-ago period’s corresponding reported figures. Flower Foods has a trailing four-quarter earnings surprise of 9%, on average.
Nomad Foods, which manufactures and distributes frozen foods, currently has a Zacks Rank of 2. NOMD has a trailing four-quarter earnings surprise of 16.3%, on average.
The Zacks Consensus Estimate for NOMD’s current financial-year sales and EPS suggests growth of 7.5% and 6.6%, respectively, from the year-ago period’s corresponding reported figures.
Tractor Supply presently carries a Zacks Rank of 2. TSCO has a trailing four-quarter earnings surprise of 9.7%, on average.
The Zacks Consensus Estimate for Tractor Supply’s sales and EPS for the current financial year suggests growth of 8.1% and 8.9%, respectively, from the year-ago period’s corresponding reported numbers. TSCO has an expected long-term earnings growth rate of 9.8%.
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