Can Chewy recoup double-digit gains in 2023?

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Shares of online retailer of pet products and services Chewy, Inc. (NASDAQ:CHWY) nearly doubled from their highest level. May 23, 2022 low of $22.22. The pandemic has helped accelerate the use of e-commerce and pet ownership, which is Chewy's wheelhouse. Once a pet is adopted or acquired, it has basic needs including food, medicine, and grooming supplies. Gathering these basic supplies can be a tedious chore to manage each month. Chewy has simplified this with its Autoship service which will automatically and regularly ship selected products to pet owners.

Autoship has been an anchor for the company when it comes to consistent and stable cash flow. Customers are incentivized to use Autoship with deep discounts. It also integrates its PracticeHub platform for vets to provide an e-commerce marketplace solution to increase practice revenue for its customers. Autoship guarantees recurring business from customers. The company has partnered with Lemonade, Inc. (NASDAQ: LMND) to expand its CarePlus insurance and wellness programs. The company plans to launch its lemonade offerings nationwide in the spring of 2023. Chewy has proven it

Non-discretionary expenses

Just as consumers need basic foods and essential items from grocery stores, pets need their form of essential medicine and food. Chewy notes that 83% of its revenue comes from non-discretionary products like pet food and health items, while discretionary items like toys are down (-5%) year-over-year .

Consumer staples stocks have performed well this year, but pet staples stocks haven't performed as well, as shares of Petco Health and Wellness Company, Inc. (NASDAQ : WOOF) are down (-49%) for the year. , Wag! Group Co. (NASDAQ: PET) is down (-78%) and PetMed Express. Inc. (NASDAQ: PETS) is down (-28%) for 2022.

Chewy has data showing how Autoship customers spend $400 per year in year two and up to $900 per year in year four. Chewy is also expanding its private label products under its Tylee's brand and its Vibeful pet wellness brand. Additionally, it continues to expand its Chewy Health ecosystem with services such as the Connect With a Vet telehealth service and CarePlus pet insurance plans.

surprise profit

Chewy released its results for the third quarter 2022 ending October 2022 on December 8, 2022. The company reported earnings per share of $0.01 compared to analyst consensus estimates for a loss of (-0, 06 USD), a beat of 0.07 USD. Revenue grew 14.5% year-over-year (YoY) to $2.53 billion, beating consensus estimates of $2.46 billion. Autoship sales increased 18.8% year-on-year to $1.86 billion, or 73.3% of total sales. Gross margins increased by 200 basis points to 28.4%. The company ended the quarter with 20.5 million active customers, up 9% from the third quarter of 2019.

Chewy CEO Sumit Singh commented, "Chewy's third quarter results showed accelerating double-digit revenue growth, continued gross margin expansion and strong revenue generation. free cash flow. The fact that we are simultaneously driving revenue growth and increasing margins is proof of our ability to get big quickly and scale quickly, regardless of the macro environment."

Upward direction

Chewy released an upward forecast for Q4 2022 revenue to be between $2.63 billion and $2.65 billion from $2.63 billion. Chewy expects revenue of $10.2 billion to $10.4 billion in fiscal 2023, down from $9.95 billion in analyst consensus estimates. CEO Singh summarized why Chewy is...