Shares of Chewy (CHWY, Financial) have surged 16%, nearing previous 52-week highs from June. This jump follows a strong Q2 earnings report, despite a modest Q3 revenue outlook. Chewy reaffirmed its FY25 sales forecast of $11.6-11.8 billion, alleviating concerns about near-term economic conditions.
- Q2 adjusted EPS was $0.24, marking the second consecutive double-digit earnings beat. Sales grew 2.5% year-over-year to $2.86 billion, in line with analyst predictions.
- Autoship sales grew by 6%, more than double the company's overall net sales growth, and accounted for over three-quarters of consolidated revenue. Autoship has boosted Chewy's market share, with net sales per active customer (NSPAC) hitting a record $565, up 6% year-over-year.
- Despite inflation, consumers are shifting towards premium pet foods, indicating the strong bond between pet owners and their pets. Chewy's redesigned mobile app has enhanced customer engagement, with unique app orders rising by 15% year-over-year.
- Chewy ended Q2 with approximately 20 million active customers, a slight sequential increase, marking the first sequential growth in over a year.
- Chewy's vet care clinics are helping to boost NSPAC rates. Customers visiting these clinics often purchase pharmacy or food products for the first time, positively impacting Chewy's ecosystem. The company currently operates six clinics, aiming for four to eight by 2024.
Chewy's Q2 report continues the positive momentum from Q1. Management has noted no further deterioration in discretionary spending, which had previously impacted FY24 numbers. With steady demand, investors are increasingly optimistic about Chewy, although the stock has a long way to go to reach its 2021 highs of $120.00.
