Is Chewy Stock a Buy as Revenue and Margins Continue to Grow?
Written by Geoffrey Seiler for The Motley Fool -> Despite turning in solid Q1 results, Chewy slightly lowered its full-year guidance in a weakening consumer environment. The company has resilient business model and the stock is cheap. Chewy (NYSE: CHWY) shares failed to gain t
Despite turning in solid Q1 results, Chewy slightly lowered its full-year guidance in a weakening consumer environment.
The company has resilient business model and the stock is cheap.
Chewy (NYSE: CHWY) shares failed to gain traction after the company reported another strong fiscal first quarter and lowered its full-year revenue guidance slightly due to a more cautious consumer. The stock is now down about 40% on the year.
Let's take a closer look at the pet products e-commerce operator's results and prospects to see if this is a buying opportunity.
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Despite earlier warnings that it was not completely immune to a weak consumer, Chewy delivered strong results. Revenue jumped 7.7% to $3.36 billion, a smidge ahead of analyst expectations. Meanwhile, adjusted earnings per share climbed 23% to $0.43, meeting the consensus estimate.
It saw its active customers rise 3.6% year over year to 21.5 million, while net sales per active customer grew 2.4% to $597. Sales derived from autoship customers, meanwhile, climbed 10.5% to $2.83 billion and accounted for 84.4% of its total revenue.
Importantly, margins continued to increase. Its gross margin rose by 50 basis points to 30.1%, while its adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) margins jumped from 6.2% to 7.5%. This helped lead to a 31.2% increase in adjusted EBITDA to $253.1 million.
