Chewy exceeds earnings expectations, so why aren’t stocks soaring?

(Chewy/Unsplash)

Social isolation and stay-at-home orders meant pets became a priority over the last year, with an increase in demand for our furry friends being seen in the US and across the globe.

Companies in the thriving industry have been benefitting from the boom, including US pet food and accessory retailer Chewy Inc. (CHWY).

The Florida-based company had both good and bad news for investors on Thursday after reporting its quarterly earnings. Chewy exceeded expectations, surprising Wall Street with sales rising 32% to $2.14 billion from the same period last year.

It also reported impressive earnings of $38.7 million, compared with its loss of $47.9 million year-over-year, and an expansion of its gross margin to 420 basis points to 27.6%. So why did shares fall 3% instead of skyrocket upon hearing the news? 

In addition to its strong earnings, the company—which was acquired by PetSmart in 2017 for $3.35 billion, the largest ever recorded e-commerce deal at the time—also reported that it has been facing labour shortages and supply problems, causing the retailer to run out of stock.

In a letter to shareholders, Chewy said that even though the company has been performing well financially, it reported that it wasn’t immune to labor shortages as it continues to grow its fulfillment centers, as well as “supply-chain challenges that are causing elevated out-of-stock issues across the retail landscape”.

“As we net the tailwinds and headwinds against each other, our outlook still comes out more positive than it was when we gave our first 2021 guidance in March,” the company said.

Despite challenges that seem to have deterred investors from being bullish on the company, though, after its stellar earnings, Chewy is apparently feeling positive about the future.

“Fiscal 2021 continues to be a busy and exciting year for Chewy. Our strategy remains intact, demand remains strong, and we remain bullish about our future and our ability to maintain our pace of execution.”

The post Chewy exceeds earnings expectations, so why aren’t stocks soaring? appeared first on Market Buzz - Get informed about the companies early investors are buzzing about.

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