Why Chewy Stock Was Surging After Earnings Today

What happened

Shares of Chewy (NYSE: CHWY) were trading up 24% as of 1:08 p.m. ET on Thursday. The leading pet e-commerce retailer delivered better-than-expected sales, but management reiterated its previous full-year guidance.

Slowing sales growth over the last year can be blamed for the steep slide in the share price. Even after the post-earnings pop, the stock is down 50% year to date, underperforming the S&P 500's fall of just 13%.

CHWY Chart

Data by YCharts

So what

Chewy's stock performance shows just how out of favor e-commerce stocks are in this environment. Tight supply chains present all kinds of challenges for retailers, but Chewy's latest sales results show it's on solid footing. Sales increased 14% year over year to $2.4 billion, while the net loss narrowed from $38.7 million in the year-ago quarter to $18.5 million.

Another healthy indicator for the business was the increase in autoship sales, a popular feature for pet owners to keep their preferred pet food arriving to their doorstep every month. Autoship sales were 72% of net sales, up from 69% a year ago. These orders provide near-term visibility to sales that is very valuable in a challenging economic environment.

A cat lying upside down on a bed.

Image source: Getty Images.

Now what

Management held to its previous full-year guidance, calling for net sales to increase 15% to 17% year over year. That translates to a range of $2.43 billion to $2.46 billion. Although management didn't raise the outlook, it's a good sign that the full-year sales growth is higher than last quarter's rate of increase. This indicates that the deceleration in sales that has weighed on the stock's performance lately is moving behind the company.

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John Ballard has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Chewy, Inc. The Motley Fool has a disclosure policy.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


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