Chewy shares soar on solid Q2 print, improved profit flow-through

Investing.com -- Chewy Inc (NYSE:CHWY ) reported much stronger-than-expected second-quarter earnings on Wednesday, sending its shares soaring. 

The e-commerce retailer delivered earnings per share (EPS) of $0.24, surpassing the consensus estimate of $0.02.

Shares of the e-commerce retailer jumped more than 12% after the opening bell. 

Revenue for the quarter came in at $2.86 billion, aligning with analyst expectations. Despite a modest 2.6% year-over-year increase in net sales, Chewy's profitability metrics were strong. Gross margin expanded by 120 basis points to 29.5%, while net income surged to $299.1 million, representing a 980 basis point increase in net margin.

An increased customer engagement level, improved operational efficiency, and strategic cost management contributed to the company's strong results. 

Chewy's active customer base continued to grow sequentially, reaching 20 million, and net sales per active customer reached a new record of $565.

Looking ahead, the company provided slightly lower-than-expected guidance for Q3 net sales, projecting growth of 3-4% versus the consensus of 4.5%, and reaffirmed its full-year sales outlook, expecting a 4-6% increase. However, the company raised its full-year adjusted EBITDA margin forecast to 4.5-4.7%, up from the previous 4.1-4.3%, ahead of the consensus of around 4.3%.

"All in all, while the top-line outlook remains muted relative to historical trends, evidence of category stabilization + better profit flow through should support shares," analysts at RBC Capital Markets said in a note.

"Valuation is likely to remain a debate," they added. 

Source: Investing.com