Key Takeaways:
A $89.5 million quarterly free cash flow print that came in below market estimates sent Chewy shares down 11 percent to $20 on Wednesday, even as the company raised its full-year outlook.
The company said in its 10-Q filing that inflation, elevated interest rates and broader economic uncertainty have affected consumer spending patterns and could continue to influence demand, product mix, purchasing frequency and promotional intensity.
Net sales rose 7.3 percent to $3.33 billion in the 13 weeks ended Aug. 2, from $3.10 billion a year earlier. Net income increased 29.8 percent to $80.5 million, while adjusted EBITDA climbed 23.7 percent to $226.7 million. Free cash flow fell to $89.5 million from $105.9 million a year earlier, even as cash from operations reached $137.4 million.
The selloff extended across the pet retail sector, with Petco falling 6 percent while Freshpet edged higher. Chewy's active customers rose 3.8 percent to 21.7 million, and Autoship subscription sales grew 9.3 percent to $2.82 billion, representing 84.6 percent of quarterly net sales.
For the first half, net sales increased 7.5 percent to $6.69 billion, with net income up 40.9 percent to $175.3 million and adjusted EBITDA advancing 27.6 percent to $479.8 million. Six-month free cash flow rose to $160.3 million from $154.6 million, while cash from operations totaled $245.9 million.
Net sales per active customer rose to $602 from $591, and Autoship accounted for 84.5 percent of year-to-date net sales at $5.65 billion, up 9.9 percent from a year earlier. The subscription program's growing revenue share points to the durability of Chewy's recurring customer base, though the company did not disclose specific full-year guidance figures in its filing.
Chewy, the largest US pet e-tailer with roughly 4,000 brands and about 190,000 products, operates through its websites and mobile apps from Plantation, Florida. The company manages logistics, transportation, supply chain and merchandising with a focus on value, service levels and operational discipline, it said in the filing.
The free cash flow shortfall raises questions about earnings quality even as the company lifted its full-year outlook. Investors will watch whether Chewy can convert its improved guidance into actual cash generation in the second half, with the next quarterly report expected in December.
This article is for informational purposes only and does not constitute investment advice.
