Chewy
However, it's still important to note that growth rates on longer timeframes and on a 2-year time frame remain impressive. Overall, Chewy's stock is down 42% on a YTD basis. The stock is down nearly 60% from its peak of $120 in February of this year. This was also a 500% gain from its bottom in March 2020.
There have been instances of growth stocks plunging more than 50% after hitting a road bump that makes investors question their growth thesis. In most cases, the stocks fail to recover but there are examples of stocks like Netflix that have managed to go on to make new highs as they were able to maintain growth. So, the earnings report will be an important indication of the company's direction.
Inside the Numbers
In Q3, Chewy reported a net loss of $0.04 per share which exceeded estimates of a loss of $0.01 per share. Revenue also came in under expectations at $2.16 billion vs $2.2 billion. Overall, revenues were up 26% from last year, while earnings were about 9% higher.
While these aren't bad numbers on an absolute basis, Chewy shareholders clearly had higher expectations. Management acknowledged some headwinds in the form of supply chain disruptions, labor shortages, and rising inflation.
Given that Chewy is so reliant on logistics and distribution, the company has been adversely affected by the supply chain and labor issues. It estimates $40 million in lost sales due to items being unavailable. Costs were also higher than expected, impacting margins. And given the competition in the space, Chewy has less room to raise prices.
However, longer-term trends remain positive like e-commerce spending and pet spending. It also continues to focus growth efforts on higher-margin products like vet services and insurance. Thus, these short-term issues could be creating an attractive, long-term entry into the stock.
