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Chewy shares slide on weaker sales outlook

 

Friday, December 08, 2023

Today’s headlines

What’s happening: Shares of Chewy fell on Thursday, after the company released results for its third quarter.

What happened: The pet products retailer announced strong growth in earnings for the third quarter.

However, Chewy slashed its sales forecast for the year amid weak demand for its products and announced a major management change.

How were the results: The Plantation, Florida-based company reported a single-digit increase in sales for the third quarter on Thursday.

  • Sales rose 8.2% year-over-year to $2.74 billion but missed the consensus estimates of $2.76 billion.
  • Adjusted earnings jumped around 36.4% year-over-year to 15 cents per share, exceeding Wall Street expectations of a loss of 6 cents per share.

Why it matters: Chewy’s adjusted EBITDA came in at $82.1 million in the latest quarter, which represented a rise of $11.7 million versus the year-ago period. Its gross margin widened slightly to 28.5%, from 28.4% in the year-earlier period.

Net sales per active customer grew by 14% to $543 but the number of active customers fell 1.3% to 20.27 million.

“Chewy continues to gain market share, with third-quarter net sales increasing 8% against industry growth in the low single digits,” CEO Sumit Singh said during the earnings call.

However, management guided to fourth-quarter net sales between $2.78 billion and $2.80 billion, lower than market estimates of $2.93 billion. The company lowered the full-year 2023 net sales to between $11.08 billion and $11.10 billion, from its forecast of $11.15 billion to $11.35 billion.

The company also named David Reeder as its new CFO, effective February 14, 2024. Reeder will replace interim CFO Stacy Bowman, who will continue to work as chief accounting officer in the company.

How shares responded: Chewy’s shares fell 0.6% to close at $19.23 on Thursday, following the release of quarterly results. The stock has lost around 49% over the past six months.

What to watch: Investors will continue monitoring inflation levels, which has sent customers looking for cheaper options. Markets will also watch competition for the company’s products.

The markets today

The USD/JPY forex pair will be in focus today following comments from Bank of Japan governor Kazuo Ueda

Context: The yen moved sharply higher on Thursday, recording its biggest single-session surge in almost a year.

Details: Japan’s central bank has maintained a policy of ultra-low rates, which has kept the Japanese yen under pressure. The Bank of Japan kept its short-term interest rates unchanged at -0.1% at its last meeting, sending the Japanese yen to its lowest level in decades versus the US dollar.

Comments from Bank of Japan governor Kazuo Ueda on Thursday raised prospects of the central bank looking to move closer to the end of its policy of ultra-low rates.

Ueda said that it would become “even more challenging” for the BoJ to manage the current monetary policy from yearend and the beginning of next year.

The US dollar fell sharply on Thursday, which provided a further boost to the Japanese yen. The US dollar index, which measures the greenback’s performance versus a basket of major peers, fell around 0.6% to 103.54. The index lost around 3% last month.

The US dollar has been under pressure due to speculations of the Federal Reserve keeping interest rates unchanged at next week’s meeting and beginning to lower rates from March next year.

The Japanese yen surged to its highest level in three months on Thursday. The JPY/USD forex pair gained around 2% to 144.13.

What to watch: Investors await the release of jobs report from the US today, which is expected to provide further direction to the USD/JPY pair.

The US economy is expected to add 180,000 jobs in November, following 150,000 job adds in the previous month. Analysts expect the unemployment rate to remain unchanged at 3.9% in November, while the average hourly earnings for employees on private nonfarm payrolls are projected to increase 0.3%.

Other Markets: European indices closed lower on Thursday, with the FTSE 100, DAX 40, CAC 40 and STOXX Europe 600 Index down by 0.02%, 0.16%, 0.10% and 0.27%, respectively.

The news shaping the markets

Japan’s Prime Minister Fumio Kishida pledged further aid of $4.5 billion to Ukraine. The news sent the safe-haven US dollar index slightly higher this morning.


South Korea reported a current account surplus of $6.8 billion in October. This being the sixth consecutive month of surplus lent support to the KRW/USD forex pair.


Argentina’s industrial production declined by 0.8% year-over-year in October, shrinking for the fifth straight month, which sent the ARS/USD pair higher in forex trading this morning.


Colombia’s annual inflation rate eased to 10.15%, from 10.48% in the prior month. This being the eighth straight month of declining inflation lent support to the COP/USD forex pair.


Brazil’s new vehicle sales declined by 2.4% to 212,600 units in November, following a 10.2% surge in October, which sent the BRL/USD pair lower in forex trading this morning.

What else to watch today

France’s payroll employment and foreign exchange reserves, Germany’s inflation rate, Russia’s total vehicle sales and inflation rate, India’s foreign exchange reserves, Canada’s capacity utilization, Brazil’s business confidence, as well as US University of Michigan consumer sentiment and Baker Hughes crude oil rigs.


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