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Chewy to face earnings pressure in the near term – Argus

© Reuters. Chewy (CHWY) to face earnings pressure in the near term – Argus
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By Sam Boughedda 

Argus analysts started Chewy (NYSE:CHWY) at Hold on Wednesday, stating that the firm expects the pet food and supplies e-commerce retailer to face earnings pressure in the near term.

The analysts explained that Chewy has expanded its market share in the pet category and that its focus on customer service has helped to differentiate it from competitors.

“Over the last four years, revenue has increased nearly 200% to $10 billion; the gross margin has expanded by 800 basis points to 28%; and the adjusted EBITDA margin has risen from negative 6.5% to positive 3%. The company posted adjusted earnings for the first time in FY23,” they wrote.

However, Argus sees a post-pandemic decline in online ordering, substantial investment spending, and weaker economic conditions weighing on the stock.

“We are setting an FY24 EPS estimate of $0.02, implying a decline of 80% this year. We expect renewed growth in FY25 with EPS of $0.13,” the analysts concluded.

Chewy shares declined 3% in Tuesday’s session, falling a further 0.7% so far in premarket trading Wednesday.

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