Bearish stock to watch: Chewy Inc (NYSE: CHWY)

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Chewy Inc (NYSE: CHWY) stock lost over 3.2% on 10th June, 2020 (as of 11:39 am GMT-4; Source: Google finance) after the company posted lower than expected results for the first quarter of FY 20. The company has reported a first-quarter loss of $47.9 million compared to a loss of $29.6 million in the year-ago period. The company has added a record number of active customers in the quarter, exceeded $1 billion in quarterly Autoship customer sales for the first time, and has expanded gross margins and posted the first ever quarter of positive adjusted EBITDA. The company generated first quarter net cash provided by operating activities of $20.7 million, compared to $51.1 million net cash used in operating activities in first quarter 2019. Free cash flow was negative $21.8 million in the first quarter compared to negative $63.4 million in first quarter 2019.

CHWY in the first quarter of FY 20 has reported the adjusted loss per share of 12 cents, beating the analysts’ estimates for the adjusted loss per share of 18 cents, according to the FactSet consensus. The company had reported the adjusted revenue growth of 46.2 percent to $1.62 billion in the first quarter of FY 20, beating the analysts’ estimates for revenue of $1.53 billion. The key revenue drivers in the first quarter were a 32.6% year-over-year increase in active customers and a 6.6% increase in net sales per active customer, to $357, excluding the impact of the extra week in the fourth quarter of 2018. The company saw positive contribution from gross margin expansion in the private label vertical, and the pharmacy business continued to post solid growth. Incremental freight and logistics investments due to COVID-19 decreased gross margin by 120 basis points in the quarter.

The company posted gross margin of 23.4 percent, has expanded 50 basis points year-over-year. The company has delivered Net margin of (3.0) percent, that contracted 30 basis points year-over-year mainly due to share-based compensation expense in the period.

The company posted the adjusted EBITDA of $3.4 million expanded by 122 percent year-over-year. The company posted Adjusted EBITDA margin of 0.2 percent expanded by 160 basis points year-over-year.

The company expects sales to be in the range of $1.62 billion to $1.64 billion in the second quarter, and to be in the range of $6.55 billion to $6.65 billion for the year. The analysts projects $1.56 billion for the second quarter, and $6.43 billion for the year.

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