Chewy Inc (NYSE:CHWY) stock fell 8.04% (As on March 23, 11:23:57 AM UTC-4, Source: Google Finance) after the company unexpectedly swung to a fiscal fourth-quarter profit as consumers spent more on average at the online pet supply retailer, which it is targeting active customer growth this year. Net sales per active customer jumped 15% to $495, while the number of active customers slipped 1.2% to 20.4 million. The drop in active customers reflects continued softness in discretionary spending across the broader economy, “as well as the residual impact of attrition from the 2020 and 2021 cohorts”. Adjusted EBITDA of $92.0 million, an increase of $120.1 million year over year. Adjusted EBITDA margin of 3.4 percent expanded 460 basis points year over year. Adjusted net income of $69.6 million, an increase of $117.4 million year over year. Free cash flow was $42.1 million, an increase of $155.5 million year over year. Net cash provided by operating activities was $100.6 million, compared to net cash used in operating activities of $66.0 million in the fourth quarter of 2021.

CHWY in the fourth quarter of FY 22 has reported the adjusted earnings per share of 16 cents, beating the analysts’ estimates for the adjusted loss per share of 10 cents. The company had reported the adjusted revenue growth of 13.4 percent to $2.71 billion in the fourth quarter of FY 22, beating the analysts’ estimates for revenue of $2.65 billion. Gross margin expanded 270 basis points annually to 28.1% in the fourth quarter, driven by favorable pricing relative to the year-ago period. There is “additional runway left for incremental gross margin expansion” over the long term. Additionally, the Autoship customer sales increased 17.5 percent year over year and generated 73.3 percent of the fourth-quarter net sales, representing a 260 basis point increase over the prior year period. Non-discretionary categories, including consumables and healthcare, remained pillars of strength, growing 18.5 percent year over year, with the offset coming from discretionary categories such as hardgoods.

Chewy expects the number of active customer to grow in 2023 while net sales per active customer is expected to further improve. The company is actively building the capabilities and team to launch the first international market over the next few quarters. In summary, in 2023 the company expects to continue benefiting from the strategic investments we made just a few years ago in warehouse automation.