Chewy (Nasdaq: CHWY) shares were more than 15% lower following the company's Q4 results which showed it missing analysts' estimates on the top and bottom line. The major factor in its miss was supply chain and transportation issues that are preventing inventories from being fully stocked and total demand to be met.
Another headwind for Chewy is that its facing tough comps due to elevated spending on e-commerce and goods during the previous year due to the pandemic and stimulus payments. This year, there are no stimulus payments and people are returning to previous shopping habits. Thus, it's not surprising that Chewy's stock is down by 65% from its high in February 2021.
Inside the Numbers
In Q4, Chewy reported a loss of $0.15 per share which was steeper than expectations of a loss of $0.08 per share. Revenue also missed at $2.39 billion vs $2.4 billion. This was a 17% increase from last year.
Its first-quarter guidance also fell short of analysts' expectations. The company attributed this and its earnings miss due to a deterioration in operating conditions for certain segments primarily due to supply chain challenges which were leading to lower levels of inventories.
Thus, the quarter saw more lost sales than expected, and it sees this persisting in Q1. For the quarter, it sees revenue between $2.4 billion and $2.43 billion which was below expectations of $2.51 billion.
Another factor was the company had less growth in higher-margin categories like health care services and pet insurance which was one of the narratives driving the stock's gain and multiple expansion in 2020 and early parts of 2021.
The company has been promoting telehealth services and recently struck an agreement with Trupanion (TRUP) to offer insurance and wellness plans for Chewy customers.
It's likely that whether Chewy turns out to be a profitable investment depends on its success in these new categories. In a way, it could be similar to how Amazon's (NASDAQ: AMZN) e-commerce business enabled it to identify and capitalize on opportunities in logistics and cloud computing which have turned out to be more lucrative than the initial business.