Online pet supplies retailer Chewy (NYSE: CHWY) is scheduled to report its maiden earnings results for the first quarter of 2019 on Thursday after the market closes. This comes after the Wall Street debut on June 14. The top line growth will mainly be driven by pet food sales apart from supplies, medicines, vet care, pet services and sale of pets as there are ample growth opportunities backed by pets health and wellness spending.
Chewy is focused on growing both its net sales and expanding its margins through different strategies, including growing sales from existing customer base, acquire new customers, leverage technological and operational efficiencies, growing private brands, expand further into pet healthcare, and explore broader platform opportunities.
For the thirteen weeks ended May 5, 2019, the company expects net sales to be $1.1 billion compared to $763.5 million in the previous year period. Cost of goods sold is predicted to be $855 million compared to $613.5 million a year ago, due to the increase in orders shipped and associated product costs, outbound freight and shipping supply costs.
Chewy expects to increase selling, general and administrative expenses to $181.9 million for the 13 weeks ended May 5, 2019 from $123.2 million a year ago, due to the increase in fulfillment costs to support overall growth of business. Advertising and market expenses are anticipated to be $102.3 million, up from $86.7 million a year earlier, due to rise in advertising and marketing through existing channels, resulting in the growth of our customer base.
Analysts expect the company to report a loss of $0.06 per share on revenue of $1.11 billion for the first quarter. Investors expect the company to post upbeat results for the maiden first-quarter. From fiscal 2012 to fiscal 2018, Chewy’s net sales per active customer grew from $223 to $334 and its net sales grew from $26 million to $3.5 billion.
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The pet industry is in the midst of a shift from in-store to online purchases, with e-commerce representing a 14% share of the food and supplies market segment in 2017, up from 4% in 2015, and projected to grow to about 25% by 2022. The pet industry is expected to grow from $48 billion in 2010 to an estimate of $75 billion in 2019, according to the data collected by the American Pet Products Association.
Chewy has been facing stiff competition from behemoths like General Mills (NYSE: GIS), Walmart (NYSE: WMT) and Amazon (NASDAQ: AMZN) that have firm footing in the market. For this, Chewy’s goal remains to attract and convert visitors into active customers and encourage repeat purchases, which accounts for about 90% of net sales.
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