Chewy sinks despite topping Q2 estimates, erasing much of its recent rally

Chewy dropped nearly 16% Wednesday, despite the online pet retailer fetching stronger-than-expected Q2 results and hiking its sales guidance for the year.

The move erased much of a recent blistering run-up for the stock, which had gained 23% off its recent August 5 low through Tuesday.

The company delivered adjusted earnings per share of $0.33 for the quarter, in line with analysts’ consensus forecast of $0.33. Sales jumped nearly 8.6% to $3.1 billion, also above forecasts, with sales to the company’s Autoship customers making up 83% of the total. 

Looking ahead: Chewy boosted its full-year sales estimates to $12.5 billion to $12.6 billion, up from $12.3 billion to $12.45 billion. Wall Street was expecting sales of $12.49 billion for the year.

For the current quarter, Chewy guided adjusted EPS to $0.28 to $0.33, compared with the Street’s $0.30 estimate.

Chewy ended the quarter with nearly 21 million active customers, up 4.5% from last year. CEO Sumit Singh said the quarter showed “Chewy’s differentiated value proposition,” citing both customer growth and wallet share gains.

Still, headline net income fell to $62 million, with net margins slipping under cost pressures tied to share-based compensation. 

Chewy shares were up 24% year to date going into the print.