Chewy (CHWY) CEO Sumit Singh is seeing a more measured U.S. customer as the pet-focused merchant fights the twin headwinds of sticky inflation and worrying headings out of the banking market.
“We definitely are [seeing a more cautious shopper] when it pertains to classifications that are discretionary in nature,” Singh informed Yahoo Finance Live (video above) at the Shoptalk retail conference in Las Vegas. “So consumables and health that comprise over 80% of our sales stay pillars of strength. Consumers aren’t trading down, and they aren’t compromising their family pet’s requirements.”
“Where they beware remains in discretionary spend,” Singh said, including that customers have actually drawn back in locations such as pet toys.
Amid a combined financial background, Singh is pressing Chewy into its very first worldwide market and automating more of its U.S. warehouse.
Singh declined to comment on what Chewy’s very first worldwide market will be (it will be revealed in May) but said that the expansion stands to unlock more growth for the e-commerce player over the long term, even as it weighs on profit margins near-term.
“We believe the brand is resilient outside the United States,” Singh said. “In terms of the investment curve, look, these are strategic investments, and we are long-term oriented.”
Despite more cautious consumers, Chewy notched a solid fourth-quarter report last week.
Net sales increased 13.4% from a year ago to $2.71 billion. Gross revenue margin expanded 270 basis points from a year earlier to 28.1%. And adjusted operating profits increased by $120.1 million from a year ago.
However, the Street took issue with a slight active customer decline sequentially and a potential near-term margin hit from worldwide growth. Chewy stock was down 12% last week in the wake of the company’s earnings report.
Some analysts are taking a wait-and-see approach on the stock, pending a reacceleration in active customers — in line with Chewy’s guidance.
“The intrinsic value of the business is much more sensitive to the terminal margin assumption than the size of the revenue base, and while 2022 gave us more confidence in a ~mid-single digit percentage EBITDA margin over the medium-term, the beginning of international expansion coupled with still weak net adds and less pricing upside from here leave us more mindful,” Morgan Stanley expert Lauren Schenk composed.
Brian Sozzi is Yahoo Finance’s Executive Editor. Follow Sozzi on Twitter @BrianSozzi and on LinkedIn. Tips on the banking crisis? Email [email protected]
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