Chewy Inc (NYSE:CHWY) reported second-quarter revenue and profit above Wall Street estimates on Thursday, even as shares fell 8.6% after the pet products retailer's free cash flow missed expectations.
Revenue rose 7.3% year-over-year to $3.33 billion, edging past the $3.32 billion analysts had forecast. Adjusted earnings per share came in at $0.36, up 9.1% from a year earlier.
Adjusted EBITDA climbed 23.7% to $226.7 million, topping estimates of $211 million, while adjusted EBITDA margin expanded 90 basis points to 6.8%, also ahead of forecasts.
Gross margin held steady at 30.4% year-over-year, and net margin improved 40 basis points to 2.4%. Free cash flow fell 15.5% to $89.5 million, well short of the $133 million analysts had expected.
Active customers grew 3.8% to 21.705 million.
Analysts at Jefferies said the company's base business, excluding acquisitions, is holding up, which they said should be viewed favorably given softer macroeconomic commentary in the prior quarter. However, they noted that one-time items and timing factors contributed to the profit beat, and that guidance pointing to stable core growth alongside heavy reinvestment means the results are not as strong as headline numbers suggest.
The analysts said Chewy's capital deployment toward expanding its addressable market in veterinary and equestrian categories is a sensible move, and that its artificial intelligence and membership initiatives show promise, though the timing of when those investments will generate higher returns remains uncertain.
