Chewy gets its bark back with foray into Canada, forecast raise (updated)

Petco Health and Wellness

01/06/2023 14:40

(Rewrites throughout, adds analyst comments in paragraph 4,6,7,
P/E ratio in paragraph 9 and share movement in paragraph 10)
    By Vansh Agarwal
       June 1 (Reuters) - Shares of Chewy Inc  CHWY.N  surged
27% in early trading on Thursday after the pet products
e-retailer announced its first foray into international markets
via Canada and raised its annual revenue forecast.
    Chewy, co-founded by activist investor Ryan Cohen, was one
of the major gainers in the sector after the pandemic sparked a
rise in pet ownership. 
    But demand has normalized from its pandemic-led peak due to
high inflation in the United States. To counter that hit,
U.S.-based Chewy announced its plan to enter the Canadian market
next quarter as it has been looking to tap into international
markets, while also investing more in advertising and automation
centers. 
    Chewy's Canada expansion would increase its total
addressable market by $12-$15 billion, Wells Fargo analysts
estimated. 
    The company, known for sending customers flowers or other
gifts if their pets die, posted a surprise profit for the first
quarter as its sales benefited from strong customer loyalty. 
    "Perhaps the biggest news from quarterly results was the
firm's decision to launch in its first international market,"
said Morningstar analyst Sean Dunlop in a research note. 
    "International expansion remains an important part of
Chewy's long-term growth narrative, and we'll be closely
monitoring the firm's first foray abroad."
    At least four brokerages raised their price target.
    Chewy, which turned profitable in the fourth quarter of
2021, currently trades at over 1,200 times the Wall Street's
earnings estimates for the next twelve months. That compares to
17 times for peer Petco Health and Wellness Company Inc
 WOOF.O . 
    Chewy's shares rose 27% at $37.4, it's best day ever if
gains hold, erasing most of its declines so far this year. 
    The company said it now expects full-year revenue of $11.15
billion to $11.35 billion, compared with $11.10 billion to
$11.30 billion expected previously. 
    Excluding items, it posted first-quarter net income of 20
cents per share, compared with analysts' expectations of a loss
of 4 cents per share.

 (Reporting by Vansh Agarwal in Bengaluru; Editing by Shweta
Agarwal)
 ((Vansh.Agarwal@thomsonreuters.com;))