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Chewy Remains Poised to Benefit From Strong Pet Fundamentals Despite Fiscal Q4 Loss, RBC Capital Markets Says

11:59AM ET 3/30/2022 MT Newswires
Chewy (CHWY) remains well-positioned to benefit from strong pet fundamentals and continued category migration online despite swinging to a net loss in fiscal Q4, a period in which near-term gross margin headwinds were "likely at their worst," RBC Capital Markets said in a note Wednesday.

The pet products e-commerce company on Tuesday showed a net loss of $0.15 per diluted share, compared with a profit of $0.05 per share a year earlier. Analysts polled by Capital IQ expected a loss of $0.08.

"We expected noisy 4Q results but admittedly underestimated the severity and duration of supply chain/labor issues," RBC analysts said as they lowered the fiscal 2022 net sales growth estimate for Chewy to 16.1% from 18.3%.

The equity research firm believes Chewy has navigated through the worst of the recent omicron labor impact while its proactive approach to increasing prices likely helped gross margins improve sequentially in early Q1.

RBC said it estimates a $200 million to $300 million sales loss for Chewy in 2022 due to inventory shortages as the company will likely continue to face supply chain issues this year.

The firm lowered its price target on Chewy shares to $73 from $77 but maintained an outperform rating on the stock.

Price: 43.97, Change: -7.03, Percent Change: -13.79