Chewy: A Strong E-commerce Play

Summary

• Chewy exceeded earnings expectations in Q4, showing strong revenue growth and improved customer monetization, with average revenue per customer rising 5% year-over-year to $578.
• The pet store demonstrated solid free cash flow growth, with an 134% year-over-year increase and a free cash flow margin expansion of 3 PP Y/Y.
• The pet niche is a passion niche, with people having a high propensity to spend a lot of money, leading to a strong recurring revenue and FCF picture.
• Chewy's valuation is attractive, trading at a forward P/E ratio 38% below its 3-year average.
• Despite risks like potential customer acquisition slowdowns, Chewy's profitability and growth in key metrics make it a compelling investment with a favorable risk profile.

Images By Tang Ming Tung

Chewy's (NYSE:CHWY) earnings for the fourth fiscal quarter were better-than-expected on Wednesday, as the pet store retailer continued to make progress in boosting its customer monetization. Chewy also improved its free cash flow and EBITDA

Analyst’s Disclosure:I/we have a beneficial long position in the shares of CHWY either through stock ownership, options, or other derivatives. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.