Why Chewy Stock Is Sinking This Week

Core Viewpoint - Chewy's stock has declined 15% following conservative guidance despite reporting a 9% increase in sales and a 38% rise in adjusted EPS for Q2 [1][4] Group 1: Financial Performance - Chewy reported a 9% increase in sales for Q2, with adjusted EPS rising by 38% [1] - Autoship sales, which include recurring purchases, increased by 15% and now represent 83% of total sales, indicating a stable revenue base [3] - Management has guided for a slower sales growth of 7.5% and adjusted EPS of $0.30 for the upcoming quarter, down from $0.33 in Q2 [1] Group 2: Market Reaction and Future Outlook - The stock drop is attributed to conservative guidance, but there is potential for Chewy to exceed estimates in the upcoming quarter [2][4] - Chewy is exploring higher-margin business opportunities, which could enhance profitability [4][5] Group 3: Strategic Initiatives - Chewy's gross margin improved by 90 basis points, driven by sponsored ads [5] - The introduction of Chewy+, a $49 per year membership program, accounted for 3% of sales in July [5] - The launch of Get Real, a premium-priced private-label fresh dog food brand, and the opening of 20 Chewy Vet Care locations by year-end are expected to contribute to higher margins [5]