Chewy Beats Earnings Estimates. Why the Stock Is Falling Anyway.

The company posted adjusted earnings of 32 cents a share for its fiscal third quarter, surpassing analysts’ consensus estimate of 30 cents. (Daniel Acker/Bloomberg)

Key Points

• Chewy’s shares dropped after its fourth-quarter outlook disappointed, despite exceeding third-quarter earnings and sales.
• Third-quarter adjusted earnings were 32 cents per share on $3.12 billion in net sales, an 8.3% increase year over year.
• Fourth-quarter adjusted earnings are projected at 24 to 27 cents per share, with net sales of $3.24 billion to $3.26 billion.

Shares of Chewy dropped Wednesday after the online pet-food retailer issued a disappointing fourth-quarter outlook.

The company posted adjusted earnings of 32 cents a share for its fiscal third quarter, surpassing analysts’ consensus estimate of 30 cents, according to FactSet. Net sales totaled $3.12 billion, up 8.3% from the prior year and ahead of Wall Street’s call for $3.1 billion.

But Chewy’s guidance for the fourth quarter came in lower than expected. The company said it expects adjusted per-share earnings of 24 cents to 27 cents, below analysts’ expectations of 29 cents. The net sales estimate of $3.24 billion to $3.26 billion also came in a tick below Wall Street’s forecast.

Chewy stock fell 4.1% in premarket trading Wednesday. Shares were up 4% this year as of Tuesday’s close, weighed down by a dramatic post-earnings drop last quarter.

“Chewy continues to outperform the pet category and expand market share, with profits once again growing faster than sales,” said CEO Sumit Singh in a statement.

Investors will now attempt to square Chewy’s third-quarter outperformance and growing market share with its tepid outlook for the current quarter.

Write to Nate Wolf at nate.wolf@barrons.com