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Chewy Posts Surprise Profit; Supply Issues Hurt Revenue

Online pet-products provider Chewy swung to a surprise profit but said supply-chain issues left it out of stock of some products, hurting revenue.
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Chewy  (CHWY) - Get Report, the online pet-products provider, swung to a surprise fiscal-first-quarter profit from a year-earlier loss on 32% higher revenue.

Chewy reported, however, that supply constraints left it out of stock of some products, hurting the quarter's revenue.

At last check Chewy shares were trading down 2.4% at $77.48. They closed regular Thursday trading up 2% at $79.35.

For the quarter ended May 2 the Dania Beach, Fla., company earned 9 cents a share compared with a loss of 12 cents a share in the year-earlier quarter. 

Revenue reached $2.14 billion from $1.62 billion.

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A survey of analysts by FactSet produced consensus estimates of a GAAP loss of 3 cents a share on revenue of $2.12 billion.

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"[Elevated] out-of-stock levels were a persistent headwind throughout the quarter and reduced our first-quarter net sales by an estimated $40 million," Chewy said in a statement. 

"These industrywide headwinds are supply-driven and we expect them to abate in the second half of the year as additional production capacity comes online. 

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"Until then we will keep actively managing our inventory and using our recommendation engines to help customers find attractive alternatives."

On the upside, the company's base of active customers rose 32% from a year earlier, giving Chewy 19.8 million of them at the end of the quarter. 

More broadly, over the past two years the active-customer base is up by 75%, or by 8.4 million customers.

The weighted-average tenure of its active customers is just under two years. "In other words, our average active customer is still squarely on the left-hand side of their lifetime-spending curve with us," the company said.

Net spending per active customer rose $31, or 8.7%, in the first quarter to a total of $388.

Gross-profit margin in the first quarter widened 4.2 percentage points to 27.2%.

Chewy also said that it was entering the fresh- and prepared-pet-food space.

The company said that it developed and patented sustainable packaging that enables it to "preserve product quality throughout the delivery process."

The products are in beta mode. Chewy said it would launch distribution in three areas covering some 60% of its customer base. It didn't specify where.

Most recently Chewy said in late May that it expanded the features within its Connect With a Vet telehealth service. 

The new features include video consultations with veterinarians, the ability to preschedule virtual consultations with vets, and extended hours of operation.