Pet supplies retailer Chewy has worst day in a year amid 'unremarkable' results

Shares of Chewy, an online pet supplies retailer, plunged nearly 11% on Wednesday, their worst performance in a year. The selloff is due to the company’s latest quarterly sales, which failed to impress investors, Barron’s explains.

Chewy plunged 10.8% on the New York Stock Exchange on Wednesday to $20.75 per share. This marked their largest one-day decline in a year. Trading volume was 2.5 times the daily average, according to Yahoo Finance data.

The selloff came after the retailer reported results for its fiscal second quarter, ended August 2. Net sales rose 7.3% year over year to $3.33 billion, while adjusted earnings per share increased 9% to $0.36. Neither figure was particularly impressive, with both roughly in line with Wall Street’s forecasts, Barron’s notes.

Nevertheless, Chewy’s management raised its net sales guidance for the fiscal year ending February 1. It previously guided for $13.40-13.55 billion but now forecasts $13.46-13.57 billion. The midpoint of the new range is above Wall Street’s expectation of $13.48 billion, Barron’s writes.

“As expected, Chewy reported a somewhat noisy second quarter,” William Blair analyst Dylan Carden wrote, as cited by Barron’s. Carden noted that the retailer’s gross margin was better than expected but believes the upside was driven mostly by what the management called discrete items, such as tariff reimbursements. Carden also noted that the company’s guidance assumes no significant improvement in the industry.

Following the earnings, Evercore ISI Group downgraded Chewy from “outperform” to “in line” and set a target price of $25 per share, Yahoo Finance data shows. That is around 20% above Wednesday’s closing price.

Most of Wall Street, however, remains upbeat on the stock: 22 analysts recommend "buy," while another nine have “hold” ratings. The average target price is $28.73 per share, implying 38% upside from the last close.