Chewy (CHWY) stock fell as much as 7% before bouncing back in premarket trading after the online pet retailer reported a double beat on earnings and revenue. The stock was up 4% at last check.
Adjusted earnings per share were $0.32 in the third quarter, compared to analyst estimates for $0.30, according to S&P Global Market Intelligence. Net sales rose 8.3% year over year to $3.12 billion, compared to estimates of $3.01 billion.
“Chewy continues to outperform the pet category and expand market share, with profits once again growing faster than sales,” CEO Sumit Singh said in the release.
Gross margins were another metric in focus for investors this quarter. Gross margins of 29.8% beat expectations but still dipped from 30.4% in Q2.
“As of late, the view has been that CHWY’s gross margin has limited upside going forward,” UBS’s research team led by Michael Lasser wrote in a note ahead of earnings. “While the scaling of its sponsored ad initiative has been a meaningful gross margin driver of the past several quarters, we think this trend needs to continue for the company to see the same magnitude of GM gains. But until then, bears may point to an increasingly competitive market, pressure from tariffs, and greater promotional activity in the back half of the year to support a capped margin upside.”