Chewy earnings top estimates, stock under pressure

Yahoo Finance Live anchors discuss the decline in stock for Chewy following third-quarter earnings.

Video transcript

[AUDIO LOGO]

JULIE HYMAN: We're also watching shares of Chewy, after the pet products retailer raised its full-year sales outlook and reported a slight uptick in active customers year-over-year to 20 and 1/2 million. You can see the shares are trading lower by about 4% here.

It looks like that people are focusing on the guidance and seeing it as a little bit light here versus what analysts were estimating. The net sales for the fourth quarter are gonna be up to $2.65 billion. Analysts we're looking for $2.68 billion. And for the full year, it looks like those-- that forecast is for-- ahead of estimates. So if it's a light forecast here, it's a very slightly light--

BRIAN SOZZI: That's not a very nice--

JULIE HYMAN: --so it seems.

BRIAN SOZZI: This is not a nice market reaction. This was a really good quarter.

JULIE HYMAN: The market is mean? It that what you're complaining about?

BRIAN SOZZI: This is a meanie, meanie market, Julie. I, obviously, you know, I'm not buying or selling stocks. But I'm defending Chewy here, and actually because the CEO is coming on with us in about an hour or so.

This was a good quarter. The margins were up in a business that hasn't historically shown a lot of margin improvement. The core part of the business, the food part of business, which represents about 82% of their sales, was strong.

Active customers up sequentially. Autoship customers up year-over-year. I mean, there was a lot of positive takeaways for this quarter. I'm just surprised to see the market reaction.

JULIE HYMAN: Well, it is what it is.

BRIAN SOZZI: It is what it is.

JULIE HYMAN: Yeah.

BRIAN SOZZI: I hear you. But look--

JULIE HYMAN: I mean, Morgan Stanley made an interesting comment. They said, there's a lack of confidence on the Street in the firm achieving long-term free cash flow generation. And so even though, you know, we've had these numbers that look relatively strong, I guess-- I guess the Street wants to see more and more consistency.

BRIAN SOZZI: Well, the only other concern that I can really call out is that there is concern how much further, in terms of price increases, they could push through into the first quarter.

JULIE HYMAN: Oh, that sounds like we're just talking about.

BRIAN SOZZI: Yes, and then the other one would be just the ability to hold on to those active customers if we do, in fact, get a recession in this country. But again, we'll put all these questions in an exclusive Yahoo Finance interview with CEO Sumit Singh, welcoming him back to our airwaves. We're looking forward to connecting with him. But again, all eyes on quarters like that. And also the Producer Price Index this morning.

JULIE HYMAN: Yes, and also we'll be watching a nice reel of all of the pets of Yahoo Finance--

BRIAN SOZZI: Oh, I love puppies.

JULIE HYMAN: --when we speak to--

BRIAN SOZZI: Love puppies.

JULIE HYMAN: --Sumit, as we usually do.

BRIAN SOZZI: Oh, god, I love teddy bears, too.