Chewy will report its earnings for the second quarter after the closing bell Tuesday. Analysts are forecasting a loss of nearly $50 million and that sales will be up 15%, which is a slowdown from revenue growth of 27% a year ago.
One of Chewy’s top competitors has already warned that consumer spending on pets may be cooling off.
Petco CEO Ronald Coughlin said during an earnings call with analysts that “we’re taking a cautious projection for the time being, given the economic uncertainty.” And chief financial officer Brian LaRose added that “the current economic environment necessitates that we be pragmatic.”
It seems that pet owners are feeling the pinch of a slowing economy and might spend more cautiously in the next few months.
“As expected, and similar to other consumer categories, inflationary pressures have softened the discretionary areas of our business,” Coughlin said during the call, adding that “this transitory response is consistent behavior” for consumers during previous soft patches for the economy.
Pet parents pinching pennies?
CEO Mark Smucker said during a call with analysts that Milk-Bone is “quite frankly, a very affordable snack option for pets” and added that Meow Mix “also meets the value equation for many consumers.”
Still, some Wall Street analysts don’t seem too worried about an economic slowdown hitting the pets category too hard. Citi’s Steven Zaccone wrote in a recent report that “pet retail continues to be a bright spot of consumer spending with retailers having pricing power to pass on inflation.”
But Zaccone conceded that “the discretionary side of pet remains a drag as consumers prioritize consumables in their fixed pet budgets amidst heightened inflation.” That’s one reason why he lowered his outlook on Petco before the company reported earnings.