US Stock Market Move | Q3 performance exceeded expectations, Chewy (CHWY.US) rose 4%.

Online pet supply retailer Chewy (CHWY.US) saw its stock price rise, with the stock up 4% to $36.2 as of the time of writing. The stock had initially dropped over 7% before the market opened. The company reported better-than-expected third-quarter performance, but its outlook for the fourth quarter and full year fell short of expectations. In the third quarter, Chewy's revenue increased by 8.3% year-over-year to $3.12 billion, driving profits to surge by 60%, with earnings per share (EPS) reaching $0.32, significantly higher than market expectations. The company attributed the solid performance to growth in Autoship orders, increased sales per active customer, and a 5% year-over-year increase in active customers. Autoship customer sales as a percentage of net sales further increased by 90 basis points to 83.9%, indicating enhanced customer loyalty. Other key financial metrics also improved, including a 30.9% increase in adjusted operating profit, a 100 basis point increase in adjusted EBITDA margin, and a 180 basis point increase in net profit margin. In terms of cash flow, the company generated a 13.3% increase in net cash from operating activities to $207.9 million, driving free cash flow to increase by 15.8% to $175.8 million year-over-year. However, despite the strong quarterly performance, the company's future guidance disappointed investors. Chewy management expects fourth-quarter EPS to fall in the range of $0.24 to $0.27, with revenue expected to be between $3.24 billion and $3.26 billion, both lower than market estimates of $0.29 EPS and $3.26 billion revenue. As for the full-year outlook, Chewy raised its sales guidance to $12.58 billion to $12.67 billion (previously $12.50 billion to $12.60 billion). While the new midpoint ($12.62 billion) is slightly higher than market expectations, with some institutions forecasting revenue as high as $12.67 billion for the full year, the market reaction has been somewhat negative.