Yahoo Finance’s Alexis Christoforous, Brian Sozzi and Heidi Chung break down Chewy’s latest earnings report.

Video Transcript

BRIAN SOZZI: The Dow has turned into the green, but it's been a tough session back and forth pretty much all session long. Want to get right to our very own Heidi Chung. Heidi, you have a little bit of positive news for us on the dog-and-cat front. Chewy earnings right around the bend.

HEIDI CHUNG: Yeah, Brian, so Chewy, the online pet retailer, is reporting earnings today after the bell. And in terms of what Wall Street is expecting here for the fourth quarter, an adjusted loss per share of about $0.09 on revenue of $1.34 billion. But yes, positive news coming. At least that's what a lot of analysts are expecting, and that is because of positive impacts from this COVID-19 outbreak.

Now positive and COVID-19 don't really go hand in hand these days, but at least when it comes to a lot of consumers going out there and panic buying to prepare for this quarantine, we have seen some businesses reap the benefits from that.

And I want to lay out three main reasons why we think Chewy is going to report a pretty positive quarter here. First, Google searches for Chewy the retailer saw a large uptick beginning March 11 and has since stayed at those elevated levels. We can see that chart from right there.

And also Bank of America out with a note saying that they took a look at the aggregated Bank of America credit- and debit-card data through March 24 which showed spending at pet retailers both online and offline. Now monthly data for January showed year-over-year growth of 6 and 1/2% and 9.8% growth in February. Now significant acceleration in March with data showing year-over-year daily spending growth averaging 21% through March 24 and peaking at 58% on March 16.

Now, pet care is one of those things where we care about our pets just like we care about our children, our other family members. So that's why a lot of people have been essentially stocking up on pet food.

We also saw that play out with General Mills. As we know, General Mills owns pet-food company Blue Buffalo, and that company reported last month saying that they saw really healthy gains in the pet-food segment. And that, of course, accounts for about 10% of total sales at General Mills.

Also taking a look at just the stock performance this year, Chewy's stock is up 23% so far in 2020, and that is compared to the broader market's 23% decline this year. And just to reiterate, Chewy did hit the market in June. At its IPO, it was about $22 a share, and it's up 62% since then. So a lot of good data points here suggesting that we're going to have a positive quarter for Chewy.

But, Brian, like we always look at with earnings, it's about the forward guidance. What is this company going to say about the quarter to come? Is there really sustainable growth here? That is the main question going forward.

BRIAN SOZZI: Yeah, Heidi, one interesting thing-- I'm really interested-- we'll talk to Chewy CEO Sumit Singh tomorrow in the 11 o'clock hour, so I'm pretty pumped up about that interview. I'm interested about their subscription service, and I think one of the keys to their IPOs last year is they have people on auto replenish, and I imagine that is going-- working overtime. But I'm also curious, with people out of work, do they cancel that?

HEIDI CHUNG: You know, that's a really good question. Of course I'm hoping that they will address that on the conference call at 5:00 PM Eastern today. But like we see with Costco, right, a lot of these companies that have this reoccurring revenue, that is the main revenue stream for them. And so Chewy's business for a long time has been we are a company that will maintain and retain customer service because that-- or customers because our customer service is what is really something that makes them stand out compared to a lot of the competitors.

A lot of analysts also saying that companies like Chewy are really insulated from a lot of these other pressures such as the COVID-19 outbreak. And so while this quarter will also be good, there's a lot of bullish sentiment around the future of this company in the long term as well, Brian.

BRIAN SOZZI: Yeah, Heidi, that was a very key point you mentioned about General Mills. Just reported earnings, very strong sales, Blue Buffalo. And a lot of that Nielsen data I track--