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Chewy (NYSE:CHWY) is on watch after striking an agreement to repurchase $500 million worth of equity directly from its BC Partners. The transaction is fully incremental to the company’s recently implemented $500M share buyback program, with initial expectations to be active in the market immediately.
Mizuho Securities analyst David Bellinger thinks the development is another key indicator that free cash flow generation is beginning to inflect for Chewy (CHWY) and allowing for newfound capital returns. He also thinks that some of the expected catalysts for Chewy (CHWY) are beginning to materialize. “The next and most consequential factor, in our view, is a clear and sustainable return to new customer growth,” he highlighted.
Shares of Chewy (CHWY) were down 1.51% in premarket trading on Thursday, after shedding 2.83% during the Wednesday session. However, the online retail stock had been on a hot streak since Q1 earnings were reported on May 29. With the earnings release, Chewy (CHWY) disclosed that sales were up 3.1% during Q1 to $2.88 billion, and adjusted EBITDA rose 47% from last year’s mark to $162.9 million. Gross margin improved during the quarter to 28.2% of sales from 28.1% a year ago. Net income for the quarter was $66.9 million, up from $22.9 million a year ago.
