Fluffy puppy index flashing red Chewy earnings meme

Ain’t No Fluffy When He’s Gone…

Great Ones, I hate to tell you this … but the U.S. economy has gone to the dogs.

No, scratch that. It’s gone beyond the dogs, if Chewy’s (NYSE: CHWY) trip to the earnings confessional means anything.

Beyond the dogs? You’re talking nonsense. What does that even mean?

I’ll tell you what it means. Remember the Fluffy Puppy Indicator?

What I'd miss keep Greatness flowing meme

You know, the indicator that tracks household spending on pets?

Don’t laugh. This is a real behavioral/economic phenomenon … kinda like an investor sentiment indicator.

You know how you can discern whether most investors on Wall Street are bullish or bearish by looking at short interest and put/call options ratios?

Basically, if there’s high short interest or high put-option open interest, it indicates that investors are bearish … and vice versa.

Well, the Fluffy Puppy Indicator works the same way, except for consumers.

When times are good, economically speaking, consumers buy their pets lots of toys, snacks, treats, pig ears, chewy treats.

Who wants a treat? Whooo wants a treat? You do! You’re such a good boy, Diego! Who’s a good boy? He’s the bestest boy. Yes, he is!

But when the economy turns south, treats, snacks and toys go by the wayside in favor of essential maintenance like food and medications. Diego’s still a good boy! Yes, he is. I’ll buy you more treats soon. Yes, I will… (I hope.)

So when major online pet supplies retailer Chewy botches an earnings report this badly? We really have to worry about Diego and his owner. Let’s look at the numbers:

  • Earnings per share: $0.05 versus -$0.11 expected.
  • Revenue: $2.43 billion versus $2.45 billion expected.

Aside from the odd fact that Chewy beat on earnings but missed on revenue, the company’s Q2 report wasn’t all that bad on the surface. But, as we all know, no one cares about the past right now.

Who's really a good boy makes me paws meme

It’s all about guidance. And Chewy just wasn’t able to throw Wall Street a bone on that front. The company set current-quarter revenue expectations between $2.44 billion and $2.46 billion, well shy of the consensus estimate for $2.57 billion.

And if that wasn’t bad enough, Chewy lowered full-year expectations to revenue of between $9.9 billion and $10 billion … or about $250 million short of the consensus estimate.


It gets worse?!

Ahem! Additionally, the situation is particularly bad because Chewy was so gung-ho back in June when it released its Q1 report:

Moving forward, Chewy’s value proposition is as compelling as ever and we continue to innovate robustly, attract customers with high lifetime values, drive engagement, and capture greater share of wallet.

But my, how that tone has changed in Q2:

Pet category consumers responded to growing economic uncertainty by curtailing some of their purchase activity, leading to industrywide declines in unit volume.

Getting back to the Fluffy Puppy Indicator, it’s not just Chewy that’s in trouble. Remember when Petco (Nasdaq: WOOF) was relegated to the doghouse last week after earnings?

As for investing advice, you might want to hold off on buying pet supply stocks for now.

This is gonna be bad for a couple quarters before the sector rebounds. Just be ready to buy either WOOF or CHWY when the economy reverses and those puppy treats and toys start flying off the shelves again.

I don’t know about you, but it feels like we’ve gone from “Who Let The Dogs Out?” to “If I die before I wake, feed Jake.

Man … now I really miss my dog.

Here’s a brief intermission from today’s sponsor while I go … um … take care of something. What?! No, I’m not crying, you’re crying…

Back At The Ranch…

America’s favorite investment is probably robbing you blind.

Oh. How uplifting.

Hey now, this is important: “$20 trillion in U.S. household wealth is invested in a total scam.”

Those aren’t my words. They’re the words of retired Lt. Col. Michael J. Carr, U.S. Air Force, CMT, CFTe.

Mike’s been everywhere — inside the Pentagon, on Wall Street — and seen it all. He explained to me how America’s favorite investment is robbing our people blind.

In his new video, Mike exposes this scam once and for all … while revealing a conservative, low-risk “replacement” strategy that can cut your risk to the bone, while delivering better returns than investing directly in stocks.

If you have any money inside the stock market, watch this now.

Going, Going...Gone!

The Good: Positively Charged … Point

ChargePoint charging EV cat meme

To any of you Great Stuff Picks investors holding ChargePoint (NYSE: CHPT) … celebrations are in order!

The EV charging company just beat Wall Street’s revenue expectations ($108 million versus $103 million) and maintained its forward guidance.

Earnings came in at a loss of $0.28 and surpassed expectations for a loss of $0.25, but hey, who’s actually posting earnings beats now? I mean … besides Chewy?

Still, for a high-growth EV-adjacent company like ChargePoint to beat sales estimates and stay positively on track for future quarters … that’s a win in this market. Even Wall Street realized that and sent the stock up 13% today.

Plus, you want to talk about getting more drivers to charging stations? California’s new combustion-engine ban will sure help with that… And however you personally feel about the Inflation Reduction Act shebang we brought up yesterday, it still plays into ChargePoint’s hand.

In corporate speak, ChargePoint is … checks notes … executing objectives across all verticals according to plan! Or something like that…

For our purposes as Great Stuff Picks investors, CHPT stock isn’t going to get much cheaper than it is now, setting it up to rally big once that whole “economy” thing is figured out and inflation is tempered.

The Bad: Storage Wars

Seagate hard drive warn guidance backup meme

Like the tick-tick-ticking time bomb of a soon-to-fail hard drive, Seagate (Nasdaq: STX) just warned investors that this quarter is gonna get ugly.

Even uglier-than-Chewy ugly?

Well, you be the judge: The digital storage company dropped current-quarter revenue expectations from $2.5 billion to $2.1 billion, while earnings will be “significantly lower” than the $1.20 per share to $1.60 per share the company previously predicted.

For any STX investors paying attention, Seagate gave heavy clues that a big sales slowdown was coming. The company pointed toward reduced spending from certain cloud customers — after all, everything you put on “the cloud” is really just going on someone else’s hard drive — and deteriorating economic conditions in Asia.

Er … make that the whole world, while you’re at it.

If data storage companies with their millions and billions of dollars aren’t buying as much storage … your local data hoarder stockpiling 8TB hard drives sure isn’t going to save the business either. And I reckon even the average consumer is shying away from any nonessential PC upgrades right now.

Maybe it’s time to start the Ticking Hard Drive Indicator? Nah…

The Ugly: More Snap, Less Chat

Snapchat Wall Street likes other social media stocks meme

In its unrelenting quest to disappoint investors and be the worst social media platform for advertisers … Snapchat parent Snap (NYSE: SNAP) just one-upped Seagate on the pessimism meter.

Where does one get a pessimism meter, Great Stuff?

The metaphor store, of course! I’m sure if you ask nicely they’ll give you one. Anyway…

Snapchat’s two top advertising execs left for Netflix, and the company wants to lay off up to 20% of its workforce to save costs. And why does Snapchat need to save costs? Because its advertising revenue has dropped off a cliff the past few quarters.

I’m starting to see a cracking pattern here, Gromit.

According to Snap … or its remaining execs, at least:

Macro headwinds such as high inflation, rising interest rates, and geopolitical risks disrupting many industry segments that are critical to growing advertising demand (and) as advertising dollars in aggregate grow more slowly, competition for these dollars intensifies.

Plus, there’s the whole problem of, you know, this is Snapchat we’re talking about here. Advertisers aren’t jumping to the platform like they are to Facebook or Twitter even in “normal times,” let alone right now.

With all of the company’s “cost-cutting measures” — which sound so much nicer than firing people and making them destitute — Snapchat better start poaching new ad execs to figure out what in the world will get ad dollars in the door.

Other platforms are making money off their primarily younger demographics — why not you, Snapchat?

Oh, one last parting shot: Netflix! Did you really just steal marketing execs from a company that has historically struggled with ad revenue and has never turned a profit? Really? I’m not sure you thought this all the way through. Good luck with those purloined Snap ad execs. You’re going to need it.

What do you think, Great Ones? If you have thoughts on any of today’s topics — and I know you do — write to us at GreatStuffToday@BanyanHill.com.

In the meantime, here’s where you can find our other junk — erm, I mean where you can check out some more Greatness:

Joseph Hargett. Editor of Great Stuff

Joseph Hargett
Editor, Great Stuff