Is Fido capricious? Pet Foods Affected by Supply Chain Disruptions

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Supply chain issues do not spare pets. Finicky felines and picky puppies may find different food in their bowl these days due to the disturbance.

Freshpet Inc. FRPT,
-3.20%,
which makes pet food from natural ingredients, issued a revenue warning on Friday after supply chain issues hit the company.

“Supply chain issues continue to pose new challenges for our business, this time with parts supplies for key packaging components,” Freshpet chief executive Billy Cyr said in a statement.

“While we have since fixed this issue, it nonetheless caused a temporary drop in production, which in turn caused our expectations for the full year to be revised which we are updating today. “

The company now forecasts sales for the year 2021 of $ 425 million and $ 430 million. The FactSet consensus is $ 437.9 million. The news caused Freshpet stock to fall nearly 5% on Friday.

The news comes a few days after Chewy Inc. CHWY,
+ 2.55%
reported their own pet food issues.

See: Costco Raises Inflation Estimate For Third Quarter In A Row, Says Some Inventory “Won’t Be Available Until Christmas”

“Wet dog food shortages have persisted, while out-of-stock levels in areas such as third-party and exclusive branded items have also increased,” Mario Marte, Chief Financial Officer of Chewy, said at the call for third quarter results on December 9. , according to a FactSet transcript.

“As a result, the negative impact of supply shortages on third quarter net sales was approximately $ 15 million more than our internal expectations.”

Chewy reported sales of $ 2.212 billion, up from $ 1.782 billion last year and according to the FactSet consensus.

Analysts have taken note of the impact on Chewy’s outlook.

“Chewy is under pressure from the effects of supply chain delays and costs, labor costs and supply issues, as well as a difficult customer acquisition environment,” wrote the Wedbush analysts in a note.

“Some of these pressures are transient, but others may persist, weighing on the outlook for revenue and EBITDA growth.”

Wedbush is pricing the Chewy stock neutral with a price target of $ 55, down from $ 70.

Other research groups have also lowered their price targets. UBS reduced its price target to $ 46 from $ 71 and maintained its sell rating. JPMorgan moved its price target from $ 95 to $ 68, but kept its overweight rating.

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“[M]argins are impacted by inflationary pressures, supply chain constraints,
and Workforce and Chewy now expects 2021 EBITDA to be stable year-over-year versus +80-100 basis points year-over-year, ”said writes Raymond James.

Chewy also said in his letter to shareholders that these factors “will weigh on the short term.
profitability.”

Raymond James assesses the performance of the Chewy Stock Market.

For the fourth quarter, Chewy is targeting sales of $ 2.40 billion to $ 2.44 billion. The FactSet consensus is $ 2.42 billion.

For the year, Chewy’s outlook is for sales of $ 8.90 billion to $ 8.94 billion. The FactSet consensus is $ 8.92 billion.

Freshpet’s stock fell 36.1% for the year. Chewy is down 39.6%. And the benchmark S&P 500 SPX,
-1.03%
gained 23.8% in 2021.

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