Better Buy: Chewy vs. Six Flags Entertainment

With the Federal Reserve aggressively raising interest rates, many economists are predicting that the U.S. economy will slip into a recession sometime in the near future.no wonder S&P 500 Index It’s down 16% this year.

Still, this presents a potentially rewarding opportunity for patient investors.But you should do further research to determine whether the decline in the stock’s price caused value Chance.

Consumer spending could slow as central banks try to bring inflation down, let’s find out chewy (blow 4.00%) and six flags entertainment (six 1.76%) See which one offers a better investment opportunity.

Image credit: Getty Images.

chewy

Chewy, an online seller of pet products, supplies and prescriptions, drew a lot of attention early in the pandemic when pet adoptions soared. The stock price has soared 210% in 2020. But the stock has hit tough times since then.

Still, the company has a lot going for it. Management cited Packaged Facts statistics stating that 95% of dog and cat owners consider their pets part of the family, and that the US pet market is expected to grow 7.5% annually from 2020 to 2025.

Plus, spending on pets tends to continue to grow during a recession. For example, it grew 12% from 2008 to 2010 (during the Great Recession), while overall consumer spending fell. This fits with empirical evidence on how people feel about their pets and are willing to spend money on them even in tough economic times.

How does this translate to revenue and earnings growth? In its recently announced results for the fiscal third quarter ended Oct. 30, sales rose 14.5% year over year to $2.5 billion. This was due to higher spend per customer, which rose nearly 14% to $477. The company also increased active accounts, which ended the period at 20.5 million, compared with 20.4 million a year ago.

The implementation of higher prices, along with easing supply chain issues and inflation, expanded Chewy’s gross margin from 26.4% to 28.4%. Its operating loss narrowed sharply to $434,000 from $31.9 million a year ago.

With strong customer service that has built shopper loyalty, Chewy remains poised to continue growing sales and driving operational profitability.

six flags

Unlike Chewy, which owns and operates North American theme parks, most of them in the U.S., its performance suffered early in the pandemic as shutdowns greatly impacted its operations. Shares are down more than 24% in 2020 and continue to fall, especially this year.

The company has been adding new attractions, including taller and faster coasters, to entice guests. A year ago, new management made moves aimed at empowering employees, with an emphasis on guests. Its plans also include “premiumisation”, which means raising fares and upgrading guest facilities.

But higher prices could hurt Six Flags’ results during a recession. While we’re not in a slump just yet, revenue for the nine months ended October 2 was down 9% to $1.1 billion, while attendance was down 25% to 16.1 million. Net income fell 28% to $96 million. It is true that with the increase in tickets and consumption in the park, the per capita consumption of tourists has increased.but here are limit price increasesespecially in an economic slowdown.

Chewy continues to grow its business on solid foundations: attractive markets, loyal customers and convenient service. That makes it the clear winner at Six Flags, which has been implementing price increases that could deter attendance, especially in a downturn. There’s no doubt that Chewy is the better investment.