Chewy Inc. (CHWY) is set to report third-quarter earnings on Wednesday, and JPMorgan thinks the pet retailer has some pleasant surprises in store. Analyst Doug Anmuth maintained his Overweight rating and $45 price target on the stock, expecting both quarterly results and full-year guidance to beat expectations.

Growth Initiatives Paying Off

The company is "leaning into growth initiatives & marketing to support share gains," Anmuth noted. That strategy appears to be working, with Chewy likely to report sequential gains in active customer net adds exceeding 160,000 for the third quarter. For the full year, the analyst projects over 718,000 customer additions.

Sales Growth Despite Softer Traffic

Here's where it gets interesting: third-party data shows a 12% year-over-year decline in website visits during Q3. Yet Anmuth expects Chewy to report 7% net sales growth for the quarter and 8% for the full year. That suggests the company is doing more with the traffic it's getting—better conversion, higher basket sizes, or both.

Guidance Raise Potential

"With strong execution, we believe CHWY could modestly raise FY25 guidance above the current $12.50B-$12.60B Net Sales and 5.4-5.7% Adj. EBITDA margins," Anmuth wrote.

Chewy shares rose 2.72% to $34.38 on Monday ahead of the Wednesday report.