CHWY

- Recent reports highlight that Chewy holds an average brokerage recommendation between Strong Buy and Buy. In contrast, a lower Zacks Rank reflects more cautious earnings expectations based on negative estimate revisions. - The contrast between upbeat brokerage ratings and weaker earnings estimate trends points to growing pressure on Chewy's underlying profit outlook and business execution, rather than just sentiment noise. - We will now look at how this earnings driven shift in sentiment around Chewy could reshape the existing investment narrative. Pressure test the bullish Chewy story against other potential opportunities by scanning hand picked 33 high quality undervalued stocks with stronger earnings sentiment and cleaner estimate trends. To own Chewy, you need to believe the pet care flywheel can keep turning. That means Autoship retaining a large, recurring base of pet owners, Chewy Health gaining traction and Vet Care clinics ramping without eroding unit returns. The immediate swing factor is whether softer discretionary categories, like premium treats and toppers, stabilize so gross profit dollars keep compounding. The biggest operational risk in the near term is a consumer that keeps trading down. Management already pulled back full year fiscal 2026 net sales expectations because spending cooled. If that pattern persists, the push into higher margin health and services may need to work harder just to offset slower core product demand. The most relevant backdrop for this earnings driven sentiment shift is Chewy's push into Chewy Vet Care. Clinics, including the Modern Animal locations, are tracking toward about 60 sites with roughly US$290 million of embedded steady state revenue. Each location has been generating about US$3.5 million of clinic revenue plus US$0.8 million of attached Chewy.com sales. That expansion gives investors a clear operational catalyst to watch. Strong execution in Vet Care and Chewy Health, supported by AI driven cost savings and automation in fulfillment, could help earnings trends line up more closely with the earlier optimistic view. If clinic performance or consumer demand in services cools, the recent caution around earnings revisions may linger. Chewy's projections are based on revenue of US$15.8b and earnings of US$577.9 million by 2029. That profile assumes revenue growth of 6.5% per year and an earnings increase of about US$304 million from current earnings of US$273.7 million. Uncover why Chewy's fair value indicates a 37% potential upside to its current price that could close sooner than the market expects. For Chewy, the alternate, more optimistic narrative leans heavily on AI and automation as the real swing factor. The most bullish analysts were modeling revenue of about US$16.4b and earnings near US$682.5 million by 2029. Your job is to decide whether this pre news optimism still fits after the latest estimate reset. Explore 4 other Chewy fair value estimates, including one that suggests as much as 181% upside from the current price! Disagree with existing narratives? Extraordinary investment returns rarely come from following the herd, so go with your instincts. - A great starting point for your Chewy research is our analysis highlighting 4 key rewards that could impact your investment decision. - See our latest analysis for Chewy. The report includes a comprehensive fundamental analysis summarized in a single visual, the Snowflake, making it easy to evaluate Chewy's overall financial health at a glance. Once you have a view on Chewy, it can help to benchmark that conviction against other opportunities that fit different risk and income profiles. The Simply Wall St screener lets you filter for the traits you care about most so you can build a watchlist that matches your own approach. - If stability and capital preservation sit high on your list, start with 32 resilient stocks with low risk scores that pair resilient fundamentals with more measured risk scores. - Income focused investors can cast a wider net across markets by scanning 8 dividend fortresses that combine higher yields with supportive underlying financials. - For those hunting earlier stage opportunities with stronger quality markers, there is a curated 20 high quality undiscovered gems that screens for solid balance sheets and healthier earnings profiles. This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned. Companies discussed in this article include CHWY. Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email [email protected]

Tractor Supply Company TSCO is likely to register an increase in the top line when it reports third-quarter 2026 results on Oct. 22, before market open. The Zacks Consensus Estimate for revenues is pegged at $3.8 billion, indicating a 2.3% jump from the year-ago figure. The bottom line of the leading rural lifestyle retailer is expected to have fallen year over year. The Zacks Consensus Estimate for earnings per share has been unchanged at 40 cents in the past 30 days, indicating a decline of around 18% from the year-ago period's figure. Tractor Supply has a negative trailing four-quarter earnings surprise of 4.6%, on average. In the last reported quarter, this Brentwood, TN-based company's earnings missed the Zacks Consensus Estimate by 2.4%. Tractor Supply's quarterly performance is likely to have benefited from demand and market share gains. The company has been gaining from demand for its core merchandise, including consumable, usable and edible products. TSCO's focus on tailoring its product offerings to rural customers' daily needs has been a key driver of its success. In addition, digital sales, supported by in-store delivery, higher traffic and improved conversion, have helped. The fiscal third-quarter results are likely to benefit from improving seasonal demand, pet business initiatives, pricing actions and investments in existing-store productivity. Improved precipitation across several geographies is likely to have extended the spring selling season and supported demand for lawn care, outdoor products and other seasonal merchandise. TSCO is also focused on strengthening its pet business through localized assortments, premium nutrition offerings, exclusive brands and enhanced digital capabilities. The expansion of Freshpet, alongside Allivet, improved subscription services and the integration of VIP Petcare are expected to have supported customer engagement and market share. Such factors, coupled with the execution of its everyday low-price strategy, are expected to have bolstered its top-line performance in the quarter under review. On its last earnings call, Tractor Supply had expected a modest sequential improvement in comparable sales during the second half, supported by ongoing business initiatives and easier year-over-year comparisons as the period progresses. Meanwhile, investments in Project Fusion remodels, store technology and existing-store productivity are expected to have enhanced the customer experience and improved returns. Our model anticipates comparable store average transaction to rise 0.4% year over year for the third quarter. However, Tractor Supply continues to witness cautious rural spending, softer discretionary demand and weaker big-ticket purchases. Additionally, higher SG&A, including depreciation and amortization costs, expenses from opening a distribution center and cost inflation, including tariffs, are likely to have been concerns. Our model indicates a 3.3% year-over-year increase in depreciation and amortization for the third quarter. Such limitations are likely to have hurt the company's bottom line in the quarter under review. Tractor Supply Company price-eps-surprise | Tractor Supply Company Quote Our proven model does not conclusively predict an earnings beat for Tractor Supply this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the chances of an earnings beat. But that is not the case here. You can uncover the best stocks before they are reported with our Earnings ESP Filter. Tractor Supply has an Earnings ESP of 0.00% and a Zacks Rank #4 (Sell) at present. From a valuation perspective, Tractor Supply stock trades at a premium relative to the Retail - Miscellaneous industry. The company has a forward 12-month price-to-earnings ratio of 16.14X, above the industry's average of 14.71X. However, the stock trades below the historical benchmarks, with a five-year high of 27.91X. Image Source: Zacks Investment Research TSCO shares have lost 24.8% in the past six months compared with the industry's 15% decline. Image Source: Zacks Investment Research Here are a few companies that have the right combination of elements to post an earnings beat this time around: Kohl's Corporation KSS currently has an Earnings ESP of +460.00% and a Zacks Rank of 1. The company is likely to register a decline in the top line when it reports third-quarter fiscal 2026 numbers. The consensus mark for revenues is pegged at $3.5 billion, which indicates a decline of 1.1% from the figure reported in the year-ago quarter. You can see the complete list of today's Zacks #1 Rank stocks here. The Zacks Consensus Estimate for Kohl's quarterly loss per share of a penny compares unfavorably with earnings per share of 10 cents seen in the year-ago quarter. The consensus mark has changed to a loss of a penny in the past 30 days from earnings of a penny. KSS has a trailing four-quarter earnings surprise of 84.8%, on average. Chewy CHWY has an Earnings ESP of +6.65% and currently has a Zacks Rank of 3. CHWY is likely to register top and bottom-line growth when it reports third-quarter fiscal 2026 results. The Zacks Consensus Estimate for its quarterly revenues is pegged at $3.4 billion, indicating a 7.4% increase from the figure reported in the year-ago quarter. The consensus estimate for CHWY's fiscal third-quarter earnings is pegged at 38 cents a share, up 18.8% from the year-ago quarter. The consensus mark has been unchanged in the past 30 days. CHWY has delivered an earnings beat of 0.8%, on average, in the trailing four quarters. American Eagle Outfitters, Inc. AEO currently has an Earnings ESP of +1.32% and a Zacks Rank of 3. AEO is likely to register top-line growth when it reports third-quarter fiscal 2026 results. The Zacks Consensus Estimate for its quarterly revenues is pegged at $1.5 billion, indicating 6.8% growth from the figure reported in the year-ago quarter. The consensus estimate for AEO's third-quarter earnings is pegged at 49 cents a share, implying a 7.6% decrease from the year-earlier quarter. The consensus mark has dipped a penny in the past 30 days. AEO has delivered an earnings beat of 86.3%, on average, in the trailing four quarters. Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Tractor Supply Company (TSCO) : Free Stock Analysis Report Kohl's Corporation (KSS) : Free Stock Analysis Report American Eagle Outfitters, Inc. (AEO) : Free Stock Analysis Report Chewy (CHWY) : Free Stock Analysis Report This article originally published on Zacks Investment Research (zacks.com). Zacks Investment Research

It has been about a month since the last earnings report for Chewy (CHWY). Shares have lost about 10.3% in that time frame, underperforming the S&P 500. Will the recent negative trend continue leading up to its next earnings release, or is Chewy due for a breakout? Well, first let's take a quick look at the most recent earnings report in order to get a better handle on the recent catalysts for Chewy before we dive into how investors and analysts have reacted as of late. Chewy reported second-quarter fiscal 2026 adjusted earnings of 36 cents a share, which rose 9.1% year over year and came in line with the Zacks Consensus Estimate. Net sales increased 7.3% to $3,330.2 million, topping the consensus mark of $3,322 million. Results reflected customer growth, market share gains and disciplined execution. Chewy added 208,000 net active customers sequentially, excluding additions related to Modern Animal, while its customer funnel remained healthy across acquisition, retention and reactivation. Organic net sales, excluding SmartPak and Modern Animal, rose 5.7% year over year. Active customers increased 3.8% to 21.705 million, while net sales per active customer advanced 1.9% to $602. On a normalized basis, adjusting for the extra week in the prior-year comparable period, net sales per active customer increased 3.8%. Management cited customer cohort maturation, greater engagement across health and pharmacy, and broader cross-category adoption as supports. Autoship customer sales climbed 9.3% to $2,817.2 million and represented 84.6% of total net sales. The program continued to grow faster than the overall business, reinforcing the recurring nature of Chewy's revenue base. Consumer pressure remained visible in discretionary areas. Treat sales slowed more sharply than core food, while premiumization and discretionary attachment stayed pressured. Even so, mid-teens hard goods growth substantially outpaced the broader market, and Pet Health and Specialty Products delivered strong organic growth. Gross margin was 30.4%, flat year over year and up 30 basis points sequentially. Adjusted EBITDA increased 23.7% to $226.7 million, supported by sponsored ads, disciplined promotional activity and lower variable cost to serve. About $10 million of upside came from timing-related benefits, mainly earlier tariff refunds and shifted rebates. More than $5 million came from discrete items, including gift-card breakage, inventory adjustments and vendor-funded merchandising. Adjusted SG&A declined to 18.4% of sales from 19.1%, reflecting fulfillment utilization, automation and productivity gains. Chewy Vet Care again generated triple-digit revenue growth, while the fresh and frozen portfolio posted triple-digit unit growth. The equine, farm and exotics business delivered a seventh consecutive quarter of mid-double-digit sales growth. Modern Animal and SmartPak also performed ahead of prior expectations. AI initiatives are moving into scaled deployment. Kai, Chewy's customer-facing AI assistant, resolved about 30% of chats through self-service in early use. Management still expects AI-related initiatives to generate low tens of millions of dollars in fiscal 2026 cost savings, scaling to about $50 million annualized in fiscal 2027. Free cash flow fell 15.5% year over year to $89.5 million, reflecting $137.4 million of operating cash flow and $47.9 million of capital expenditures. Chewy ended the quarter with $612 million of cash, cash equivalents and marketable securities and more than $1 billion of total available liquidity. The company deployed $200 million toward share repurchases and bought back 9.9 million shares in the quarter. It also completed the $400 million Modern Animal acquisition and raised $600 million through its inaugural term loan issuance. Chewy expects fiscal 2026 net sales between $13.46 billion and $13.57 billion, implying reported growth of 6.8%-7.7% and organic growth of 5.5%-6.3%. Management had earlier guided net sales in the band of $13.40-$13.55 billion. Adjusted EBITDA margin is projected at 6.7%-6.8%, with the low end raised by 10 basis points from the prior range. For the third quarter, net sales are expected at $3.323-$3.358 billion, with adjusted EBITDA margin of 6.6%-6.7% and adjusted earnings of around 39 cents a share. The outlook assumes no meaningful consumer recovery and continued low pricing contribution, while management expects Chewy to keep gaining share. In the past month, investors have witnessed a upward trend in fresh estimates. Currently, Chewy has a great Growth Score of A, though it is lagging a lot on the Momentum Score front with an F. However, the stock has a grade of B on the value side, putting it in the second quintile for value investors. Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in. Estimates have been broadly trending upward for the stock, and the magnitude of these revisions looks promising. Interestingly, Chewy has a Zacks Rank #4 (Sell). We expect a below average return from the stock in the next few months. Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Chewy (CHWY) : Free Stock Analysis Report This article originally published on Zacks Investment Research (zacks.com). Zacks Investment Research

Chewy (NYSE:CHWY) primarily earns its revenue by selling pet food, essential supplies, and specialized animal medications directly to consumers online. It focused on integrating its recent veterinary acquisition to gradually expand its physical clinical care footprint across new geographic locations, while a third-party supplier issued a voluntary product recall for two specific dog supplements over potential contamination concerns. Coupang (NYSE:CPNG) generates its core revenue by operating a large e-commerce marketplace and managing multiple logistics delivery services for international consumers. It expanded the geographic coverage of its signature delivery service to reach more customers throughout Taiwan, while simultaneously facing a new on-site investigation and legal standoff with South Korean regulatory authorities over its ongoing pricing strategies and supplier policies. Revenue here refers to the data provider's standardized income statement revenue line item, which serves as a primary metric for individual investors looking to evaluate top-line business scale and assess overall operational trajectory over time. Calendar quarter | Chewy Revenue | Coupang Revenue Q3 2024 | $2.9 billion (quarter ended Oct. 27, 2024) | $7.9 billion (quarter ended Sept. 30, 2024) Q4 2024 | $3.3 billion (quarter ended Feb. 2, 2025) | $8.0 billion (quarter ended Dec. 31, 2024) Q1 2025 | $3.1 billion (quarter ended May 4, 2025) | $7.9 billion (quarter ended March 31, 2025) Q2 2025 | $3.1 billion (quarter ended Aug. 3, 2025) | $8.5 billion (quarter ended June 30, 2025) Q3 2025 | $3.1 billion (quarter ended Nov. 2, 2025) | $9.3 billion (quarter ended Sept. 30, 2025) Q4 2025 | $3.3 billion (quarter ended Feb. 1, 2026) | $8.8 billion (quarter ended Dec. 31, 2025) Q1 2026 | $3.4 billion (quarter ended May 3, 2026) | $8.5 billion (quarter ended March 31, 2026) Q2 2026 | $3.3 billion (quarter ended Aug. 2, 2026) | $8.9 billion (quarter ended June 30, 2026) When comparing Chewy to Coupang, I lean toward Chewy. Admittedly, neither e-commerce company has delivered compelling levels of revenue growth. However, I look upon Chewy's growth potential more favorably. Between its expansion into Canada and its efforts to open vet clinics, it appears to have greater potential for expansion and could enter other markets in the future. Although Coupang is the e-commerce leader in South Korea, its days of rapid growth appear to be over. While it has moved into Taiwan to stoke revenue growth, it must compete with Sea Limited and others in that market. Also, with e-commerce becoming established globally, it seems to have fewer obvious opportunities for expansion. Additionally, Coupang does not currently earn a profit, so a P/E ratio comparison is not appropriate. Nonetheless, when comparing the price-to-sales (P/S) ratio of both companies, Chewy's 0.6 P/S ratio is lower than Coupang's 0.8 sales multiple. Thus, as both companies seek newer and more creative opportunities to deliver higher growth, Chewy seems to hold the edge at this time. Before you buy stock in Chewy, consider this: The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Chewy wasn't one of them. The 10 stocks that made the cut could produce monster returns in the coming years. Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you'd have $370,440!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you'd have $1,470,022!* Now, it's worth noting Stock Advisor's total average return is 955% — a market-crushing outperformance compared to 215% for the S&P 500. Don't miss the latest top 10 list, available with Stock Advisor, and join an investing community built by individual investors for individual investors. See the 10 stocks » *Stock Advisor returns as of October 7, 2026. Will Healy has positions in Sea Limited. The Motley Fool has positions in and recommends Chewy and Sea Limited. The Motley Fool recommends Coupang. The Motley Fool has a disclosure policy. Chewy vs. Coupang: Steady vs. Fluctuating Quarterly Revenue Trends was originally published by The Motley Fool

Chewy has seen its stock slide sharply in recent years, and the question for anyone looking at the shares now is whether the current price lines up with what the business earns. With the company pushing beyond pure e-commerce into pet health services, the valuation story increasingly comes back to its earnings power rather than just top-line ambition. - Chewy's share price has fallen 72.9% over the past 5 years, which puts the spotlight firmly on whether the earnings profile can support even today's lower level. - Recent efforts to grow recurring revenue through pet health and services can influence how investors think about the durability and timing of Chewy's future earnings stream. - There is a second opinion on Chewy worth weighing. See what analysts think Chewy's shares could be worth. The stock's next move may depend on whether Chewy's current earnings justify the valuation that the market is placing on it today. If you are comparing Chewy with other earnings-focused opportunities, it can be helpful to see how similar themes play out across 32 high quality undervalued stocks. The P/E ratio is a useful lens for Chewy because investors are weighing the business on the earnings behind its pet retail and health services push. Chewy trades on a P/E of 26.8x, which is clearly higher than the Specialty Retail industry average of 16.1x and also above a peer group average of 15.5x. Based on a tailored fair multiple that factors in Chewy's own growth profile, margins, size and risk, the current P/E sits on the expensive side. This means the stock prices in a stronger earnings story than the sector as a whole. Because Chewy is leaning into health services and recurring revenue while rivals like Petco are still in the earlier stages of a turnaround, the premium P/E suggests the market already credits Chewy with a more established model in this space despite the recent share price slide. For anyone comparing the ticker with other earnings driven ideas, the key question is whether that richer multiple feels justified once you weigh Chewy's execution, competition and the timing of future profit delivery. Explore the numbers behind Chewy's P/E valuation. Simply Wall St Narratives for Chewy pick up where the P/E puzzle leaves off. They explain which assumptions on Chewy's growth, margins and earnings would need to hold for the stock to be worth materially more or materially less than it is today. Rather than relying on a single multiple or model output, each narrative sets out the key drivers behind its view of fair value so you can compare those expectations with Chewy's actual results as they are reported. One of the top community narratives on Chewy: 37% undervalued "The company's increased focus on innovation, such as the Chewy+ membership and mobile app improvements, is driving new customer acquisition and higher conversion rates..." Discover why this Narrative puts Chewy at 37% undervalued. Everything here has focused on what Chewy looks like today, yet there is a separate view that comes from where professional analysts see the business a few years from now, and how that stacks up against the current share price. Explore where analysts expect Chewy to be in a few years. This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned. Companies discussed in this article include CHWY. Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email [email protected]

Chewy (NYSE:CHWY) primarily generates revenue by operating a comprehensive online retail platform that supplies an extensive variety of pet food, daily accessories, prescribed medications, and specialized wellness items directly to individual pet owners living all across the United States. It recently finalized the acquisition of a dedicated veterinary platform to introduce physical clinic locations and virtual care services, while several third-party pet food brands sold on its website were simultaneously recalled for potential bacterial contamination. MercadoLibre mainly earns revenue by operating a massive digital commerce marketplace, managing complex regional logistics networks, and offering various financial technology services, such as digital payment processing and consumer credit, to everyday users across Latin America. It recently completed the widespread regional rollout of a new artificial intelligence search architecture across multiple marketplace websites. At the same time, several external law firms announced targeted investigations into potential violations of federal securities laws by the organization. Revenue here refers to the data provider's standardized income-statement revenue line item, and consistently tracking this metric helps individual investors clearly understand the total volume of money flowing into a business before any normal operating expenses are finally deducted. Calendar quarter | Chewy Revenue | MercadoLibre Revenue Q3 2024 | $2.9 billion (quarter ended Oct. 27, 2024) | $5.3 billion (quarter ended Sept. 30, 2024) Q4 2024 | $3.2 billion (quarter ended Feb. 2, 2025) | $6.1 billion (quarter ended Dec. 31, 2024) Q1 2025 | $3.1 billion (quarter ended May 4, 2025) | $5.9 billion (quarter ended March 31, 2025) Q2 2025 | $3.1 billion (quarter ended Aug. 3, 2025) | $6.8 billion (quarter ended June 30, 2025) Q3 2025 | $3.1 billion (quarter ended Nov. 2, 2025) | $7.4 billion (quarter ended Sept. 30, 2025) Q4 2025 | $3.3 billion (quarter ended Feb. 1, 2026) | $8.8 billion (quarter ended Dec. 31, 2025) Q1 2026 | $3.3 billion (quarter ended May 3, 2026) | $8.8 billion (quarter ended March 31, 2026) Q2 2026 | $3.3 billion (quarter ended Aug. 2, 2026) | $10.2 billion (quarter ended June 30, 2026) Admittedly, if looking at the raw numbers, MercadoLibre is the obvious choice, as its revenue has risen fast over time. Nonetheless, the risk profile may put Chewy in a more favorable light. For one, Chewy is based in the U.S., and many American investors may feel more comfortable investing in a market they might understand better. Additionally, among the consumer discretionary stocks, Chewy's P/E ratio of 28 is well below the 48 P/E ratio of MercadoLibre. Furthermore, in the second quarter of 2026, MercadoLibre's net income fell 11% year over year despite 50% revenue growth over the same period. In comparison, Chewy's net income rose 29% year over year, while revenue increased only 7%, which may put risk-averse investors at ease. However, MercadoLibre's net income fell because it chose to sacrifice short-term profits in favor of bolstering its e-commerce and fintech businesses, a move that could pay off in the long term. Thus, if their risk tolerance permits, they are probably better off choosing MercadoLibre. Data source: Financial Modeling Prep. Data as of Sept. 21, 2026. Before you buy stock in Chewy, consider this: The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Chewy wasn't one of them. The 10 stocks that made the cut are built for long-term growth and could produce monster returns in the coming years. Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you'd have $384,839!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you'd have $1,385,657!* That performance is why people listen. With a track record of beating the S&P 500 by 4x, Stock Advisor offers a distinct advantage. Don't miss the latest top 10 list, available with Stock Advisor, and join an investing community built for the long haul. See the 10 stocks » *Stock Advisor returns as of September 25, 2026. Will Healy has positions in MercadoLibre. The Motley Fool has positions in and recommends Chewy and MercadoLibre. The Motley Fool has a disclosure policy. Chewy vs. MercadoLibre: Steady Results vs. Rapid Revenue Growth was originally published by The Motley Fool

Image source: The Motley Fool. Wednesday, Sept. 9, 2026 at 8:00 a.m. ET Head of Investor Relations and Strategic Finance - Natalie Nowak Chief Executive Officer - Sumit Singh Chief Financial Officer - Christopher S. Deppe Operator: Hello, everyone. Thank you for joining us, and welcome to the Chewy quarter 26 earnings call. After today's prepared remarks, we will host a question-and-answer session. If you would like to ask a question, please press *1 to raise your hand. To withdraw your question, press *1 again. I will now hand the conference over to Lee Horowitz, Head of Investor Relations and Strategic Finance. Lee, please go ahead. Natalie Nowak: Thank you for joining us on the call today to discuss our second quarter results for fiscal year 2026. Joining me today are Chewy CEO, Sumit Singh and CFO, Christopher S. Deppe. Our earnings release, which was filed with the SEC earlier today, has been posted to the Investor Relations section of our website. In addition to the earnings release, the presentation summarizing our results is also available on our website at investor.chewy.com. On our call today, we will be making forward-looking statements including statements concerning Chewy's financial results and performance, industry trends, strategic initiatives, share repurchase program, and the environment in which we operate. Such statements are considered forward-looking statements under the Private Securities Litigation Reform Act of 2000. These statements involve certain risks, uncertainties, and other factors that could cause actual results to differ materially from our forward-looking statements. We encourage you to review our SEC filings including the section titled risk factors in our most recent Form 10-K as a discussion of these risks. Reported results should not be considered an indication of future performance. Forward-looking statements on this call are based on information available to us as of today's date. We assume no obligation to update any forward-looking statements except as required by law. During this call, we will discuss certain non-GAAP financial measures. Reconciliation of these non-GAAP items the most directly comparable GAAP financial measures is provided on our Investor Relations website and in our earnings release. These non-GAAP measures are not intended as a substitute for GAAP results. Additionally, unless otherwise stated, all comparisons discussed on today's call will be against the comparable period for fiscal year 2025. Finally, this call in its entirety is being webcast on our Investor Relations website. A replay of the audio webcast will be available on our Investor Relations website. And with that, I would like to turn the call over to Sumit. Sumit Singh: Thank you, Lee, and good morning, everyone. Chewy delivered strong results in the second quarter continuing to gain share and expand profitability. Our performance underscores the strength of our business model and disciplined execution. Our recurring revenue base supports durable sales while our expanding ecosystem and the growing contribution from Chewy Health drive structural wallet share gains. Together, these advantages position us to outperform in the current environment. Our earnings algorithm also provides the capacity to continue investing for long term growth. During the second quarter, while we did not see a meaningful recovery in the more pressured consumer backdrop for the pet market, Importantly, however, we did not see further deterioration. The environment has broadly stabilized to the trends we observed exiting the first quarter. And against this backdrop, Chewy continues to outperform the broader pet category by roughly 2x to 3x. And we continue to generate compelling growth across both scaled areas of our business and newer strategic growth platforms. Chewy vet care continues to scale in line with the economic framework outlined at our recent Investor Day. With our total clinic portfolio, again delivering triple digit revenue growth in the second quarter. Meanwhile, our fresh and frozen portfolio is meaningfully outpacing the broader category, delivering triple digit unit growth. And our equine farm and exotics business delivered its seventh consecutive quarter of mid-double-digit year-over-year sales growth. Taken together, this momentum demonstrates the breadth of growth opportunities across the Chewy ecosystem and our ability to capitalize on them without relying solely on a recovery in the broader pet market. We delivered Q2 total enterprise net sales at the high-end of our guidance range of $3.33 billion representing 7.3% year-over-year growth. Excluding the impact of SmartPak and modern animal, Q2 organic net sales increased 5.7% year-over-year. Driven by active customer growth, NEST Pack expansion, and ongoing market share gains. We ended the quarter with 21.7 million active customers. Up 3.8% year-over-year, while net sales per active customer increased $602. Autoship customer sales once again outpaced overall company growth, increasing 9.3% and representing 84.6% of total net sales in the quarter, further reinforcing the predictability, durability, and recurring nature of our revenue base. Importantly, our customer funnel remains healthy. We continue to add customers, improve retention, reactivate lapsed customers, and deepen engagement across the Chewy ecosystem. These dynamics support our ability to continue gaining share within the pet industry. Now to profitability. Q2 adjusted EBITDA margin reached 6.8%. While the upside relative to our expectation was largely driven by timing and discrete benefits, the underlying business continued to deliver substantial year-over-year margin expansion. Our sponsored ads portfolio continues to scale through robust growth while generally stable pricing despite rapidly expanding supply reflects a healthy underlying auction ecosystem Our retail product mix continues to shift towards high margin categories. Such as health, and we continue to lower our variable cost to serve through automation, scale, operating discipline, and increasingly AI-enabled productivity. Importantly, our strengthening earnings profile also gives us the flexibility to reinvest in the business. Where we see opportunities with compelling returns we will continue to deploy capital behind initiatives that can accelerate growth while maintaining the operating discipline that has driven our margin expansion. Up until this point. Turning to Chewy Health. We remain highly encouraged by the progress across our health ecosystem. Chewy vet care, continues to demonstrate strong customer satisfaction, attractive veterinarian productivity, and retention, compelling 4-wall economics, and importantly, the ability to drive incremental engagement across the broader ecosystem. We are also making strong progress integrating modern animal, which performed ahead of our expectations in the quarter. These early results reinforce our conviction that the strategic combination of modern animal and Chewy Vet Care. Together, the 2 businesses provide greater scale complementary capabilities, attractive unit economics, and differentiated telehealth offerings. Collectively, these trends create a powerful foundation from which to expand our veterinary platform, improve access to care, and connect more customers with the broader Chewy Health ecosystem providing meaningful runway for future growth. Furthermore, while 2026 is intended to be a foundational year for SmartPak as we strengthen the business's core operating drivers and position it for durable growth, our early progress has been encouraging. SmartPak performed ahead of our expectations reinforcing our conviction in the opportunity ahead. The early performance of both businesses reinforces our confidence in our ability to use Chewy's scale and capabilities to improve acquired assets and generate compelling returns as we the power of the Chewy platform. Now turning to AI. Our AI strategy continues to progress from capability development towards scaled deployment and measurable financial impact. In Q2, we made strong progress deploying AI across 3 areas. Improving the customer experience, increasing team member productivity, and structurally lowering our cost to serve. On the customer side, we recently launched Kai, our AI-powered assistant select group of customers in the mobile app. Early results are encouraging with approximately 30% of chats resolved through self-service across common needs such as orders, returns, autoship, and account management. To keep true to our Chewy spirit, customers who prefer or require human support are seamlessly connected to a care team member within seconds. At the same time, we are deploying AI-enabled tools across customer care, pharmacy, Chewy vet care to reduce manual work and improve productivity. In customer care, we launched agent facing AI capabilities which are helping transform customer signals into intelligent insights reducing burden on agents, and increasing team member productivity. In pharmacy, AI is helping automate data extraction and validation while improving review consistency. In vet care, at select Chewy vet care locations, we launched our AI-powered capability called Kali. Which is supporting appointment confirmations, scheduling, routine follow ups while reflecting Chewy's brand voice and customer's first tone. These initiatives are beginning to translate into financial benefits. We continue to expect AI related initiatives to generate low-tens of millions of dollars of cost savings in fiscal 2026, scaling to approximately $50 million on an annualized basis in fiscal 2027. Importantly, we view these benefits as another durable lever within our earnings model. As these capabilities scale, we should help us improve productivity, lower our variable cost to serve, and create additional flexibility to reinvest behind attractive growth opportunities. Before I turn the call over to Christopher, let me briefly address our outlook. 3 months ago, we reset our expectations to reflect a more cautious consumer environment. Since then, the trends underlying that outlook have broadly stabilized. We are not assuming a meaningful consumer recovery for the balance of this fiscal year. Instead, our confidence remains grounded in what we can control. Gaining share, growing and retaining customers, scaling health, and driving structural efficiencies across the business. At the same time, Modern Animal and SmartPak are collectively contributing above the levels contemplated within our prior outlook, and our profitability performance continues to demonstrate the structural improvements underlying our earnings algorithm. Chewy remains well positioned to gain share profitably grow earnings and free cash flow, and build the capabilities that will drive long term shareholder value. With that, I will turn it over to Christopher. Christopher S. Deppe: Thank you, Sumit. And thank you all for joining us today. Q2 performance demonstrates the strength and consistency of Chewy's execution across the business, with total enterprise net sales at the high end of our guidance range and adjusted EBITDA margin exceeding our expectations. Let me start with our financial and customer performance. Second quarter net sales reached $3.33 billion, representing 7.3% year-over-year growth. Excluding SmartPak and Modern Animal, organic net sales increased 5.7% year-over-year, consistent with the midpoint of our prior expectations. Both acquired businesses performed ahead of the assumptions embedded in the prior outlook, which I will address in more detail, when I discuss our updated guidance. Organic growth in the quarter was supported by continued active customer growth, higher NSPAC, and ongoing market share gains. We ended the quarter with 21 point 7 million active customers representing 3.8% year over year growth and 208 thousand sequential net additions. This included 43 thousand unique customers who have transacted with SmartPak since the acquisition and are now reflected in our active customer count. Autoship customer sales reached $2.8 billion increasing 9.3% year-over-year and representing 84.6% of total net sales. Autoship continues to grow faster than the overall business, reinforcing the durability, predictability, and recurring nature of Chewy's revenue base. NSPAC reached $602, On a reported basis, NSPAC increased 1.9% year-over-year. And on a normalized basis, accounting for the extra week in the prior year comparable period, NSPAC increased 3.8%. NSPAC growth continues to benefit from customer cohort maturation increasing engagement across health and pharmacy, and broader cross category adoption. These drivers were partially offset by continued pressure on discretionary attachment and premiumization. Pressure on premiumization and discretionary spending materialized broadly in line with our expectations during the quarter. Affecting both the consumables and hard goods categories. As we discussed last quarter, purchasing behavior within consumables is influenced by both premiumization and discretionary attachment. In the second quarter, treats sales growth slowed more sharply than growth in core food. Reflecting moderation in discretionary purchases and the broader macroeconomic pressures we have been describing. Importantly, Chewy continues to gain meaningful share across categories. Industry data suggests that the broader consumables market is broadly flat year-over-year, making Chewy's mid single digit growth a healthy level of outperformance. Similarly, our mid teens hard goods growth substantially outpaced the broader market reflecting the benefits of the assortment and merchandising improvements we have made over the past year, despite continued pressure on discretionary spending. Finally, pet health and specialty products delivered strong organic growth underscoring the momentum across our expanding suite of health related offerings for pet parents. Turning to profitability. Adjusted EBITDA reached $227 million in the quarter, representing a 6.8% adjusted EBITDA margin above our guidance of 6.3% to 6.4%. Second quarter gross margin was 30.4%, flat year-over-year and up 30-basis-points sequentially. As a reminder, the year over year comparison was against certain non MAP related pricing and other benefits realized in the second quarter of fiscal 2025. Gross margin exceeded expectations supported by continued growth in sponsored ads, and disciplined promotional activity. However, approximately $10 million of the upside reflected timing related benefits, primarily tariff refunds that were received earlier than anticipated, as well as certain rebate benefits that shifted from the second half into the second quarter. The quarter also included more than $5 million of discrete benefits related to gift card breakage, inventory adjustments, and certain vendor funded merchandising activity. While these items benefited second quarter results, they are not indicative of our underlying margin run rate. Taken together, these timing related and discrete items accounted for essentially all of the adjusted EBITDA outperformance relative to expectations. Even excluding these benefits, adjusted EBITDA margin expansion remained very healthy, and gross margin expanded year over year after normalizing for nonrecurring items in both periods. As these timing benefits normalize, we expect gross margin to decline modestly on a sequential basis in Q3. Broadly consistent with the normal seasonality we experienced last year. As a reminder, we continue to expect fuel to represent a mid single digit million dollar headwind through the balance of the year. Even with these factors and normal second half seasonality, we continue to expect full year gross margin expansion although at a more moderate pace than we delivered in fiscal 2025. Please note that my discussion of SG&A excludes share based compensation expense and related taxes, as well as transaction and integration related costs. Second quarter non-GAAP SG&A $612 million or 18.4% of net sales compared with 19.1% in the prior year period. We delivered 70-basis-points of year-over-year SG&A leverage reflecting improved fulfillment center utilization, lower variable cost to serve, disciplined headcount management, and continued productivity gains across the organization. Lower variable cost to serve remains the largest contributor to SG&A leverage. As our automated facilities continue to scale and utilization improves, we are leveraging the fixed cost infrastructure embedded within the network while also reducing variable costs through automation, process improvements, and AI-enabled tools. We continue to expect SG&A leverage in the second half remain broadly consistent with what we delivered during the first half. Advertising and marketing expense was $215 million or 6.5% of net sales. Essentially flat year-over-year as a percentage of sales. We continue to allocate spend towards channels and customer cohorts where we see attractive acquisition economics and long term value. Supporting healthy active customer growth while maintaining disciplined returns. Looking ahead, we expect to increase advertising and marketing activity in the second half relative to Q2. With spending more heavily weighted towards Q3 than Q4. This cadence reflects attractive opportunities we are seeing to invest in brand awareness ahead of the holiday season. Which we expect to support customer engagement during peak and beyond. Q2 adjusted net income was $149 million translating into adjusted diluted earnings per share of $0.36 As discussed, the majority of the upside relative to our guidance reflected timing and other nonrecurring gross margin benefits. At the same time, the underlying margin performance continued to benefit from structural SG&A leverage and operating efficiencies I described earlier. Modern animal was included in these results and, as expected, represented a modest drag to adjusted EBITDA margin in the quarter. Let me close the discussion of second quarter results with cash flow and capital allocation. Free cash flow for the quarter was $90 million compared with $106 million in the prior year period. This reflected $137 million of net cash provided by operating activities and $48 million of capital expenditures. Note that while free cash flow was down year over year, this was entirely timing related and we continue to expect full year free cash flow through of roughly 80%. We ended the quarter with $612 million of cash, cash equivalents and marketable securities and over $1 billion of total available liquidity. During the quarter, we completed the acquisition of Modern Animal for $400 million raised $600 million through our inaugural term loan issuance, and deployed $200 million towards share repurchases. Repurchased 9.9 million shares during the quarter, After accounting for shares issued in the Chewy employee equity programs, these repurchases resulted in a 2% sequential reduction in weighted average diluted shares outstanding this quarter. Chewy's capital allocation framework remains unchanged. We will continue to invest behind strategic priorities where we see attractive returns maintain a conservative and flexible balance sheet, and return excess capital to shareholders. Within that framework, we continue to believe that Chewy shares are undervalued at current levels. Repurchases, therefore, remain an attractive use of capital and we expect to remain opportunistic in our activity. Based on our performance through the first half, and the increased visibility we now have, let me move to the outlook for the balance of the year. As I discussed, while we continue to see modest pressure on attachment and premiumization, in line with what we discussed last quarter, importantly trends have not deteriorated further relative to the assumptions embedded in our prior outlook. This increased visibility into the operating environment, combined with the consistency of Chewy's market share gains, gives us confidence to narrow the full year organic net sales growth range. In our view, the downside scenario underpinning the prior low end of guidance which assumed a more meaningful weakening of the end market has become less likely. Additionally, SmartPak and Modern Animal are performing ahead of initial expectations as we progress with the integration. Leading us to raise our forecast for their contributions. For fiscal year 2026, we now expect total net sales of $13.46 billion to $13.57 billion, representing year-over-year growth 6.8% to 7.7% including organic net sales growth of 5.5% to 6.3%. The performance of our core business in the quarter supports our continued expectations to deliver near the midpoint of the updated sales guidance. Importantly, the midpoint does not assume any meaningful improvement in the consumer environment but consistency at the levels we have seen for the last several months. Consistent with the prior outlook, the high end of the range contemplates either an improvement in the market backdrop stronger execution against our plan, or a combination of both. Conversely, the low end assumed some renewed deterioration in the operating environment, although less pronounced than the downside scenario embedded in the prior guidance. Now turning to profitability guidance. As mentioned previously, while we delivered strong underlying performance in the second quarter, essentially all of the upside relative to expectations reflected timing related and discrete items. That said, reflecting the strength of our underlying performance year to date, including the continued scaling of AI initiatives, we are raising the low end of full year fiscal 26 EBITDA margin guidance by 10-basis-points and narrowing the range to 6.7% to 6.8%, from 6.6 to 6.8%. This outlook reflects our continued confidence in the underlying earnings profile of the business, and our ability to deliver substantial year-over-year margin expansion. At the midpoint, this implies over 100-base-points of year over year adjusted EBITDA margin expansion and $912 million of adjusted EBITDA for fiscal 26. Consistent with our comments last quarter, this guidance includes a modest margin rate drag for modern animal. For the third quarter of fiscal 26, we expect net sales of $3.323 billion to $3.358 billion representing reported year over year growth of 6.6% to 7.7% and organic net sales growth of 5.3% to 6.2%. This outlook reflects the same operating assumptions embedded in the full year guidance I just described. For the third quarter, we expect adjusted EBITDA margins of 6.6% to 6.7%, representing roughly 85-basis-points of year over year expansion at the midpoint. We also expect adjusted diluted earnings per share of around $0.39 Finally, for the full year, we now expect share based compensation expense, including related tax taxes, to remain broadly flat to last year weighted average diluted shares outstanding of approximately 410 million shares net interest expense of $10 million to $15 million capital expenditures of 1.5% to 2% of net sales and an effective tax rate of 24% to 26%. In closing, Chewy's Q2 results reinforce our in the underlying health and earnings power of the business. Continue to gain share grow our recurring customer base, and expand profitability through structural improvements across the organization. Our updated outlook reflects increased visibility into the balance of the year and continued confidence in our ability to deliver profitable growth. With that, I will turn the call back over to Sumit for closing remarks. Sumit Singh: Thank you, Christopher. To close, the key takeaway from the quarter is that Chewy continues to grow customers gain share, and expand earnings even in a pet market that remains under pressure. We are growing both sides of the customer equation. The number of customers we serve and the amount that they spend with Chewy. While Autoship continues to reinforce the recurring and durable nature of our revenue base. At the same time, our earnings profile continues to strengthen. We are driving greater efficiency across the business scaling higher margin growth areas such as health and sponsored ads, and beginning to realize tangible productivity benefits. From AI and automation. We are particularly encouraged by the progress across Chewy Health including the early performance of modern animal and the continued scaling of Chewy vet care. As these businesses grow, we believe they can deepen customer expand wallet share, and become an increasingly meaningful contributor to Chewy's long term growth and earnings power. Importantly, our outlook does not depend on a meaningful recovery in the broader pet category. We remain focused on the things we can control. Serving customers exceptionally well, gaining share, scaling our strategic growth platforms, and continuing to improve the efficiency of the business. Taken together, we believe these capabilities position Chewy to compound earnings and free cash flow over time while continuing to invest behind attractive growth opportunities and create durable long term shareholder value. Thank you to every Chewy team member for their continued dedication and to our customers. For their trust. Operator, we are now ready to take your questions. Operator: We will now begin the question-and-answer session. Please limit yourself to 1 question and 1 follow-up. If you would like to ask a question, please press *1 now to raise your hand. To withdraw your question, press *1 again. We ask that you pick up your handset when asking a question to allow for optimum sound quality. If you are muted locally, please remember to unmute your device. Please stand by now while we compile the Q&A roster. Your first question comes from the line of Steven Forbes with Guggenheim. Your line is open. Please go ahead. Steven Forbes: Morning. Sumit, Christopher. Sumit, you mentioned the sort of the moderation in treat sales during the quarter. I guess, at a more accelerated pace than consumables. Is there a way to frame up for the group here on sort of what percentage of consumables is treats or what you would consider to be more discretionary? And then and then any particular pockets within treats that are more notable in terms of what you are seeing from a consumer behavioral standpoint? Sumit Singh: Hey, Steven, I will stay away from precisely defining the penetration of treats within the business. Candidly, what you are hearing is essentially you know, discretionary does not just mean supplies, and I think that is the meta point. That currently consumer consumers are continuing to spend pretty, you know, at a pretty normal level on their core food, meds, and the engagement through Autoship remains very strong and healthy with Chewy. And from a discretionary part of consumables, it is the treats and the toppers. If you look at an average consumer, an average consumer would experiment with over 10 types of treats across a variety of treat categories, might be soft, might be hard, might be chews, might be jerky, dental. Premium, rehydrated, raw, freeze dried. And these all come at different price points and different consumption patterns. Relative to the household that we serve. Some go on autoship, some do not go on autoship, some go on autoship and come off. So there is a dynamic behavior that customers follow as it comes to what we consider the discretionary part of consumables, which is if you are allocating a budget from a household perspective, you know, you prioritize core food, you prioritize meds, You prioritize categories like supplements, which are health and wellness oriented. And then everything else falls a little bit more towards the discretionary side. Right? And so within that, what I would also then categorize perhaps to answer the next type of question is, like, we interpret the relative growth, right, rates as consumers prioritizing discretionary hard goods over essential consumables. Right? And so the 2 businesses are being influenced by different underlying factors. Consumables remains our largest and more most mature category, and Autoship fuels it with large penetration towards dog. And a very healthy penetration towards cat. Hard goods is a bit of a different story, and that is more of the you know, the work that we have done to bring to the category and drive the category towards double digit growth over the last couple of years that we have been candid in talking about. Right? So the growth primarily reflects improved execution and outsized share capture. Given that we have materially expanded the breadth and relevance of our assortment that has improved our ability to serve customer needs and capture demand in that category. So there is a lot going on under the categories here, but I think the main takeaway is, you know, there are certain types of these merge classes that are a bit more you know, consumers are viewing them as a bit more discretionary. And for everything that is based in core business, plus the newer parts of the businesses that might be fresh food, that might be which is actually a growing TAM, might be our health related categories or the large, you know, strong equine business that we are building. Very healthy growth rates there. Steven Forbes: Helpful. And then just a quick follow-up. I do not know if it is possible for you to frame up how you expect the Modern Animal acquisition to impact net adds during the Q3 given the SmartPak impact during the second quarter And then any early comments on how the conversion of those customers to the Chewy Autoship platform is trending. I do not know whether in absolute or just relative to expectations. Sumit Singh: Yeah. Both good questions. So we have not yet the so we have sized the impact to net ads. We I think we gave you a preview we bought the asset, and we said they have roughly 100 thousand customers, and we you know, roughly 40% of that or in the 40 to 50 range. Be net new to Chewy. Yeah. We are continuing the integrations So once we are ready to sort of disclose that, we will build that in. Presently, when we are giving you forecasting, it is not including you know, the modern animal net adds. So you should view our guidance as organic growth in the business And when we do disclose it, we will come back and share the specifics just like we did with SparkPack this time. In terms of conversion of customers to Autoship, we expect that to be super healthy. You know, we are in the process of integration. The acquisition closed a couple of months ago. So our focus on the back half of the year, particularly is on integration. Trends are the initial inputs that we had forecast are performing better than our initial forecast, which is why the commentary on the strengthening part of the business that you heard on the call but we expect Autoship platform trending to be high. There is no reason to believe that this would not translate, much like a Chewy customer or a normal Chewy base does. Thank you. Sure. Operator: Your next question comes from the line of Nathaniel Feather with Morgan Stanley. Your line is open. Please go ahead. Nathaniel Feather: Hey, Sumit, Christopher. Thanks for taking the question. Given some of the pressure you have seen in organic growth from the weaker macro, I guess, are you thinking about balancing margin expansion with potentially the ability to lean in a little bit to reaccelerate growth. And Sumit, you noted in the script that you have flexibility to reinvest in the business. You know, touch on the key areas you believe you can lean deeper in here. Thank you. Sumit Singh: Yeah. I think it is a it is a prudent question at this time. I will keep my remarks. I will elaborate on this. And so just expect me to just share my thinking a bit out loud. So I think you should think about it 2 ways. 1, either the question sort of, like, hey. How much would you consider investing to accelerate revenue growth? And then the second part is, you know, I guess, what levers do we have available to accelerate sales growth? Right? And so investment's not always a part of our consideration and planning at Chewy when we are planning for sales growth. We believe we have credible levers in front of us where we can self fund slash drive growth at very healthy ROI. You know? So those if I take you down the list, on the top of my mind, a, remain enthusiastic about Chewy Plus. And we expect to introduce a refreshed program design very short into the market. You heard me talk about, you know, aligning and arriving at a strong product market fit. And we believe that the redesigned offering will strengthen consumer value proposition and deliver that compelling product market fit that I have been you know, talking about for the last 1 quarter or so. Number 2, you know, we continue to identify attractive opportunities to deploy marketing dollars and bring more customers into the Chewy funnel. Right? And so when you look at our performance in Q2, right, primarily a few weeks of effort where we pushed a deliberate investment decision rather than, you know, accept a deterioration in marketing efficiency. So for Q2, we leaned in a bit, and, you know, we did not tolerate any deterioration in marketing efficiency. And our targeting conversion CRM and app capabilities are the areas we essentially leaned in on. And that continue to improve you know, they continue to improve those capabilities. And they supported more efficient acquisition of high quality customers for us. In Q2, which we expect to repeat you know, going into Q3. You also heard on the earnings call that we said we expect to lean in a bit and, you know, invest in brand building. We believe is a prudent investment in front of the holidays, but it also sets up you know, importantly, 2027 in a very strong way. You know? This is a playbook that we are borrowing from the end of 2024 in the way that we entered 2025 and we are taking some learnings from that playbook and deploying it in the back half of 2026. And then you know, lastly, I would say, we are also moving with urgency to bring some unique products and experiences designed to deepen engagement, increase attachment across additional and compound nest pack to market in the back half of this year. Right? So you should expect us to have some incremental conversations with you about some net new launches as we play through Q3. Right? So that is how you should think about you know, the levers that we have and the mind share on where we are putting that mind share to drive accelerated growth. Christopher S. Deppe: In terms of investment levels, we have not yet determined the appropriate levels of reinvestment for 2027 as that work remains part of our 2027 planning process. Right? And you can expect that any decision will be grounded in a attractive long term returns and calibrated against our broader earning and earnings and margin objectives. Sumit Singh: Right? But I will leave you with this thought. Look at fiscal 25 and 2026 out 2025 results. And 2026 outlook. Incremental margins reflect several moving pieces. We have structural margin drivers that we have articulated for some time. And we continue to deliver across those as expected. You know, have the cost associated with bringing new fulfillment capacity online. Balanced with ongoing efficiencies across the organization including our contribution from AI initiatives. So we have got a really healthy, you know, playbook that we can deploy against while keeping highly disciplined and trying to self fund a bunch of our investments you know, leaving ourselves the room and the capability to drive accelerated growth. Without taking away from the algorithm that we have shared with you. Nathaniel Feather: Thanks, Amit. That was really helpful. Just 1 small follow-up there. On the Chewy Plus redesign, I guess, how to speak through, what the learnings have been from that program to date and where you feel you can drive some incremental improvements to increase adoption? Thanks. Sumit Singh: Yeah. So we really like the program so far. You know, it is helped us drive it helped it helped us learn the boundaries of, you know, sales customer penetration, and profitability guardrails. Which were important to learn. At the at the at 1 level beneath that, it is helped us understand specific cohort interaction, cohort behavior, maturity curves of cohorts, given that we played the program through for roughly, you know, 5 quarters now. And that is, in our opinion, a good amount of learning. And what we found was, you know, through the voice of the customer, customers have loved, you know, the same sort of chewy forward customer centric principles that we have leaned in with. You know, trying to maximize the value that they extract from the platform, the that they have, the loyalty features that we bring forward. At the same time, you know, we heard that while customers really appreciate the components that we brought forward, You know, they would appreciate it even more if we connected the broad offerings that make Chewy the ecosystem of choice. To bring those offerings to them. Right? And so I am hinting towards, you know, the program design evolving to include, you know, a multitude of health benefits that then drive the customer to interact across a variety of our business you know, new and existing, and therefore, deepen their engagement. So if I were to if I were to design a marketing tagline, and I am not a marketing copywriter, I would say, you know, meet the new Chewy Plus. You know, cheaper, better, more care, you know, integrated. Right? that is a terrible copy, but that is why I am not a marketing copywriter. But you should expect you should expect us to listen to customers and go out and really position the program to gain scale and drive, you know, the attachment and the in sales stronger than what we are seeing today. So we are excited. Without really, you know, disturbing, the margin, kind of profile of that particular program. So that is how we are thinking about it. More to come in Q3. Very helpful. Thank you. Sure. Operator: Your next question comes from the line of Dylan Carden with William Blair. Your line is open. Please go ahead. Dylan Carden: Appreciate it. Thank you. Curious if you can help us understand sort of the pet industry stabilization commentary as it relates to pricing units at household formation. And then particularly sort of how you are envisioning pricing to trend in your guide. Into the back half. Thanks. Sumit Singh: Sure, Dylan. I can take the first part. Christopher will take the second part. there is a lot here in what is going on within the pet industry. I would say broadly, you know, when we entered Q1 started noticing some signs. You would heard me comment at some of the conferences around hey. The industry, you know, we are not essentially baking in a rebound. Coming into 2026, but we were expecting that rebound in 2025. The stability that we were expecting coming into Q1 you know, started deteriorating a bit in the April-- late March, April time frame, which is what you heard us comment on our Q1, earnings call and we reset our guidance at that particular point. Right? So we said, hey. We are not essentially baking in a rebound of sales growth at this particular point. We do not expect pricing inputs to materially change. What that means is we do not expect pricing to be a benefit, net benefit in 2026, but we also do not you know, the promotionality environment to be, irrational, which is by the way, what we are continuing to see for the most part. You know, there are sort of peaks and valleys in some promote promo you know, in some months. But for the most part, the environment's relatively stable. And then underneath of that, you know, we would said to you that, hey. Dog seems to be worsening. Cat seems to be strengthening. So for the most part, those Inputs that I talked about have continued as we have played through Q2. Importantly, however, the inputs of traffic, right, have stabled slash strengthened towards Chewy. And online continues to pull share. From the overall industry. So the secular trend tailwind plus the value prop that we are bringing to the table allows us to continue to aggregate share, albeit in this slightly more consumer industry, right, in the consumer pet consumers pet world. So that is kind of how we are projecting. So you heard in our comments stable. We are not baking in a rebound. We believe we have the ability to continue to drive and outperform the market in the back half. And then you just heard me take you through a series of levers and a broad thinking. On, on the fact that we are not sitting idle. As we move into 2026 regardless of what the macro does. Christopher? Christopher S. Deppe: Yeah. I just to reiterate, you know, I think about how we set guidance. We updated our outlook and it does not assume any recovery Sumit noted. Or any improvement in consumer behavior. You know, the trends we have seen have been broadly consistent with what we saw exiting Q1, and we view that moving forward You know, within that backdrop, you know, our outlook reflects continued execution against the drivers that we can control, which is active customer growth, retention or reactivation, auto ship engagement, cross category adoption, health care growth, market share gains. And so you know, we expect to grow meaningfully ahead of the category without needing that external recovery. You know, we do believe we have a greater visibility into the range of out stability and trends allowed us to remove the more severe downside scenario that we contemplated last quarter. Allowing us to narrow that organic growth range. You know, for us, the high end would require either some better market backdrop you know, stronger execution against our initiatives or some combination of those 2. And the low end, you know, reflects a bit more pressure to consumer than we are seeing today, but not as bad as what we expected. In the prior original outlook that we gave last quarter. From a pricing standpoint, just to reiterate what Sumit said, we are operating a very low price environment. And we are not seeing any benefit there, which we have factored into our guidance. You know, as Sumit noted, we are we are not seeing deflation in the category. Just not meaningful pricing contribution to sales growth. Excellent. Dylan Carden: Thank you. And as a follow-up, Sumit, you have been very helpful in kinda thinking through the AgenTic side of all of this. Any update on of AI chatbot product discovery and now that you have got perhaps half a year in from when this really kinda started taking off. How your platform is integrated with that. Is it a headwind? Does the business become more reliant? On Autoship Anything kinda update there would be helpful. Thanks. Sumit Singh: So it is a we think of it as a net tailwind Dylan has and I have continued to maintain that point of view including, you know, writing about it pretty publicly a few months ago. You know, on agentic surfaces, we continue to lead with product innovation. We are following those metrics closely. And we are pleased with Chewy's position, in terms of search aggregation and search demand you know, traffic driving. Towards Chewy. Secondly, you know, on our surface, and evolving consumer behavior in terms of product discovery, so 1 of the unique products that I mentioned, you know, on my remarks a bit earlier when responding to Nathaniel. In terms of the unique products that we are bringing to life, that is very much on the back of our minds to offer customers a net new way of interacting with Chewy and deepening their engagement. So, you know, I will not will not give the details away here. Broadly speaking, we will continue to innovate behind this new and utilize it to improve experience and drive deeper customer engagement. While making sure that as the aggregation shifts upwards to agentic surface is positioned to lead and capture an outsized portion of that demand. Okay. Thank you very much. Sure. Operator: Your next question comes from the line of Douglas Anmuth with JPMorgan Chase. Your line is open. Please go ahead. Douglas Anmuth: Great. Thanks for taking the questions. Sumit, I just wanted to go back to some of your margin and cost related comments. I guess, just what kind of confidence do you have just around the AI driven efficiencies that you talked about, the low tens of millions, I think, in fiscal 26 and then the 50 million plus in 2027. And then perhaps more importantly, then how do you think about the headroom in lowering cost to serve going forward just on a multiyear basis? Thanks. Sumit Singh: Yeah. Hey, Douglas, So high confidence. Let's start with the answers first. High confidence in our AI driven efficiency for both the framework as well as the results that we are seeing flow through, into the P&L. We expect and we are just getting started. You know, the update that I provided this morning on our customer facing AI assistant named Kai, Kai. You know, we are in still, you know, less than 10% or 15% of our traffic is exposed to that. And it is been in the market less than a month. But we accelerated that deployment from Q3 into Q2, When we lowered the sales guidance, as you recall, we had to have enough confidence in our own ability to essentially absorb all of that profit impact and overdrive to profitability in the back half. And some part of that is us pulling in the initiatives that were slated to launch in the back half especially those where we had high confidence. And so this is 1 of them. Where we are seeing a very high customer take rate, and now it is about, you know, scaling our capability to open up the coverage radius, to both customers as well as use cases. Other examples that I provided to you around building customer facing internal team member facing agents, whether that is deployed in the pharmacy fulfillment space, which is allowing us to lower our cost to serve in pharmacy, which is durable. So we do not expect these to, you know, essentially, these are structurally lowering the fulfillment cost that it takes us, you know, to essentially pick, pack, and ship an order to you. And so that is very durable. Same thing in customer service. You know, our agents interact with a multitude of softwares, and spend time in looking for answers and building that coherence. Particularly for agents that are net new in a way that we help them ramp up, and therefore not suffer the productivity dilution. The internal tools that we are launching are rapidly allowing us to essentially level those net new agents and their performance much closer to our experienced agents and therefore embed that productivity in and lower the cost to serve structurally. So, yeah, hopefully, that gives you a sense for why we do not just believe that these are an experiment mode. We believe these can be embedded And as these scale, right, it sort of compounds the earnings that you have heard us say. To the or educate you on the range of $50 million. Now I do wanna clarify 1 thing. Right? As investors look to 2027, it would not be appropriate to mechanically layer the growing contribution on AI or from AI on top of our fiscal 26 margin trajectory. Right? We view AI as an increasingly important component of our broader productivity agenda, and it gives us greater confidence in our ability to deliver against those financial objectives. However, these efficiencies will also help offset the normal cost pressures Right? So whether that is wage inflation, you know, or other trends in the industry, So they will help us offset the normal cost and we may reinvest some of these funds to drive you know, attractive growth opportunities. So net, we view AI as a powerful enabler of continued margin not as a stand alone pool of savings that will flow directly into the bottom line. So I think both sides of the equation just have to be sort of appropriately understood. Christopher S. Deppe: In terms of headroom that we see in lowering cost to serve, I can provide a quick point. Christopher is nodding at me. He will he is he is gonna take this 1. Yeah. Absolutely. Douglas, we feel strongly about our multi outlook and road map to lower variable cost to serve. You know, Sumit talked about some of the AI initiatives. We also have, continued automation You know, we are north of 50% of our volume flowing through automated states, and we will continue to grow that over time. And so we have a robust road map there to continue to lower our variable cost to serve and deliver SG&A leverage in the p and Then our confidence in hitting the long term margin path of 10% plus EBITDA that we have mentioned is stronger at this point. And continues to strengthen with every quarter and year. that is how I would wrap that up. Good to hear. Great. Thank you both. Appreciate it. Operator: Your next question comes from the line of Steven Zaccone with Citi. Your line is open. Please go ahead. Steven Zaccone: Hey. Good morning. Thanks very much for taking my question. I wanted to ask about some of the gross margin puts and takes in the second half of the year. Christopher, it looks you to dig into that a little bit more. You talked about gross margin being down year over year in the third quarter. Just elaborate on that a little bit. And maybe to zoom out, sponsored ads has been a gross margin tailwind for quite some time. Help us understand the contribution this year from accretion perspective, and can that continue to be accretive as we look into next year? Christopher S. Deppe: Yes. Thanks, Steven. So just 1 clarifying point. Here. In the script, we talked about Q3 being down sequentially from Q2. It will not be down year-over-year. So Q3, the quarterly margin progression in the second half of the year will look more like 2025. Where Q3 will step down from Q2. But it will leverage year on year, both Q and Q and Q4, we expect to modestly leverage year on year. And so, you know, sponsored ads will be a tailwind, has been a tailwind for some time we launched the program in fiscal 23. You know, we continue to deliver gross margin tailwinds from sponsored ads, both on-site ads and off-site ads, are growing, this year. And gross margin also continues to benefit structurally from mix premiumization. As we move forward and grow our Chewy Health ecosystem. So, you know, sponsored ads will, will continue, to grow, and, you know, I think you can continue to expect that next year as well. Sumit Singh: The gross margin story has not changed, Steven. At the beginning of the year, we said it is gonna be a driver you know, 2 main things are going to be drivers of gross margin this year. it is going to be our continued mix premiumization. it is going to be continued tailwind from sponsored ads, albeit at a lower level than what you saw in 2025. And so, essentially, we said, you know, margins are expected to expand albeit at a lower rate relative to 25. The only thing that has changed since about things keep changing up monthly, but the broad trending that has changed is when we came into the year, we did not really understand, you know, how much tariff no. Sorry. Not tariff. How much fuel impact should we bake in relative to, you know, the war in the middle East? And so we started with sort of low, low single digit impact That we obviously have updated to mid single digit impact that we talked about in Q1. And so we are absorbing that incremental headwind while continuing to deliver expanded gross margins as we move through the year. So overall, quite satisfied with the story. Steven Zaccone: Okay. Understood. Thanks for that clarification. My thought was know, to follow-up on some of the questions around the industry. So when you think about what is missing, for the industry to see higher growth, You know, how do you break it down whether it is macro or whether it is just the softness and sort of the dog category that continues to, to be a bit of a challenge. Sumit Singh: Well, so the softness in dog category the you know, the trending around dog net dog adoptions is tied closely to some of the macro factors as we talk about. So these 2 things are you know, correlated slash causal in nature. You know, dog formation is closely linked to household formation, less linked to, you know, kind of a renter's market per se. So when you look at you know, the density of dog, right, you need a bit of an underlying stable economy driving household penetration to drive dog penetration. that is 1 of the reasons for the rise of cats is because, you know, on a real estate basis, cats are much more you know, friendly and economical from that standpoint. And b, we are seeing a lot more cat innovation happen now than we have seen over the last decade or so. Number 2 is pricing. Now rec you know, recall, you know, helpful to recall that we have gone through double digit inflation for a few years compounded you know, as we have come out of the pandemic years. Now it is been stable, you know, for the last, several quarters, But you know, there have been other factors that have then pressured the consumer's mindset. Albeit, you know, fuel, gas, grocery, etcetera. And so to us, you know, all of this goes into you know, what we believe is, you know, headwind towards, cost of ownership. Right? Which is why you know, retailers and e tailers that are trusted in delivering value, passing on that value, passing on convenience, you know, and helping consumers you know, deal with this kinda life on a life cycle basis. Are the ones that will durably continue to compound their advantage. Which is why we view this as a short term or transitory headwind, and our focus is to continue to build Chewy and strengthen, you know, our proposition at compound advantages to rapidly accelerate as we come out of this short term blip. Overall, we do not expect the resilience in the category or the relative immunity in the category to decline over the over the long term. Okay. that is very helpful. Best of luck in the back half. Operator: And the next question will be the question for this call. It is coming from the line of Benjamin Black with Deutsche Bank. Your line is open. Please go ahead. Benjamin Black: Good morning. You for taking my questions. Maybe a follow-up on AI, Sumit. Can you can you dig in a little bit more on the early takeaways from Cali or Kai? And you know, how do you think the customer impact and the customer experience, would evolve over the next 12 to 18 months? Thank you. Sumit Singh: Yeah. So, obviously, you know, when we took a customer facing project that a product that essentially, you know, a parallel capability, that we have been known to deliver through our exceptional human service agents you can expect that the bar that this product has to meet is exceptionally high. And so that is the first design principle that from a service bar standpoint, in terms of being true to brand and tone, it has to be spot on. And so, you know, in terms of success parameters and dimensions, you know, that is built into it. In terms of customer impact and experience, how it will evolve, So I talked about expanding coverage use cases. Right? So today, Kai is you know, if you are in the beta, you are welcome to try this. If not, you will be pulled into beta because we are expanding the program quite rapidly. You know, it is it is addressing what we believe are the top you know, contact drivers. Right? Where is my stuff? Where is my order? You know, shipment status. I need help with auto ship management, those type of customer inquiries. We have also embedded automated returns and refunds you know, which is powered by our deep study and knowledge of machine learning in the background, you know, into Kai. And so these are multiple agents that sit under an orchestrator essentially allow us to direct customer traffic to bring back the appropriate response and self help. It is particularly suited to consumers that are propense towards self-help. These are younger cohorts that continue to become a large portion of consumer base. Right? The Gen Zs and the Alphas are less inclined to pick up the phone and call an agent. And so experiences like these not only keep you know, the convenience right on top of mind, it meets them where they want to be met. And then imagine, you know, in the future, we could because we are building this in a multi agent orchestration framework, you could essentially keep building agentic capabilities and layering in to build more holistic solutions that then combine product recommendations, you know, and deepen customer engagement from a service interaction point of view. Right? And we spent several quarters building the infrastructure and focusing on our data being right, so now we can essentially build these type of solutions on top. We believe we have a durable competitive advantage here because companies will take years to get to this point, you know, or they will essentially have to go out and integrate through third party providers where all of our solution is first party built. So we are quite excited about, you know, the journey of this. We cannot wait for inference cost to continue to come down because candidly, you know, we I believe we can scale faster than right now how some of the cost is actually scaling. Overall, we are quite excited about this type of stuff. Cali, same thing. You know, these are outbound appointments. Scheduling, you know, type of use cases that we are trying out with Kali, which is a voice agent. So we have both capabilities at this point. Kai is a chat capability, and Kali is a voice based capability. We are trying out with multiple different types of use cases. Very helpful. Thanks very much. Sure. Operator: This concludes today's call. Thank you for attending. You may now disconnect. Before you buy stock in Chewy, consider this: The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Chewy wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years. Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you’d have $414,015!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $1,385,459!* Now, it’s worth noting Stock Advisor’s total average return is 960% — a market-crushing outperformance compared to 213% for the S&P 500. Don't miss the latest top 10 list, available with Stock Advisor, and join an investing community built by individual investors for individual investors. See the 10 stocks » *Stock Advisor returns as of September 9, 2026. This article is a transcript of this conference call produced for The Motley Fool. While we strive for our Foolish Best, there may be errors, omissions, or inaccuracies in this transcript. As with all our articles, The Motley Fool does not assume any responsibility for your use of this content, and we strongly encourage you to do your own research, including listening to the call yourself and reading the company's SEC filings. Please see our Terms and Conditions for additional details, including our Obligatory Capitalized Disclaimers of Liability. The Motley Fool has positions in and recommends Chewy. The Motley Fool has a disclosure policy. Chewy (CHWY) Q2 2026 Earnings Call Transcript was originally published by The Motley Fool

Chewy, Inc. CHWY used its fiscal second-quarter 2026 earnings call to emphasize a steadier pet-spending backdrop, continued share gains and a higher full-year outlook, with CEO Sumit Singh and CFO Chris Deppe assuming no meaningful consumer recovery. The company reported adjusted earnings per share (EPS) of $0.36, which matched the Zacks Consensus Estimate. Revenues of $3.33 billion topped the consensus mark of $3.32 billion. Deppe also stressed that timing and discrete benefits boosted fiscal second-quarter profitability. Chewy price-consensus-eps-surprise-chart | Chewy Quote CEO Sumit Singh said that the pet market did not meaningfully recover in the fiscal second quarter, but it also did not deteriorate further from trends seen exiting the first quarter. Singh said that Chewy continued to outperform the broader pet category by roughly two to three times, supported by share gains across established businesses and newer platforms. Responding to William Blair, Singh said that pricing is not providing a net benefit in fiscal 2026. Deppe added that guidance assumes current consumer trends remain broadly consistent rather than improve. Deppe said that fiscal 2026 net sales are now expected to be between $13.46 billion and $13.57 billion, including organic growth of 5.5% to 6.3%. The midpoint assumes no meaningful consumer improvement. Deppe narrowed adjusted EBITDA margin guidance to 6.7%-6.8% from 6.6%-6.8%. He stressed that essentially all fiscal second-quarter profitability upside reflected about $10 million of timing benefits and more than $5 million of discrete benefits. For the fiscal third quarter, Deppe guided to sales of $3.323 billion to $3.358 billion, adjusted EBITDA margin of 6.6% to 6.7% and adjusted EPS of around $0.39. Singh said that Chewy ended the fiscal second quarter with 21.7 million active customers, up 3.8% year over year, while net sales per active customer reached $602. Deppe said that Autoship sales rose 9.3% and represented 84.6% of total net sales. He also reported 208,000 sequential net active-customer additions, including 43,000 unique SmartPak customers. A Guggenheim analyst pressed management on softer treat sales. Singh said that core food and medications remain consumer priorities, while treats and toppers are more exposed to discretionary budget pressure. Singh said that Chewy Vet Care again delivered triple-digit revenue growth. He added that Modern Animal performed ahead of expectations, reinforcing his confidence in the combined veterinary platform. Singh said that SmartPak exceeded initial expectations. He also said a refreshed Chewy Plus program will add more health benefits while preserving the program's margin contribution profile. Asked by Morgan Stanley about reinvestment, Singh pointed to self-funded growth levers in marketing, customer engagement and new products. He said that fiscal 2027 reinvestment levels have not yet been determined. Singh said that Chewy's AI strategy is moving toward measurable financial impact. Its Kai assistant is resolving about 30% of selected customer chats through self-service. Singh expects AI initiatives to generate low tens of millions of dollars in cost savings in fiscal 2026, scaling to about $50 million on an annualized basis in fiscal 2027. Responding to JPMorgan, Singh expressed high confidence in those efficiencies but cautioned against treating them as pure incremental profit. Deppe said that more than 50% of volume flows through automated states, supporting further cost-to-serve reductions. Singh closed with a focus on customer growth, wallet-share expansion, health, sponsored ads, AI and automation, while stressing that the outlook does not depend on a broader pet-market rebound. Deppe's guidance paired a narrower sales range with higher profitability expectations while still accounting for softer discretionary spending and normal second-half seasonality. Singh and Deppe centered the earnings call on execution, market-share gains and funding growth within Chewy's earnings framework rather than relying on stronger external demand. CHWY carries a Zacks Rank #4 (Sell), with a Value Score of B, a Growth Score of A, a Momentum Score of A and a VGM Score of A. Those Style Scores reflect favorable characteristics across value, growth and momentum. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here. Zacks methodology treats Style Scores as complements to the Zacks Rank and gives the Rank primacy in stock selection. The current rank therefore tempers the favorable Style Scores and reflects an unfavorable earnings-estimate-revision backdrop. The Rank can change as estimates are revised after the just-reported results. Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Chewy (CHWY) : Free Stock Analysis Report This article originally published on Zacks Investment Research (zacks.com). Zacks Investment Research

Shares of Chewy (NYSE:CHWY) fell 11% on Wednesday after the online pet-supplies retailer reported disappointing results in its second-quarter earnings report. Chewy posted revenue growth of 7.3% to $3.33 billion, which was slightly ahead of estimates at $3.32 billion. However, excluding its acquisitions of SmartPak and Modern Animal, revenue was up just 5.7%. Missed Nvidia in 2009? This Rare Signal Is Flashing Again. In 2009, a "Double Down" signal flashed for a little-known chipmaker called Nvidia. For the first time in years, that same "Total Conviction" signal is flashing for a company 1/100th the size of Nvidia. Continue » Further down the income statement, gross margin held steady at 30.4%, and adjusted earnings per share improved from $0.33 to $0.36, which matched estimates. Image source: Getty Images. In addition to meeting expectations, Chewy also raised its guidance for the full year. The company now sees revenue of $13.46 billion-$13.57 billion, representing 6.8%-7.7% growth. It also raised its adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) margin guidance from 6.6%-6.8% to 6.7%-6.8%. The guidance hike was primarily due to the strength of the recent acquisitions, rather than the core business. However, the raised guidance seemed to be overshadowed by comments on the earnings call indicating that consumer demand was still sluggish, as management noted continued pressure on discretionary attachment and premiumization. Pet products are generally thought of as a consumer staples category, as they're a need rather than a want, but Chewy's growth potential lies in its ability to sell add-ons like toys or coax customers into spending more money on premium pet food, as well as adding new customers. Its percentage of sales from autoship continues to grow, reaching 84.6% in the quarter, which is in line with the company's strategy, but that leaves less room for one-off purchases that can drive growth. The pet industry has struggled since the pandemic, as the surge in pet adoptions led to an unsustainable boom in the industry, and growth rates have significantly slowed since then. Chewy was valued like a growth stock at one point, but it seems its heady days of market share gains and rapid growth have faded, and the category it competes in is mature. It's hard to fault the business for doing anything wrong in the quarter, and the moves to diversify with those two acquisitions make sense, but it seems like the stock price is still correcting from earlier expectations of higher growth. The current concerns about inflation and weak consumer discretionary spending haven't helped either. As the chart below shows, Chewy has delivered years of underwhelming stock performance and slowing growth. CHWY data by YCharts With the stock down 50% from its 52-week-high, the best argument for buying Chewy right now may be that the stock is cheap. Based on its adjusted earnings per share consensus of $1.52 for the year, Chewy trades at a forward P/E of just 13. However, that forecast is propped up by adjustments like share-based compensation, which is on track for $300 million this year. On a generally accepted accounting principles (GAAP) basis, the consensus calls for just $0.79, giving it a more average P/E ratio of 25. At this point, Chewy is starting to resemble a slower-growth consumer staples stock like Procter & Gamble, rather than the disruptive growth stock it was once seen as. Given that, I think the stock is best avoided, at least until the company can deliver faster organic growth. There are better buys elsewhere. Before you buy stock in Chewy, consider this: The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Chewy wasn’t one of them. The 10 stocks that made the cut are built for long-term growth and could produce monster returns in the coming years. Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you’d have $410,024!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $1,372,815!* That performance is why people listen. With a track record of beating the S&P 500 by 4x, Stock Advisor offers a distinct advantage. Don't miss the latest top 10 list, available with Stock Advisor, and join an investing community built for the long haul. See the 10 stocks » *Stock Advisor returns as of September 10, 2026. Jeremy Bowman has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Chewy. The Motley Fool has a disclosure policy. Is Chewy a Buy After Its Latest Earnings Report? was originally published by The Motley Fool

Chewy, Inc. CHWY reported second-quarter fiscal 2026 adjusted earnings of 36 cents a share, which rose 9.1% year over year and came in line with the Zacks Consensus Estimate. Net sales increased 7.3% to $3,330.2 million, topping the consensus mark of $3,322 million.Results reflected customer growth, market share gains and disciplined execution. Chewy added 208,000 net active customers sequentially, excluding additions related to Modern Animal, while its customer funnel remained healthy across acquisition, retention and reactivation. Organic net sales, excluding SmartPak and Modern Animal, rose 5.7% year over year. Active customers increased 3.8% to 21.705 million, while net sales per active customer advanced 1.9% to $602.On a normalized basis, adjusting for the extra week in the prior-year comparable period, net sales per active customer increased 3.8%. Management cited customer cohort maturation, greater engagement across health and pharmacy, and broader cross-category adoption as supports. Autoship customer sales climbed 9.3% to $2,817.2 million and represented 84.6% of total net sales. The program continued to grow faster than the overall business, reinforcing the recurring nature of Chewy's revenue base.Consumer pressure remained visible in discretionary areas. Treat sales slowed more sharply than core food, while premiumization and discretionary attachment stayed pressured. Even so, mid-teens hard goods growth substantially outpaced the broader market, and Pet Health and Specialty Products delivered strong organic growth. Chewy price-consensus-eps-surprise-chart | Chewy Quote Gross margin was 30.4%, flat year over year and up 30 basis points sequentially. Adjusted EBITDA increased 23.7% to $226.7 million, supported by sponsored ads, disciplined promotional activity and lower variable cost to serve.About $10 million of upside came from timing-related benefits, mainly earlier tariff refunds and shifted rebates. More than $5 million came from discrete items, including gift-card breakage, inventory adjustments and vendor-funded merchandising. Adjusted SG&A declined to 18.4% of sales from 19.1%, reflecting fulfillment utilization, automation and productivity gains. Chewy Vet Care again generated triple-digit revenue growth, while the fresh and frozen portfolio posted triple-digit unit growth. The equine, farm and exotics business delivered a seventh consecutive quarter of mid-double-digit sales growth. Modern Animal and SmartPak also performed ahead of prior expectations.AI initiatives are moving into scaled deployment. Kai, Chewy's customer-facing AI assistant, resolved about 30% of chats through self-service in early use. Management still expects AI-related initiatives to generate low tens of millions of dollars in fiscal 2026 cost savings, scaling to about $50 million annualized in fiscal 2027. Free cash flow fell 15.5% year over year to $89.5 million, reflecting $137.4 million of operating cash flow and $47.9 million of capital expenditures. Chewy ended the quarter with $612 million of cash, cash equivalents and marketable securities and more than $1 billion of total available liquidity.The company deployed $200 million toward share repurchases and bought back 9.9 million shares in the quarter. It also completed the $400 million Modern Animal acquisition and raised $600 million through its inaugural term loan issuance. Chewy expects fiscal 2026 net sales between $13.46 billion and $13.57 billion, implying reported growth of 6.8%-7.7% and organic growth of 5.5%-6.3%. Management had earlier guided net sales in the band of $13.40-$13.55 billion. Adjusted EBITDA margin is projected at 6.7%-6.8%, with the low end raised by 10 basis points from the prior range.For the third quarter, net sales are expected at $3.323-$3.358 billion, with adjusted EBITDA margin of 6.6%-6.7% and adjusted earnings of around 39 cents a share. The outlook assumes no meaningful consumer recovery and continued low pricing contribution, while management expects Chewy to keep gaining share.Shares of this Zacks Rank #4 (Sell) company have fallen 19.3% over the past six months against the industry’s rise of 13.8%. The Vita Coco Company, Inc. COCO, a leading beverage company that develops, markets and distributes coconut water and other plant-based beverages, currently sports a Zacks Rank #1 (Strong Buy). COCO delivered a trailing four-quarter earnings surprise of 21.9%, on average. You can see the complete list of today’s Zacks #1 Rank stocks here. The Zacks Consensus Estimate for The Vita Coco Company’s current fiscal-year sales and earnings per share (EPS) calls for growth of 31.6% and 64.7%, respectively, from the year-ago figures. Target Corporation TGT, a general merchandise retailer, currently carries a Zacks Rank of 2 (Buy). TGT delivered a trailing four-quarter earnings surprise of 10.5%, on average.The Zacks Consensus Estimate for Target’s current fiscal-year sales and EPS implies growth of 4.7% and 37.8%, respectively, from the year-ago figures.Laird Superfood, Inc. LSF is a consumer product company that develops, manufactures and markets plant-based, natural and functional food and beverage products. LSF currently carries a Zacks Rank #2. The Zacks Consensus Estimate for Laird Superfood’s current fiscal-year sales and EPS suggests growth of 188.2% and 104%, respectively, from the year-ago figures. LSF delivered an earnings surprise of 100% in the last reported quarter. Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Chewy (CHWY) : Free Stock Analysis Report Target Corporation (TGT) : Free Stock Analysis Report Vita Coco Company, Inc. (COCO) : Free Stock Analysis Report Laird Superfood, Inc. (LSF) : Free Stock Analysis Report This article originally published on Zacks Investment Research (zacks.com). Zacks Investment Research

This article first appeared on GuruFocus. Net Sales: $3.33 billion in Q2 fiscal 2026, up 7.3% year-over-year. Organic Net Sales: Increased 5.7% year-over-year, excluding SmartPak and Modern Animal. Active Customers: 21.7 million, up 3.8% year-over-year. Net Sales Per Active Customer (NSPAC): $602, up 1.9% year-over-year on a reported basis and 3.8% on a normalized basis. Autoship Customer Sales: $2.8 billion, up 9.3% year-over-year, representing 84.6% of total net sales. Gross Margin: 30.4%, flat year-over-year and up 30 basis points sequentially. Adjusted EBITDA: $227 million, with a 6.8% margin, above guidance of 6.3% to 6.4%. Non-GAAP SG&A: $612 million, or 18.4% of net sales, down from 19.1% in the prior year period. Advertising and Marketing Expense: $250 million, or 6.5% of net sales, essentially flat year-over-year as a percentage of sales. Adjusted Net Income: $149 million, translating to adjusted diluted EPS of $0.36. Free Cash Flow: $90 million for the quarter, compared with $106 million in the prior year period. Capital Expenditures: $48 million in the quarter. Share Repurchases: $200 million deployed, repurchasing 9.9 million shares. Full Year 2026 Net Sales Guidance: $13.46 billion to $13.57 billion, representing 6.8% to 7.7% year-over-year growth. Full Year 2026 Organic Net Sales Growth Guidance: 5.5% to 6.3%. Full Year 2026 Adjusted EBITDA Margin Guidance: 6.7% to 6.8%, implying $912 million of adjusted EBITDA at the midpoint. Q3 2026 Net Sales Guidance: $3.323 billion to $3.358 billion, representing 6.6% to 7.7% reported growth and 5.3% to 6.2% organic growth. Q3 2026 Adjusted EBITDA Margin Guidance: 6.6% to 6.7%. Q3 2026 Adjusted Diluted EPS Guidance: Approximately $0.39. Warning! GuruFocus has detected 2 Warning Sign with CHWY. Is CHWY fairly valued? Test your thesis with our free DCF calculator. Release Date: September 09, 2026 For the complete transcript of the earnings call, please refer to the full earnings call transcript. Chewy Inc (NYSE:CHWY) delivered strong Q2 results with net sales at the high end of guidance, growing 7.3% year-over-year to $3.33 billion, and continued to gain market share by outperforming the broader pet category by 2-3 times. The company's recurring revenue model remains robust, with Autoship sales growing 9.3% year-over-year and representing 84.6% of total net sales, while active customers increased 3.8% to 21.7 million. Chewy Inc (NYSE:CHWY) expanded profitability with adjusted EBITDA margin reaching 6.8%, exceeding guidance, driven by structural SG&A leverage, lower variable cost to serve, and growth in high-margin areas like sponsored ads and Chewy Health. Strategic growth platforms are scaling successfully, with Chewy Vet Care delivering triple-digit revenue growth, fresh and frozen portfolio achieving triple-digit unit growth, and the equine, farm, and exotics business posting its seventh consecutive quarter of mid-double-digit sales growth. The company raised its full-year adjusted EBITDA margin guidance to 6.7%-6.8% and narrowed its organic net sales growth outlook to 5.5%-6.3%, reflecting increased visibility and confidence in the business despite a stable consumer environment. AI initiatives are progressing well, with the launch of Kai and Callie showing early success, and the company expects AI-related cost savings of low tens of millions in fiscal 2026, scaling to approximately $50 million annually in fiscal 2027. Chewy Inc (NYSE:CHWY) continues to face a pressured consumer environment, with no meaningful recovery expected in the pet market for the remainder of fiscal 2026, and trends have only stabilized rather than improved. Discretionary spending remains weak, with treats sales growth slowing more sharply than core food, and pressure on premiumization and discretionary attachment affecting both Consumables and Hardgoods categories. The company's Q2 adjusted EBITDA outperformance was largely driven by timing and discrete benefits, including tariff refunds and rebate shifts, which are not indicative of the underlying margin run rate and will not recur. Gross margin is expected to decline modestly on a sequential basis in Q3, and the company faces a mid-single-digit million-dollar headwind from fuel costs through the balance of the year. Free cash flow in Q2 decreased year-over-year to $90 million from $106 million, primarily due to timing-related factors, although the company maintains its full-year free cash flow outlook of roughly 80%. The integration of Modern Animal and SmartPak, while performing ahead of expectations, still represents a modest drag on adjusted EBITDA margin, and the company has not yet determined the appropriate levels of reinvestment for 2027. Q: Can you elaborate on the early takeaways from the AI-powered customer assistant Kai and voice agent Callie, and how you think the customer experience will evolve over the next 12 to 18 months?A: Sumit Singh (CEO): We have exceptionally high standards for these tools to be true to our brand and tone. Kai is currently in beta, addressing top contact drivers like order status and Autoship management, and we've embedded automated returns and refunds. It is particularly suited for younger cohorts (Gen Z and alphas) who prefer self-service. We are building this in a multi-agent orchestration framework, which allows us to layer in more agentic capabilities for holistic solutions and deeper engagement. We believe this is a durable competitive advantage as it is first-party built, and we are excited about scaling as inference costs come down. Callie is our voice-based agent for outbound appointment scheduling and follow-ups. Q: How are you thinking about balancing margin expansion with the potential to lean in more to reaccelerate growth, and what are the key areas you believe you can invest deeper in?A: Sumit Singh (CEO): We have credible, self-funding levers to drive growth at healthy ROIs. These include a refreshed Chewy+ program design launching shortly, which will integrate more health benefits to deepen engagement. We are also identifying attractive opportunities to deploy marketing dollars efficiently, as we did in Q2, and plan to invest in brand awareness ahead of the holidays. We are moving with urgency to bring unique products and experiences to market in the back half of the year. Investment levels for 2027 are not yet determined, but any decision will be grounded in attractive long-term returns and calibrated against our broader earnings and margin objectives. Q: What gives you confidence in the AI-driven efficiencies (low tens of millions in fiscal 2026 and ~$50 million in 2027), and how much headroom do you see in lowering cost to serve on a multi-year basis?A: Sumit Singh (CEO): We have high confidence in our AI-driven efficiency framework and the results flowing into the P&L. We accelerated the deployment of Kai from Q3 into Q2, and it's showing a very high customer take rate. These initiatives are structurally lowering fulfillment costs and improving customer service productivity. However, it would not be appropriate to mechanically layer AI savings on top of our 2026 margin trajectory, as these efficiencies will help offset normal cost pressures and may be reinvested. Christopher Deppe (CFO): We have a robust multi-year roadmap to lower variable cost to serve, with over 50% of volume flowing through automated states and continued growth expected. This supports our confidence in hitting the long-term margin path of 10% plus EBITDA. Q: Can you frame up the moderation in treats sales versus core consumables, and what percentage of consumables is discretionary?A: Sumit Singh (CEO): The key point is that discretionary spending isn't just supplies. Consumers are prioritizing core food, meds, and health-oriented categories like supplements. Within consumables, treats and toppers are the discretionary part, where consumers experiment with over 10 types at different price points. We interpret the relative growth rates as consumers prioritizing essential consumables over discretionary ones. Hardgoods growth reflects our improved execution and outsized share capture from an expanded assortment, while newer areas like fresh food and health-related categories are seeing very healthy growth. Q: How do you expect the Modern Animal acquisition to impact net adds in Q3, and how is the conversion of those customers to the Autoship platform trending?A: Sumit Singh (CEO): We previously stated Modern Animal has roughly 100,000 customers, and we expect 40%-50% to be net new to Chewy. Our current guidance does not include Modern Animal net adds, as we are still integrating the business. We will disclose specifics once ready, similar to how we handled SmartPak. The initial performance of Modern Animal is ahead of our forecast, and we expect Autoship conversion to be very healthy, as there is no reason to believe these customers won't behave like a normal Chewy base. Q: Can you help us understand the pet industry stabilization commentary as it relates to pricing, units, and household formation, and how you envision pricing trending in the back half?A: Sumit Singh (CEO): The environment has stabilized to the trends we saw exiting Q1. We don't expect pricing to be a net benefit in 2026, but we also don't expect an irrational promotional environment. Dog adoptions are worsening while cat is strengthening. Importantly, traffic has stabilized and strengthened towards Chewy, and online continues to pull share from the overall industry. Christopher Deppe (CFO): Our updated outlook does not assume any recovery or improvement in consumer behavior. The stability allowed us to remove the more severe downside scenario and narrow our organic growth range. We are operating in a very low price environment with no meaningful pricing contribution to sales growth. Q: What are the gross margin puts and takes in the second half of the year, and can sponsored ads continue to be accretive into next year?A: Christopher Deppe (CFO): Q3 gross margin will be down sequentially from Q2 but will still leverage year-over-year. Both Q3 and Q4 are expected to modestly leverage year-on-year. Sponsored ads continue to be a tailwind, with both on-site and off-site ads growing this year. Gross margin also benefits structurally from mix premiumization as we grow the Chewy Health ecosystem. We expect sponsored ads to continue growing and be accretive next year as well. Sumit Singh (CEO): The gross margin story hasn't changed. The main drivers are mix premiumization and sponsored ads tailwinds, albeit at a lower level than 2025. We are absorbing a mid-single-digit million-dollar fuel headwind while still delivering expanded gross margins. Q: What's missing for the pet industry to see higher growth, and how do you break it down between macro factors and softness in the dog category?A: Sumit Singh (CEO): The softness in the dog category is closely tied to macro factors. Dog formation is linked to household formation, which requires a stable economy. This is driving the rise of cat ownership, as cats are more economical and there is more cat innovation now. Pricing is another factor, as we've gone through double-digit inflation for years. These factors create a headwind towards the cost of ownership. We view this as a transitory headwind, and our focus is on building Chewy's proposition to compound advantages and accelerate as we come out of this short-term blip. We don't expect the category's long For the complete transcript of the earnings call, please refer to the full earnings call transcript.