CHWY's AI Personalization Strategy Drives Engagement & Retention

Chewy, Inc.’s CHWY increasing focus on AI-driven personalization is strengthening customer engagement and retention, while also enhancing the efficiency and scalability of its digital platform. The company is embedding artificial intelligence across its ecosystem, particularly within the purchase experience, to improve search relevance, product discovery and tailored recommendations for pet parents.

A key strength of CHWY’s strategy lies in its ability to leverage first-party data, including pet profiles, purchase history and behavioral insights, to deliver a highly curated shopping experience. Management highlighted that AI enables “personalization driven by memory,” allowing the platform to anticipate customer needs and present relevant products seamlessly. This is particularly valuable in the pet category, wherein trust and convenience drive repeat purchases.

This personalization engine is closely tied to CHWY’s Autoship ecosystem, which accounted for more than 83.3% of fiscal 2025 net sales. By enhancing product discovery and automating replenishment through AI, the company is strengthening recurring purchase behavior, improving retention and increasing net sales per active customer. This creates a durable engagement flywheel that supports long-term revenue growth.

Beyond engagement, AI is also driving operational efficiency, which has direct valuation implications. The company is deploying AI across customer service, fulfillment, pharmacy and marketing to streamline workflows, reduce costs and improve productivity. Management expects these initiatives to deliver low-10s of millions of dollars in benefits in fiscal 2026, with a path to $50 million or more in annualized savings in fiscal 2027, supporting margin expansion.

This personalization framework supports CHWY’s valuation and earnings outlook. The company guided for $13.6-$13.75 billion in 2026 net sales, implying 8-9% year-over-year growth, alongside an adjusted EBITDA margin guidance of 6.6-6.8%, suggesting a 100-basis-point year-over-year rise. As AI continues to improve customer retention and drive operating leverage, it is positioned to remain a key pillar of CHWY’s long-term growth and margin expansion story.

CHWY’s Price Performance, Valuation & Estimates

Chewy, which competes with BARK, Inc. BARK and Petco Health and Wellness Company, Inc. WOOF, has seen its shares decline 24.6% in the past three months compared with the industry’s decline of 6.8%. Meanwhile, BARK shares have declined 55.7% and Petco has lost 4.8%.

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From a valuation standpoint, CHWY trades at a trailing price-to-sales ratio of 0.76X, below the industry’s average of 1.91X. It has a Value Score of A. CHWY is trading at a premium to BARK (with a forward 12-month P/S ratio of 0.16) and Petco (0.15).

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The Zacks Consensus Estimate for CHWY’s fiscal 2026 earnings implies year-over-year growth of 28.4%, whereas the same for fiscal 2027 indicates an uptick of 22.2%. Estimates for fiscal 2026 and 2027 have been revised upward by 7 cents and 8 cents, respectively, in the past 30 days.

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CHWY currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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This article originally published on Zacks Investment Research (zacks.com).

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