Chewy Q1 Earnings Call Highlights
Key Points
- Interested in Chewy? Here are five stocks we like better.
- Chewy beat on growth and profitability in Q1 fiscal 2026, with net sales up 7.7% to about $3.36 billion, adjusted EBITDA margin rising to 7.5%, and free cash flow increasing more than 45% year over year.
- Management cut full-year sales guidance to $13.40 billion-$13.55 billion as it sees softer consumer spending and weaker premiumization, though it kept adjusted EBITDA margin guidance unchanged at 6.6% to 6.8%.
- Chewy said it is still gaining market share and is leaning on growth initiatives like Autoship, Chewy Health, Vet Care, AI efficiencies and Sponsored Ads, while adding clinics and integrating SmartPak and Modern Animal.
Chewy (NYSE:CHWY) reported first-quarter fiscal 2026 results that showed continued sales growth, higher profitability and strong free cash flow, while management lowered its full-year sales outlook to account for a softer consumer environment in the pet category.
Chief Executive Officer Sumit Singh said the online pet retailer “delivered solid results in Q1, continuing to outperform the broader pet category while further expanding profitability and free cash flow.” He said the company added nearly 200,000 net customers during the quarter and continued to capture category share, even as consumer conditions weakened late in the period.
First-quarter net sales rose 7.7% year over year to approximately $3.36 billion. Chewy ended the quarter with 21.5 million active customers, up 3.6% from the prior year. Net sales per active customer, or NSPAC, increased to $597.
Autoship remained a key contributor to the company’s recurring revenue base. Autoship customer sales increased more than 10% year over year to approximately $2.83 billion and represented 84.4% of total net sales in the quarter.
Margins Expand Despite Softer Consumer Backdrop
Chewy reported first-quarter gross margin of 30.1%, up about 50 basis points year over year. Chief Financial Officer Chris Deppe said gross margin benefited from Sponsored Ads, favorable category mix and continued operating discipline, partly offset by a low single-digit million-dollar impact from fuel surcharges passed on by carrier partners.
Adjusted EBITDA reached approximately $253 million, representing a 7.5% adjusted EBITDA margin. That was up about 130 basis points from the prior year, with adjusted EBITDA flow-through of more than 25%. Adjusted net income was approximately $180 million, or adjusted diluted earnings per share of $0.43.
Free cash flow was approximately $71 million, up more than 45% year over year. The company generated approximately $109 million of net cash from operating activities and spent approximately $38 million on capital expenditures.
Deppe said the profitability gains reflected “the structural strengthening of Chewy’s earnings model,” including contributions from gross margin improvement, Sponsored Ads, fulfillment productivity, operating discipline and broader operating leverage.
Full-Year Sales Outlook Reduced
Management lowered its fiscal 2026 net sales outlook to a range of approximately $13.40 billion to $13.55 billion, representing year-over-year growth of about 6.3% to 7.5%. The outlook includes expected fiscal 2026 net sales contributions of approximately $80 million from SmartPak and approximately $70 million from Modern Animal.
Chewy maintained its full-year adjusted EBITDA margin guidance of 6.6% to 6.8%, implying approximately $900 million of adjusted EBITDA at the midpoint of the revenue and margin ranges.
Singh said the updated guidance reflects a more conservative view of consumer spending and category growth for the rest of the year. He said Chewy is seeing “a modest level of incremental pressure on premiumization and product attach rates” among existing customers, creating a short-term headwind to NSPAC.
Deppe said discretionary attachment and premiumization behavior are under more pressure than expected. He also said Chewy no longer believes it is prudent to assume a meaningful acceleration in consumer spending in the back half of the year.
For the second quarter, Chewy expects net sales of approximately $3.30 billion to $3.33 billion, representing about 6% to 7% growth. The company also introduced quarterly adjusted EBITDA margin guidance, projecting second-quarter adjusted EBITDA margin of 6.3% to 6.4% and adjusted diluted EPS of approximately $0.36.
Deppe said second-quarter profitability will face more difficult year-over-year gross margin comparisons because of non-recurring MAP pricing benefits in the prior-year period, along with elevated fuel surcharge costs that are expected to create a roughly mid-single-digit million-dollar headwind.
Health, Vet Care and Acquisitions Remain Strategic Focus
Management highlighted Chewy Health and Chewy Vet Care as major long-term growth initiatives. Singh said pet healthcare represents approximately $54 billion of total addressable market, including more than $40 billion tied to in-clinic products and veterinary services.
Singh said Chewy Vet Care clinics are producing strong standalone economics while also serving as customer acquisition and retention channels for the broader Chewy platform. Approximately 40% of Chewy Vet Care customers are new to Chewy, and those customers tend to reach year-one NSPAC of about $900, according to Singh.
The company closed its acquisition of SmartPak during the quarter and completed its acquisition of Modern Animal shortly after quarter-end. Singh said Modern Animal adds a complementary clinic footprint with above-industry unit economics and a technology-enabled model aligned with Chewy Vet Care.
Deppe said Chewy had 18 Chewy Vet Care clinics at the end of the prior fiscal year and added 29 clinics through Modern Animal, bringing the total to 47. The company still plans to open 10 to 12 new Chewy Vet Care clinics in fiscal 2026 and expects to exit the year with roughly 60 clinics.
AI and Sponsored Ads Cited as Margin Drivers
Chewy also said it continues to deploy artificial intelligence across customer service, pharmacy operations, fulfillment and marketing workflows. Singh said the company still expects AI-driven efficiencies to contribute a low tens of millions of dollars in fiscal 2026, with a larger ramp expected in 2027 and beyond. In response to an analyst question, Singh confirmed that the company still expects more than $50 million in AI-related savings in fiscal 2027.
Sponsored Ads remained another margin expansion driver. Singh said the company exited fiscal 2025 at roughly the midpoint of its expected 1% to 3% contribution range and continues to expect about two-thirds to 70% of the contribution at full entitlement to flow to the bottom line. He said Chewy is expanding beyond on-site ads into off-site ads and highlighted the launch of Chewy Max, a product designed to help advertisers collaborate with the company more efficiently.
Management Says Share Gains Continue
During the question-and-answer session, analysts asked whether the weaker environment reflected macroeconomic pressure or company-specific issues. Singh said Chewy is “very clearly gaining share,” citing internal data, competitive data and stronger direct and branded search traffic toward Chewy. He said absolute clicks increased by mid-single-digit percentages year over year even as industry-level trends weakened.
Singh said Chewy is not seeing signs of a material change in the competitive environment. He described the broader retail promotional environment as active but rational and said Chewy will remain disciplined in promotions and marketing investment, prioritizing long-term return on customer acquisition rather than dilutive growth.
“While the consumer environment has become modestly more challenged, our first quarter results reinforce that the power of the Chewy model remains durable and continues to strengthen,” Singh said in closing remarks.
About Chewy (NYSE:CHWY)
Chewy, Inc (NYSE: CHWY) is a leading e-commerce retailer specializing in pet food, supplies and services. The company offers a comprehensive assortment of products for dogs, cats, fish, birds and other small animals, including prescription medications, veterinary health products, grooming essentials and toys. Through its online platform and mobile app, Chewy provides an intuitive shopping experience with features such as Autoship, ensuring regular deliveries of pet essentials at schedule intervals.
Founded in 2011 by Ryan Cohen and Michael Day, Chewy initially operated under the name Mr.
This instant news alert was generated by narrative science technology and financial data from MarketBeat in order to provide readers with the fastest reporting and unbiased coverage. Please send any questions or comments about this story to [email protected].
Where Should You Invest $1,000 Right Now?
Before you make your next trade, you'll want to hear this.
MarketBeat keeps track of Wall Street's top-rated and best performing research analysts and the stocks they recommend to their clients on a daily basis.
Our team has identified the five stocks that top analysts are quietly whispering to their clients to buy now before the broader market catches on... and none of the big name stocks were on the list.
They believe these five stocks are the five best companies for investors to buy now...
Source MarketBeat
Chewy Inc Stock
With 47 Buy predictions and not a single Sell prediction Chewy Inc is an absolute favorite of our community.
Based on the current price of 17.05 € the target price of 38 € shows a potential of 122.87% for Chewy Inc which would more than double the current price.
