Chewy (CHWY) Earnings & Analysis

Latest quarter

Chewy’s Q2 FY2027 revenue exceeded the consensus by 0.42%, while adjusted earnings per share matched the consensus at $0.36. Revenue rose to $3.3 billion from $3.1 billion a year earlier, and diluted earnings per share increased to $0.20 from $0.14.

The company’s filing attributed sales growth primarily to an increase in active customers, which reached 21.7 million, including approximately 43 thousand attributable to SmartPak. Net sales per active customer rose to $602, with growth across consumables, pet health and specialty products, and hardgoods. Autoship customer sales represented 84.6% of net sales, up from 83.0% a year earlier.

Chewy reported a 30.4% gross margin, unchanged from the prior year, while operating margin rose to 2.76% from 2.25%. The filing said the current quarter included approximately $10 million in one-time tariff and rebate reimbursement benefits. Free cash flow fell to $89.5 million from $105.9 million; CFO Christopher Deppe attributed the decline to timing.

Adjusted EPS is the figure the consensus estimates, not the GAAP EPS above.

What management said on the call

CEO Sumit Singh said the pressured pet-market consumer backdrop had broadly stabilized after the first quarter, but had not meaningfully recovered. CFO Christopher Deppe said treats sales growth slowed more sharply than core food growth as shoppers moderated discretionary purchases. Singh declined to precisely quantify treats’ share of Chewy’s business when asked, but said customers continued to prioritize core food and medications.

Deppe said pressure on premiumization and discretionary spending affected both consumables and hardgoods. Singh attributed hardgoods growth to improved execution and share gains following an expansion of the assortment. On pricing, he said the promotional environment was relatively stable, while Deppe said the outlook included no meaningful contribution to sales growth from pricing.

On margins, Deppe said timing-related tariff refunds and rebate benefits, together with discrete items, accounted for essentially all of adjusted EBITDA’s outperformance against expectations. He said improved fulfillment-center utilization, lower variable costs and productivity gains supported selling, general and administrative expense leverage. Deppe expects gross margin to decline modestly from the second quarter to the third as timing benefits normalize.

Singh said Chewy had begun deploying AI in customer care, pharmacy and veterinary clinics. He said its customer assistant had resolved approximately 30% of chats through self-service among a select group of mobile-app customers. The company also expects AI initiatives to generate approximately $50 million in annualized cost savings in fiscal 2027.

Asked about growth investments, Singh said Chewy planned a refreshed Chewy Plus design and would invest in brand building ahead of the holidays. Deppe said marketing spending would be weighted more toward the third quarter than the fourth. Singh also said Modern Animal customer additions were not included in the company’s forecast while integration continued.

Guidance

For fiscal 2026, CFO Christopher Deppe said Chewy narrowed its organic net sales growth range to 5.5% to 6.3% and increased its forecast for SmartPak and Modern Animal contributions. Chewy now expects total net sales of $13.46 billion to $13.57 billion.

Deppe said Chewy also raised the low end of its full-year adjusted EBITDA margin guidance, to 6.7% to 6.8% from 6.6% to 6.8%.