Chewy Reports Steady Q2 2026 Results Amid Market Decline

Chewy, Inc. (CHWY) reported steady financial results for the second quarter of fiscal year 2026, with revenue up 7.3% year-over-year, but shares fell 4.38% in premarket trading to $22.25. The company's net sales reached $3.33 billion, exceeding forecasts by about $10 million. Organic net sales rose 5.7%, excluding acquired businesses SmartPak and Modern Animal. Adjusted diluted EPS matched Wall Street forecasts at $0.36 per share. Adjusted EBITDA margin came in at 6.8%, above the guidance range of 6.3% to 6.4%. The company's gross margin remained flat year-over-year at 30.4%, with non-GAAP SG&A at $612 million, or 18.4% of net sales. Advertising and marketing expenses were $250 million, or 6.5% of net sales. Free cash flow was $90 million, down from $106 million a year earlier, with operating cash flow at $137 million. Capital expenditures were $48 million, and the company had $612 million in cash equivalents and marketable securities, with over $1 billion in total available liquidity. The company completed the acquisition of Modern Animal for $400 million, raised $600 million through a term loan issuance, and deployed $200 million towards share repurchases, buying back 9.9 million shares. Active customers increased to 21.7 million, up 3.8% year-over-year, with net sales per active customer reaching $602, up 1.9% year-over-year. Autoship customer sales were $2.8 billion, up 9.3%, representing 84.6% of total net sales. For fiscal 2026, Chewy expects net sales of $13.46 billion to $13.57 billion, representing growth of 6.8% to 7.7%, including organic net sales growth of 5.5% to 6.3%. Adjusted EBITDA margin guidance was raised to 6.7% to 6.8%. The company expects to generate low tens of millions of dollars in cost savings from AI initiatives in fiscal 2026, scaling to about $50 million annually in fiscal 2027. In Q3 fiscal 2026, Chewy expects revenue of $3.323 billion to $3.358 billion, with adjusted diluted EPS of about $0.39 and adjusted EBITDA margins of 6.6% to 6.7%. The company's CEO, Sumit Singh, noted that Chewy continues to outperform the broader pet category by roughly 2 to 3 times. The CFO, Chris Deppe, highlighted that EBITDA outperformance was driven by timing-related and discrete items, but margin expansion remained healthy. The company's AI assistant, Kai, resolved approximately 30% of chats through self-service, and a vet care appointment tool, Callie, was launched at select Chewy Vet Care locations.