Chewy, Inc. CHWY raised its fiscal 2026 outlook after second-quarter sales growth, customer gains and operating efficiencies supported a better full-year view. The update is notable because management is not assuming a meaningful recovery in consumer spending.
The outlook also reflects contributions from acquired businesses and early AI savings. Investors still have to weigh softer discretionary demand, temporary margin benefits and mixed earnings-revision signals.
Chewy Raises Its Full-Year Sales Outlook
Chewy now expects fiscal 2026 net sales of $13.46-$13.57 billion, implying growth of 6.8%-7.7%. The prior range was $13.40-$13.55 billion. Organic sales growth is projected to be in the range of 5.5%-6.3%.
SmartPak and Modern Animal are contributing above prior assumptions. Autoship customer sales rose 9.3% to $2.82 billion and represented 84.6% of second-quarter net sales, while active customers increased 3.8% to 21.7 million.
Chewy Expands Its Profitability Outlook
Management raised the low end of adjusted EBITDA margin guidance by 10 basis points, bringing the fiscal 2026 range to 6.7%-6.8%. At the midpoint of the sales and margin ranges, the outlook implies adjusted EBITDA of about $912 million.
The second-quarter margin picture also showed structural gains. Adjusted SG&A fell to 18.4% of sales from 19.1% a year earlier, helped by fulfillment utilization, automation and lower variable cost to serve.
AI Adds a New Efficiency Lever
Chewy expects AI-related initiatives to generate cost savings in the low tens of millions of dollars in fiscal 2026 and approximately $50 million on an annualized basis in fiscal 2027.
Kai, Chewy's customer-facing AI assistant, resolved roughly 30% of chats through self-service in early use. The company is also deploying AI tools across customer care, pharmacy and veterinary operations to reduce manual work and improve productivity.
Q2 Results Reveal the Outlook's Caveats
Second-quarter net sales rose 7.3% to $3.33 billion, while adjusted EBITDA increased 23.7% to $226.7 million. Adjusted earnings of 36 cents per share rose 9.1% year over year and matched the Zacks Consensus Estimate.
The profit upside was not entirely recurring. About $10 million came from timing-related benefits, while more than $5 million reflected discrete items. Management said that these items accounted for essentially all of the adjusted EBITDA outperformance versus expectations. Discretionary spending and premiumization also remained pressured.
Earnings Momentum Meets the Zacks Signals
Chewy's earnings trajectory remains positive even as estimate revisions have softened. The Zacks Consensus Estimate for fiscal 2026 earnings is pegged at $1.53 per share, up 20.5% from fiscal 2025, but the estimate has declined 3.6% over the past four weeks. Fiscal 2027 earnings are expected to be $1.86 per share.
Chewy Price, Consensus and EPS Surprise
Chewy price-consensus-eps-surprise-chart | Chewy Quote
Valuation has contracted alongside share-price weakness. CHWY trades at 19.44X forward earnings.
Image Source: Zacks Investment Research
Freshpet, Inc. FRPT focuses on fresh, refrigerated pet food and trades at 35.14X forward earnings. Petco Health and Wellness Company, Inc. WOOF operates across pet retail, services and health and trades at 20.46X forward earnings. Different business mixes limit direct comparisons, but the figures provide context for Chewy's current multiple.
Chewy currently carries a Zacks Rank #4 (Sell), alongside a Growth Score of A, a Value Score of B, a VGM Score of A and a Momentum Score of D.
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The favorable Growth and VGM Scores point to supportive growth and blended style characteristics, but the Zacks Rank and Momentum Score indicate weaker near-term estimate and price trends. That combination keeps the improved operating outlook in balance with softer revisions, consumer pressure and execution risk.
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