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Chewy, Inc. (CHWY - Free Report) reported solid first-quarter fiscal 2026 results, wherein the top line beat the Zacks Consensus Estimate, and the bottom line met the same. Both metrics showed year-over-year growth.
Chewy noted that while the overall pet category remains resilient, the consumer environment has become more challenging since the company established its initial fiscal 2026 outlook. In response to these evolving conditions, management is updating its full-year sales outlook to reflect softer consumer trends and more conservative internal assumptions. As a result, shares of CHWY lost 2.1% in yesterday’s trading session.
CHWY’s Quarterly Performance: Key Metrics and Insights
Chewy posted adjusted earnings of 43 cents per share, which came in line with the Zacks Consensus Estimate. The figure increased from 35 cents in the prior-year period.
The company reported net sales of $3,357.2 million, surpassing the Zacks Consensus Estimate of $3,352 million. The figure increased 7.7% from $3,116 million posted in the year-ago period.
The Autoship subscription program remained a cornerstone of Chewy’s model. Autoship customer sales grew 10.5% year over year to $2,832.6 million from $2,562.7 million, outpacing overall net sales growth. The metric represented 84.4% of total net sales.
The company ended the quarter with 21.5 million active customers, increasing 3.6% year over year. The metric missed the Zacks Consensus Estimate of $21.6 million.
Chewy’s net sales per active customer reached $597, meeting the Zacks Consensus Estimate. The metric reflects a 2.4% year-over-year increase from $583.
CHWY’s Margin & Cost Performance
Chewy’s gross profit increased 3.6% year over year to $1,011.4 million from $923.8 million. The gross margin expanded by 50 basis points (bps) year over year to 30.1%, driven primarily by continued growth in sponsored ads, favorable category mix and operating discipline.
Adjusted SG&A expenses reached $593 million in the fiscal first quarter. As a percentage of net sales, this metric declined 90 basis points year over year to 17.7%, due to lower variable costs from productivity improvements and AI-led efficiencies.
Advertising and marketing expenses for the fiscal first quarter were $206.1 million compared with $193.8 million in the prior-year period. As a percentage of sales, advertising and marketing expenses were 6.1%.
The adjusted EBITDA increased 31.3% year over year to $253.1 million from $192.7 million. The adjusted EBITDA margin increased 130 bps year over year to 7.5% from 6.2%, driven by adjusted EBITDA flow-through of greater than 25%. This level of profitability expansion reflects the structural strengthening of Chewy's earnings model.
CHWY’s Financial Health Snapshot
CHWY ended the quarter with approximately $485.2 million in cash, cash equivalents and $34.9 million in marketable securities. Total shareholders’ equity stood at $424.2 million.
The company generated net cash provided by operating activities of $108.5 million and free cash flow of $70.8 million for the quarter, up 45.4% from the prior-year period. Capital expenditures were $37.7 million, consistent with ongoing investment needs across the network.
Capital allocation remained active. The company repurchased $200 million of common stock during the quarter, reflecting continued emphasis on returning cash to shareholders alongside strategic investments.
What to Expect From CHWY in the Future?
Chewy revised its full-year fiscal 2026 net sales outlook, with expectations between $13.4 billion and $13.55 billion compared with the previous guidance range of $13.6 billion to $13.75 billion. The updated outlook includes expected net sales contributions of approximately $80 million from SmartPak and approximately $70 million from Modern Animal during fiscal 2026.
Adjusted EBITDA margin is expected to be in the range of 6.6-6.8%, roughly a 100 bps year-over-year increase at the midpoint. This outlook reflects a more conservative view of consumer spending patterns and category growth assumptions. Management emphasized that the change was tied to slower expected net sales per active customer expansion, driven by weaker discretionary attachment and premiumization.
For the second quarter of fiscal 2026, the company expects net sales in the range of $3.3-$3.33 billion, reflecting 6-7% year-over-year growth. The outlook assumes a generally stable operating environment and consumer trends compared with the end of the first quarter. The company continues to see healthy customer engagement, strength in Autoship and ongoing market share gains. However, near-term pressure remains on discretionary attachment and premiumization behavior. Management is also introducing quarterly adjusted EBITDA margin guidance to provide greater transparency amid varying profitability drivers.
Chewy expects second-quarter adjusted EBITDA margin to be between 6.3% and 6.4%, representing approximately 50 basis points of year-over-year expansion at the midpoint. Profitability is expected to face pressure from tougher gross margin comparisons due to prior-year nonrecurring MAP pricing benefits and elevated fuel surcharge costs. However, ongoing SG&A discipline and operational efficiency improvements are expected to support margin performance during the quarter.
This Zacks Rank #4 (Sell) stock has lost 22.3% in the past three months against the industry’s gain of 8.3%.
Image Source: Zacks Investment Research
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CVNA delivered a negative trailing four-quarter earnings surprise of 71.6%, on average. The Zacks Consensus Estimate for CVNA’s current financial-year sales implies growth of 35.7%, and the same for earnings implies a decline of 6.5% from the year-ago reported numbers.
Global-e Online Ltd. (GLBE - Free Report) provides a platform to enable and accelerate global, direct-to-consumer cross-border e-commerce. It currently carries a Zacks Rank of 2 (Buy).
GLBE delivered a trailing four-quarter earnings surprise of 57%, on average. The Zacks Consensus Estimate for Global-e Online’s current financial-year sales and earnings implies growth of 30.5% and 187.2%, respectively, from the year-ago reported numbers.
Commerce.com, Inc. (CMRC - Free Report) provides an artificial intelligence-driven commerce ecosystem in the United States, Europe, the Middle East, Africa, the Asia Pacific, and internationally. CMRC currently sports a Zacks Rank of 1. The company delivered a trailing four-quarter earnings surprise of 187.9%, on average.
The Zacks Consensus Estimate for CMRC’s current financial-year sales and earnings indicates growth of 2.7% and 57.7%, respectively, from the year-ago reported numbers.
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Chewy Q1 Earnings Meet Estimates, Sales Beat on Autoship Strength
Key Takeaways
Chewy, Inc. (CHWY - Free Report) reported solid first-quarter fiscal 2026 results, wherein the top line beat the Zacks Consensus Estimate, and the bottom line met the same. Both metrics showed year-over-year growth.
Chewy noted that while the overall pet category remains resilient, the consumer environment has become more challenging since the company established its initial fiscal 2026 outlook. In response to these evolving conditions, management is updating its full-year sales outlook to reflect softer consumer trends and more conservative internal assumptions. As a result, shares of CHWY lost 2.1% in yesterday’s trading session.
CHWY’s Quarterly Performance: Key Metrics and Insights
Chewy posted adjusted earnings of 43 cents per share, which came in line with the Zacks Consensus Estimate. The figure increased from 35 cents in the prior-year period.
Chewy Price, Consensus and EPS Surprise
Chewy price-consensus-eps-surprise-chart | Chewy Quote
The company reported net sales of $3,357.2 million, surpassing the Zacks Consensus Estimate of $3,352 million. The figure increased 7.7% from $3,116 million posted in the year-ago period.
The Autoship subscription program remained a cornerstone of Chewy’s model. Autoship customer sales grew 10.5% year over year to $2,832.6 million from $2,562.7 million, outpacing overall net sales growth. The metric represented 84.4% of total net sales.
The company ended the quarter with 21.5 million active customers, increasing 3.6% year over year. The metric missed the Zacks Consensus Estimate of $21.6 million.
Chewy’s net sales per active customer reached $597, meeting the Zacks Consensus Estimate. The metric reflects a 2.4% year-over-year increase from $583.
CHWY’s Margin & Cost Performance
Chewy’s gross profit increased 3.6% year over year to $1,011.4 million from $923.8 million. The gross margin expanded by 50 basis points (bps) year over year to 30.1%, driven primarily by continued growth in sponsored ads, favorable category mix and operating discipline.
Adjusted SG&A expenses reached $593 million in the fiscal first quarter. As a percentage of net sales, this metric declined 90 basis points year over year to 17.7%, due to lower variable costs from productivity improvements and AI-led efficiencies.
Advertising and marketing expenses for the fiscal first quarter were $206.1 million compared with $193.8 million in the prior-year period. As a percentage of sales, advertising and marketing expenses were 6.1%.
The adjusted EBITDA increased 31.3% year over year to $253.1 million from $192.7 million. The adjusted EBITDA margin increased 130 bps year over year to 7.5% from 6.2%, driven by adjusted EBITDA flow-through of greater than 25%. This level of profitability expansion reflects the structural strengthening of Chewy's earnings model.
CHWY’s Financial Health Snapshot
CHWY ended the quarter with approximately $485.2 million in cash, cash equivalents and $34.9 million in marketable securities. Total shareholders’ equity stood at $424.2 million.
The company generated net cash provided by operating activities of $108.5 million and free cash flow of $70.8 million for the quarter, up 45.4% from the prior-year period. Capital expenditures were $37.7 million, consistent with ongoing investment needs across the network.
Capital allocation remained active. The company repurchased $200 million of common stock during the quarter, reflecting continued emphasis on returning cash to shareholders alongside strategic investments.
What to Expect From CHWY in the Future?
Chewy revised its full-year fiscal 2026 net sales outlook, with expectations between $13.4 billion and $13.55 billion compared with the previous guidance range of $13.6 billion to $13.75 billion. The updated outlook includes expected net sales contributions of approximately $80 million from SmartPak and approximately $70 million from Modern Animal during fiscal 2026.
Adjusted EBITDA margin is expected to be in the range of 6.6-6.8%, roughly a 100 bps year-over-year increase at the midpoint. This outlook reflects a more conservative view of consumer spending patterns and category growth assumptions. Management emphasized that the change was tied to slower expected net sales per active customer expansion, driven by weaker discretionary attachment and premiumization.
For the second quarter of fiscal 2026, the company expects net sales in the range of $3.3-$3.33 billion, reflecting 6-7% year-over-year growth. The outlook assumes a generally stable operating environment and consumer trends compared with the end of the first quarter. The company continues to see healthy customer engagement, strength in Autoship and ongoing market share gains. However, near-term pressure remains on discretionary attachment and premiumization behavior. Management is also introducing quarterly adjusted EBITDA margin guidance to provide greater transparency amid varying profitability drivers.
Chewy expects second-quarter adjusted EBITDA margin to be between 6.3% and 6.4%, representing approximately 50 basis points of year-over-year expansion at the midpoint. Profitability is expected to face pressure from tougher gross margin comparisons due to prior-year nonrecurring MAP pricing benefits and elevated fuel surcharge costs. However, ongoing SG&A discipline and operational efficiency improvements are expected to support margin performance during the quarter.
This Zacks Rank #4 (Sell) stock has lost 22.3% in the past three months against the industry’s gain of 8.3%.
Image Source: Zacks Investment Research
Stocks to Consider
Some better-ranked stocks have been discussed below:
Carvana Co. (CVNA - Free Report) operates an e-commerce platform for buying and selling used cars, currently sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
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Global-e Online Ltd. (GLBE - Free Report) provides a platform to enable and accelerate global, direct-to-consumer cross-border e-commerce. It currently carries a Zacks Rank of 2 (Buy).
GLBE delivered a trailing four-quarter earnings surprise of 57%, on average. The Zacks Consensus Estimate for Global-e Online’s current financial-year sales and earnings implies growth of 30.5% and 187.2%, respectively, from the year-ago reported numbers.
Commerce.com, Inc. (CMRC - Free Report) provides an artificial intelligence-driven commerce ecosystem in the United States, Europe, the Middle East, Africa, the Asia Pacific, and internationally. CMRC currently sports a Zacks Rank of 1. The company delivered a trailing four-quarter earnings surprise of 187.9%, on average.
The Zacks Consensus Estimate for CMRC’s current financial-year sales and earnings indicates growth of 2.7% and 57.7%, respectively, from the year-ago reported numbers.