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Chewy Leverages AI for Productivity Gains and Margin Expansion
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Key Takeaways
CHWY is deploying AI to improve customer experience, team productivity and cost-to-serve efficiency.
AI is reducing manual work in customer care and pharmacy while helping lower fulfillment costs.
CHWY expects AI initiatives to save low tens of millions in 2026, reaching about $50 million in 2027.
Chewy, Inc. (CHWY - Free Report) highlighted that its AI strategy is progressing from capability development toward scaled deployment and measurable financial impact. In the second quarter, management made strong progress in deploying AI across three key areas: enhancing the customer experience, improving team member productivity and structurally lowering the cost to serve. The broader deployment reflects Chewy’s efforts to apply AI across its operations to reduce manual work, improve productivity and lower costs.
The company is deploying AI-enabled tools across customer care, pharmacy and Chewy Vet Care to reduce manual work and improve productivity. In customer care, agent-facing AI capabilities are transforming customer signals into intelligent insights, reducing the burden on agents and enhancing team member productivity. In pharmacy, AI is helping automate data extraction and validation while improving review consistency, with management also highlighting its role in lowering fulfillment costs.
Chewy is leveraging the continued scaling of its automated facilities and improving utilization to better utilize the fixed-cost infrastructure embedded within its network. At the same time, the company is working to reduce variable costs through automation, process improvements and AI-enabled tools. These initiatives are contributing to lower variable cost to serve and SG&A leverage as facility utilization improves. The approach is designed to structurally lower costs through automation and AI-enabled productivity.
These initiatives are beginning to generate tangible financial benefits, with Chewy expecting AI-related initiatives to deliver low tens of millions of dollars in cost savings in fiscal 2026, scaling to approximately $50 million on an annualized basis in fiscal 2027. Management views AI as an increasingly important part of its broader productivity agenda, with some of these efficiencies potentially helping offset normal cost pressures or being reinvested into attractive growth opportunities.
The Zacks Rundown for CHWY
Shares of this Zacks Rank #1 (Strong Buy) company have lost 18.6% in the past six months against the industry’s growth of 13.3%.
Image Source: Zacks Investment Research
From a valuation standpoint, CHWY trades at a forward price-to-earnings ratio of 20.90, slightly higher than the industry’s average of 20.87.
Image Source: Zacks Investment Research
The Zacks Consensus Estimate for CHWY’s current and next fiscal year earnings implies a year-over-year rise of 19.7% and 21.7%, respectively.
Image Source: Zacks Investment Research
Other Stocks to Consider
Some other top-ranked stocks have been discussed below:
Petco Health & Wellness Company, Inc. (WOOF - Free Report) operates as a pet specialty retailer, focusing on enhancing the lives of pets, pet parents, and its Petco partners in the United States, Mexico, Puerto Rico, and Chile. At present, WOOF carries a Zacks Rank of 2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for WOOF’s current fiscal-year sales and earnings indicates growth of 0.6% and 100%, respectively, from the year-ago figures. WOOF delivered a trailing four-quarter earnings surprise of 166.7%, on average.
Central Garden & Pet Company (CENTA - Free Report) produces and distributes various products for the lawn and garden, and pet supplies markets in the United States. It currently carries a Zacks Rank 2.
The Zacks Consensus Estimate for Central Garden’s current financial-year sales implies a decline of 4.5%, and the same for earnings implies growth of 9.2% from the year-ago reported numbers. Central Garden delivered a trailing four-quarter earnings surprise of 41.8%, on average.
Phibro Animal Health Corporation (PAHC - Free Report) operates as an animal health and mineral nutrition company in the United States, Latin America and Canada, Europe, the Middle East, Africa, and the Asia Pacific. PAHC presently carries a Zacks Rank of 2.
The Zacks Consensus Estimate for PAHC's current fiscal-year sales and earnings implies growth of 3.8% and 6.5%, respectively, from the year-ago actuals. PAHC delivered a trailing four-quarter earnings surprise of 18.4%, on average.
View the Zacks #1 Rank List
Image: Bigstock
Chewy Leverages AI for Productivity Gains and Margin Expansion
Key Takeaways
Chewy, Inc. (CHWY - Free Report) highlighted that its AI strategy is progressing from capability development toward scaled deployment and measurable financial impact. In the second quarter, management made strong progress in deploying AI across three key areas: enhancing the customer experience, improving team member productivity and structurally lowering the cost to serve. The broader deployment reflects Chewy’s efforts to apply AI across its operations to reduce manual work, improve productivity and lower costs.
The company is deploying AI-enabled tools across customer care, pharmacy and Chewy Vet Care to reduce manual work and improve productivity. In customer care, agent-facing AI capabilities are transforming customer signals into intelligent insights, reducing the burden on agents and enhancing team member productivity. In pharmacy, AI is helping automate data extraction and validation while improving review consistency, with management also highlighting its role in lowering fulfillment costs.
Chewy is leveraging the continued scaling of its automated facilities and improving utilization to better utilize the fixed-cost infrastructure embedded within its network. At the same time, the company is working to reduce variable costs through automation, process improvements and AI-enabled tools. These initiatives are contributing to lower variable cost to serve and SG&A leverage as facility utilization improves. The approach is designed to structurally lower costs through automation and AI-enabled productivity.
These initiatives are beginning to generate tangible financial benefits, with Chewy expecting AI-related initiatives to deliver low tens of millions of dollars in cost savings in fiscal 2026, scaling to approximately $50 million on an annualized basis in fiscal 2027. Management views AI as an increasingly important part of its broader productivity agenda, with some of these efficiencies potentially helping offset normal cost pressures or being reinvested into attractive growth opportunities.
The Zacks Rundown for CHWY
Shares of this Zacks Rank #1 (Strong Buy) company have lost 18.6% in the past six months against the industry’s growth of 13.3%.
Image Source: Zacks Investment Research
From a valuation standpoint, CHWY trades at a forward price-to-earnings ratio of 20.90, slightly higher than the industry’s average of 20.87.
Image Source: Zacks Investment Research
The Zacks Consensus Estimate for CHWY’s current and next fiscal year earnings implies a year-over-year rise of 19.7% and 21.7%, respectively.
Image Source: Zacks Investment Research
Other Stocks to Consider
Some other top-ranked stocks have been discussed below:
Petco Health & Wellness Company, Inc. (WOOF - Free Report) operates as a pet specialty retailer, focusing on enhancing the lives of pets, pet parents, and its Petco partners in the United States, Mexico, Puerto Rico, and Chile. At present, WOOF carries a Zacks Rank of 2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for WOOF’s current fiscal-year sales and earnings indicates growth of 0.6% and 100%, respectively, from the year-ago figures. WOOF delivered a trailing four-quarter earnings surprise of 166.7%, on average.
Central Garden & Pet Company (CENTA - Free Report) produces and distributes various products for the lawn and garden, and pet supplies markets in the United States. It currently carries a Zacks Rank 2.
The Zacks Consensus Estimate for Central Garden’s current financial-year sales implies a decline of 4.5%, and the same for earnings implies growth of 9.2% from the year-ago reported numbers. Central Garden delivered a trailing four-quarter earnings surprise of 41.8%, on average.
Phibro Animal Health Corporation (PAHC - Free Report) operates as an animal health and mineral nutrition company in the United States, Latin America and Canada, Europe, the Middle East, Africa, and the Asia Pacific. PAHC presently carries a Zacks Rank of 2.
The Zacks Consensus Estimate for PAHC's current fiscal-year sales and earnings implies growth of 3.8% and 6.5%, respectively, from the year-ago actuals. PAHC delivered a trailing four-quarter earnings surprise of 18.4%, on average.