Q2 2026 Chewy Inc Earnings Call Transcript
Key Points
- Chewy Inc (CHWY) delivered strong Q2 results with net sales at the high end of guidance, growing 7.3% year-over-year to $3.33 billion, and continued to gain market share by outperforming the broader pet category by 2-3 times.
- The company's recurring revenue model remains robust, with Autoship sales growing 9.3% year-over-year and representing 84.6% of total net sales, while active customers increased 3.8% to 21.7 million.
- Chewy Inc (CHWY) expanded profitability with adjusted EBITDA margin reaching 6.8%, exceeding guidance, driven by structural SG&A leverage, lower variable cost to serve, and growth in high-margin areas like sponsored ads and Chewy Health.
- Strategic growth platforms are scaling successfully, with Chewy Vet Care delivering triple-digit revenue growth, fresh and frozen portfolio achieving triple-digit unit growth, and the equine, farm, and exotics business posting its seventh consecutive quarter of mid-double-digit sales growth.
- The company raised its full-year adjusted EBITDA margin guidance to 6.7%-6.8% and narrowed its organic net sales growth outlook to 5.5%-6.3%, reflecting increased visibility and confidence in the business despite a stable consumer environment.
- AI initiatives are progressing well, with the launch of Kai and Callie showing early success, and the company expects AI-related cost savings of low tens of millions in fiscal 2026, scaling to approximately $50 million annually in fiscal 2027.
- Chewy Inc (CHWY) continues to face a pressured consumer environment, with no meaningful recovery expected in the pet market for the remainder of fiscal 2026, and trends have only stabilized rather than improved.
- Discretionary spending remains weak, with treats sales growth slowing more sharply than core food, and pressure on premiumization and discretionary attachment affecting both Consumables and Hardgoods categories.
- The company's Q2 adjusted EBITDA outperformance was largely driven by timing and discrete benefits, including tariff refunds and rebate shifts, which are not indicative of the underlying margin run rate and will not recur.
- Gross margin is expected to decline modestly on a sequential basis in Q3, and the company faces a mid-single-digit million-dollar headwind from fuel costs through the balance of the year.
- Free cash flow in Q2 decreased year-over-year to $90 million from $106 million, primarily due to timing-related factors, although the company maintains its full-year free cash flow outlook of roughly 80%.
- The integration of Modern Animal and SmartPak, while performing ahead of expectations, still represents a modest drag on adjusted EBITDA margin, and the company has not yet determined the appropriate levels of reinvestment for 2027.
Hello, everyone. Thank you for joining us, and welcome to the Chewy second quarter 2026 earnings call. (Operator Instructions)
I will now hand the conference over to Lee Horowitz, Head of Investor Relations and Strategic Finance. Lee, please go ahead.
Thank you for joining us on the call today to discuss our second quarter results for fiscal year 2026. Joining me today are Chewy's CEO, Sumit Singh; and CFO, Chris Deppe.
Our earnings release, which was filed with the SEC earlier today, has been posted to the Investor Relations section of our website. In addition to the earnings release, the presentation summarizing our results is also available on our website at investor.chewy.com.
On our call today, we will be making forward-looking statements, including statements concerning Chewy's financial results and performance, industry trends, strategic initiatives, share repurchase program, and the environment in which we operate. Such statements are considered
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