Chewy, Inc. Posts Strong Q2 Sales and Raised Fiscal 2025 Guidance; Shares Decline in Post-Earnings Trading

Chewy, Inc. (NYSE: CHWY) reported its fiscal second-quarter 2026 earnings, demonstrating robust net sales growth and an upward revision to its full-year 2025 net sales outlook. Despite these positive indicators, the stock experienced a notable decline in premarket trading, largely attributed to a significant drop in unadjusted GAAP earnings and investor scrutiny of future guidance.

Market Performance Overview

Chewy, Inc. (NYSE: CHWY), the online retailer for pet products, announced its fiscal second-quarter 2026 results on September 10, 2025. While the company reported an 8.6% year-over-year increase in net sales, surpassing both its own guidance and analyst expectations, and subsequently raised its full-year 2025 net sales forecast, shares of CHWY saw a premarket decline of as much as 10%. This market reaction underscores investor sensitivity to the specifics of the earnings report, particularly a significant reduction in GAAP net income due to one-time charges.

Fiscal Second Quarter Financial Highlights

For the quarter ended June 30, 2025, Chewy posted net sales of $3.1 billion, exceeding the high end of its guidance range and analyst consensus of $3.08 billion. This growth was notably driven by its recurring Autoship service, which saw sales rise by 15% and accounted for a record 83% of total net sales. The company also demonstrated strong operational efficiency, with gross margin expanding by 90 basis points year-over-year to 30.4%, surpassing the estimated 30%.

Adjusted EBITDA reached $183.3 million, translating to a 5.9% margin, an 80 basis point expansion from the previous year. Adjusted diluted earnings per share (EPS) came in at $0.33, aligning with both analyst expectations and the company's prior guidance. However, on a GAAP basis, net income dropped by 80% year-over-year to $0.14 per share, primarily impacted by a $79.1 million compensation and tax-related expense. Free cash flow for the quarter stood at $105.9 million.

Customer engagement metrics also showed positive trends, with active customers growing 4.5% year-over-year to nearly 21 million, and net sales per active customer (NSPAC) increasing by 4.6% to $591. As of the end of the quarter, Chewy maintained a robust balance sheet with approximately $592 million in cash and cash equivalents, remaining debt-free with an overall liquidity position of around $1.4 billion. The company also executed $125 million in share repurchases during the period.

Strategic Growth Drivers

Chewy highlighted several strategic initiatives aimed at sustaining its growth trajectory. The Chewy Plus membership program, which moved from beta to a full rollout, has surpassed initial expectations, contributing 3% of total monthly sales in July and projected to reach a mid-single-digit share of net sales by year-end. This program, likened to Amazon Prime or Costco memberships by CEO Sumit Singh, has shown to drive higher NSPAC, greater profit per customer, increased purchasing frequency, and stronger Autoship adoption among its members.

Further expansion into fresh and frozen food offerings is underway, alongside plans to open 8-10 new Chewy Vetcare clinics in fiscal year 2025, which have notably exceeded initial models for new customer acquisition. Investments in technology and healthcare, coupled with an expanding private label lineup, are central to Chewy's long-term strategy to reinforce its customer-centric approach and gain market share.

Market Reaction and Outlook

Despite the strong top-line performance and strategic advancements, Chewy's stock experienced a significant decline following the earnings announcement. Analysts suggest this reaction was largely driven by the substantial decline in GAAP earnings, which overshadowed the otherwise positive financial and operational results. This indicates high investor expectations and a sensitivity to any perceived impact on the company's bottom line, even if due to one-off charges.

Looking ahead, Chewy raised its fiscal year 2025 net sales guidance to a range of $12.5 billion to $12.6 billion, up from the previous outlook of $12.3 billion to $12.45 billion. The midpoint of this new guidance, $12.55 billion, stands above the consensus estimate of $12.45 billion. The company reiterated its adjusted EBITDA margin outlook for FY2025 at 5.4% to 5.7% and anticipates converting approximately 80% of adjusted EBITDA into free cash flow. Capital expenditures for the full year are expected to be at the lower end of its previously stated range of 1.5% to 2% of net sales.

Broader Industry Context

Chewy's 8.6% year-over-year net sales growth significantly outpaced the broader pet industry, which is projected to grow at a lower single-digit rate of 3%-4% for 2025. Management emphasized that Chewy's outlook reflects ongoing market share gains, achieved through execution, customer quality, and an increased share of wallet, with minimal reliance on price inflation. This performance highlights Chewy's strong competitive position within the evolving e-commerce sector and pet care industry, as it continues to capitalize on robust demand for pet-related products and services. The company's market capitalization stands at $17.38 billion, with a Price-to-Earnings (P/E) ratio of 45.05, indicating a premium valuation reflecting its growth prospects and market leadership. Industry analysts will continue to monitor the impact of Chewy's membership strategy, investments in selling, general, and administrative (SG&A) expenses, and plans to enhance its hardgoods segment as key indicators of future performance.

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[1] Chewy, Inc. Q2 2026 Results - Earnings Call Presentation[2] Chewy Q2 2026 Earnings Report - MarketBeat[3] Strategy Announces Second Quarter 2025 Financial Results

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