Chewy Q1 Earnings Call Highlights

Key Points

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• Chewy beat on growth and profitability in Q1 fiscal 2026, with net sales up 7.7% to about $3.36 billion, adjusted EBITDA margin rising to 7.5%, and free cash flow increasing more than 45% year over year.

• Management cut full-year sales guidance to $13.40 billion-$13.55 billion as it sees softer consumer spending and weaker premiumization, though it kept adjusted EBITDA margin guidance unchanged at 6.6% to 6.8%.

• Chewy said it is still gaining market share and is leaning on growth initiatives like Autoship, Chewy Health, Vet Care, AI efficiencies and Sponsored Ads, while adding clinics and integrating SmartPak and Modern Animal.

Chewy (NYSE:CHWY) reported first-quarter fiscal 2026 results that showed continued sales growth, higher profitability and strong free cash flow, while management lowered its full-year sales outlook to account for a softer consumer environment in the pet category.

Chief Executive Officer Sumit Singh said the online pet retailer “delivered solid results in Q1, continuing to outperform the broader pet category while further expanding profitability and free cash flow.” He said the company added nearly 200,000 net customers during the quarter and continued to capture category share, even as consumer conditions weakened late in the period.

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First-quarter net sales rose 7.7% year over year to approximately $3.36 billion. Chewy ended the quarter with 21.5 million active customers, up 3.6% from the prior year. Net sales per active customer, or NSPAC, increased to $597.

Autoship remained a key contributor to the company’s recurring revenue base. Autoship customer sales increased more than 10% year over year to approximately $2.83 billion and represented 84.4% of total net sales in the quarter.

Margins Expand Despite Softer Consumer Backdrop

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Chewy reported first-quarter gross margin of 30.1%, up about 50 basis points year over year. Chief Financial Officer Chris Deppe said gross margin benefited from Sponsored Ads, favorable category mix and continued operating discipline, partly offset by a low single-digit million-dollar impact from fuel surcharges passed on by carrier partners.

Adjusted EBITDA reached approximately $253 million, representing a 7.5% adjusted EBITDA margin. That was up about 130 basis points from the prior year, with adjusted EBITDA flow-through of more than 25%. Adjusted net income was approximately $180 million, or adjusted diluted earnings per share of $0.43.

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Free cash flow was approximately $71 million, up more than 45% year over year. The company generated approximately $109 million of net cash from operating activities and spent approximately $38 million on capital expenditures.

Deppe said the…