Chewy Shares Fall as Treat Sales Slump Signals Consumer Pullback in Pet Spending

Chewy Inc. shares fell Wednesday as the company's fiscal second-quarter results underscored a shift in pet-owner spending toward essentials and away from discretionary items, despite a slight revenue beat and an upgraded full-year forecast.

The online pet retailer reported adjusted earnings per share of $0.36, matching consensus estimates, on revenue of $3.33 billion, which topped the consensus mark of $3.32 billion. However, the stock slid and analysts cut price targets, according to reports.

The weakness centers on consumer behavior. Chewy executives said pet owners continue to prioritize core food and medications while pulling back on treats and toppers, which are more exposed to discretionary budget pressure. "Treats are softer," Chief Executive Sumit Singh told analysts on the earnings call, adding that the broader pet category has not meaningfully recovered.

Singh said the pet market did not deteriorate further from trends seen at the end of the first quarter, but it also did not improve. Chewy continues to outperform the broader category by roughly two to three times, driven by share gains across established and newer platforms.

Singh noted that pricing is not providing a net benefit in fiscal 2026. Chief Financial Officer Chris Deppe added that current guidance assumes consumer trends remain broadly consistent rather than improve.

Subdued Spending Drives Cautious Guidance

Chewy raised its full-year outlook, but the new targets incorporate no meaningful consumer recovery. Deppe said fiscal 2026 net sales are expected between $13.46 billion and $13.57 billion, representing organic growth of 5.5% to 6.3%. He narrowed adjusted EBITDA margin guidance to 6.7% to 6.8% from a prior range of 6.6% to 6.8%.

The company credited essentially all of the fiscal second-quarter profitability upside to about $10 million in timing benefits and more than $5 million in discrete benefits.

For the fiscal third quarter, Chewy guided to sales of $3.323 billion to $3.358 billion, adjusted EBITDA margin of 6.6% to 6.7%, and adjusted EPS of approximately $0.39.

Autoship Shows Stability

The subscription-based Autoship program continues to anchor Chewy's business. Deppe said Autoship sales rose 9.3% and represented 84.6% of total net sales. Active customers reached 21.7 million, up 3.8% year over year, while net sales per active customer hit $602.

Sequential net active-customer additions totaled 208,000, including 43,000 unique SmartPak customers. Singh said SmartPak has exceeded initial expectations.

Chewy Vet Care delivered triple-digit revenue growth, and the Modern Animal veterinary platform performed ahead of expectations, reinforcing Singh's confidence in the combined offering. The company also refreshed its Chewy Plus loyalty program, adding health benefits while maintaining its margin contribution.

AI Drives Efficiency, Not Growth

The company is converting artificial intelligence into measurable cost savings. Singh said its Kai assistant now resolves about 30% of selected customer chats through self-service. He expects AI initiatives to generate low tens of millions of dollars in cost savings in fiscal 2026, scaling to roughly $50 million on an annualized basis in fiscal 2027.

Deppe noted that more than 50% of volume flows through automated states, supporting further reductions in cost to serve.

Singh cautioned that the efficiencies should not be treated as pure incremental profit, and said fiscal 2027 reinvestment levels have not yet been determined.

Analyst Revisions

Following the results, several analysts lowered their price targets on Chewy, as reported. The stock, which carries a Zacks Rank of 4 (Sell), reflects an unfavorable earnings-estimate-revision backdrop, though it scores highly on value, growth, and momentum metrics.

Singh closed the call by emphasizing that the company's outlook does not depend on a broader pet-market rebound. Instead, Chewy is focused on customer growth, wallet-share expansion, its health business, sponsored ads, AI, and automation—all funded within its own earnings framework.