Shares of leading e-commerce pet goods specialist Chewy (CHWY +0.99%) are down 11% this week as of noon ET on Thursday. Chewy reported second-quarter earnings on Wednesday and exceeded Wall Street's sales expectations, while its adjusted earnings per share were in line with analysts' hopes. The company also raised full-year guidance, but its shares tumbled regardless, as analysts noted that a one-time tariff benefit may have helped Chewy beat earnings.
NYSE: CHWY
Key Data Points
Regardless of the market's reaction to Chewy's Q2 results, I think the results were perfectly fine, even if somewhat underwhelming. Q2 highlights included:
- sales growth of 7.3% (5.7% organic)
- a 3.8% increase in active customers to 21.7 million
- a 1.9% rise in net spend per active customer
- autoship revenue growth of 9.3%
- adjusted EPS climbing 9.1%
- Chewy Vet Care (CVC) clinic revenue soaring by triple digits
- guidance for 6.8% to 7.7% revenue growth in 2026
Image source: The Motley Fool.
Ultimately, a sound quarter -- just not world-beating. To that point, with everything going on in the macro economy right now, I think these results are promising enough for me to keep accumulating shares over time. CEO Sumit Singh put this in perspective well, explaining,
During the second quarter, while we did not see a meaningful recovery in the more pressured consumer backdrop for the pet market, we did not see further deterioration... The environment has broadly stabilized to the trends we observed exiting the first quarter. And against this backdrop, Chewy continues to outperform the broader pet category by roughly 2x to 3x.
Trading at just 14 times forward earnings and 10 times forward earnings before interest, depreciation, and amortization (EBITDA), Chewy remains reasonably priced, considering that my investment thesis for the company remains fully intact. While its days as a high-flying growth stock are likely in the rearview mirror, Chewy offers future growth from CVC clinics, steadily improving margins, and a juggernaut recurring revenue business in Autoship, which now accounts for 84.6% of its sales. I'm happy to buy and hold at today's valuation.
