Chewy, Inc. reported upbeat first-quarter results but lowered its fiscal 2026 sales outlook, prompting several analysts including TD Cowen, RBC Capital, JP Morgan, and Goldman Sachs to reduce their price targets. The online pet retailer's adjusted earnings of 43 cents per share exceeded the 39-cent consensus estimate, while net sales rose 7.7% year over year to $3.357 billion, beating expectations of $3.352 billion. Despite the earnings beat, the company's revised revenue forecast for fiscal 2026 of $13.4 billion to $13.55 billion, down from a prior range of $13.6 billion to $13.75 billion, fell short of the $13.84 billion analyst estimate.

Analyst Reactions

Following the announcement, multiple firms adjusted their ratings and price targets. Goldman Sachs analyst Alexandra Steiger maintained a Buy rating but lowered the price target to $34 from $46. TD Cowen analyst William Kerr maintained a Buy rating but lowered the price target to $34 from $42. Citizens analyst Andrew Boone maintained a Market Outperform rating but lowered the price target to $28 from $45. Baird analyst Justin Kleber kept an Outperform rating and reduced the price target from $40 to $30. Barclays analyst Ross Sandler maintained an Overweight rating while cutting the price target from $40 to $36. RBC Capital analyst Steven Shemesh maintained an Outperform rating and lowered the price target to $34 from $47. JP Morgan analyst Doug Anmuth maintained an Overweight rating and lowered the price target to $29 from $35.

Q2 Guidance

For the second quarter, Chewy forecast adjusted earnings of 36 cents per share, above the 25-cent analyst estimate. However, the company projected sales of $3.30 billion to $3.33 billion, which is below the consensus estimate of $3.38 billion. Shares of Chewy fell 4.5% to trade at $19.03 on Thursday following the announcement.

Chewy, Inc. reported first-quarter fiscal year 2026 results that exceeded analyst expectations, but the online pet retailer lowered its full-year sales outlook due to a more cautious consumer spending environment. Net sales increased 7.7% year over year to $3.357 billion, surpassing the consensus estimate of $3.352 billion. Despite the revenue beat, the company reduced its fiscal 2026 revenue guidance to a range of $13.4 billion to $13.55 billion, down from the previous forecast of $13.6 billion to $13.75 billion, citing pressure from elevated fuel prices and broader macroeconomic factors. Shares were trading lower following the announcement, hitting a new 52-week low.

Financial Performance

Adjusted earnings per share came in at $0.43, ahead of the $0.39 consensus estimate. GAAP net income rose 51.9% to $94.8 million, up from $62.4 million in the prior year. Adjusted EBITDA surged 31.3% to $253.1 million, with the margin expanding 130 basis points to 7.5%. Gross margin improved 50 basis points to 30.1%, while net margin increased 80 basis points to 2.8%. Free cash flow for the quarter was $70.8 million, a 45.4% increase compared to the prior year period.

Operational Metrics

Chewy added nearly 200,000 net customers, bringing the total active customer count to 21.5 million. Net sales per active customer increased 2.4% to $597. Autoship customer sales rose 10.5% to $2.83 billion, accounting for 84.4% of total net sales. Management noted that pressure on premium product purchases and lower product attach rates weighed on net sales per active customer as spending patterns became more selective. Analysts highlighted that the deceleration reflects a weaker consumer environment late in the quarter, as consumers became more deliberate on discretionary spending.

Outlook and Strategy

For the second quarter, Chewy projects sales of $3.30 billion to $3.33 billion and adjusted EPS of $0.36, compared to analyst estimates of $3.38 billion and $0.25 respectively. The company expects quarterly active customer additions to trend toward the lower end of its previously stated range of approximately 150,000 to 250,000 net additions. Despite the softer revenue outlook, Chewy maintained its fiscal 2026 adjusted EBITDA margin guidance of 6.6% to 6.8%. The company indicated that artificial intelligence-driven efficiencies are expected to contribute savings in the low tens of millions of dollars in fiscal 2026 and more than $50 million in fiscal 2027. Regarding its Modern Animal acquisition, Chewy expects to end the year with 60 clinics and invest further in expansion in 2027 and beyond.

Balance Sheet Highlights

Cash and cash equivalents at the end of the period were $485.2 million, compared to $860.1 million at the end of the prior fiscal year. The company used $200.0 million for share repurchases during the quarter and $174.8 million, net of cash acquired, for an acquisition. Total assets stood at $3,303.7 million.