CHWY: 1Q'26 Review - Trimming Estimates/PT on More Challenged Category Outlook

Research evidence excerpt

CHWY: 1Q'26 Review - Trimming Estimates/PT on More Challenged Category Outlook

A 3,116.6A 3,264.7A

discipline and fulfillment productivity improvements yielding early benefits 2026 3,357.2A 3,315.0E 3,329.1E 3,473.4E Prev. 3,362.3E 3,364.1E 3,472.5E 3,626.9E

from tech and AI-enabled efficiencies. CHWY reiterated its commitment to 2027 3,598.3E 3,561.1E 3,577.2E 3,729.9E

deliver "low tens of millions of dollars" in AI- driven efficiencies in 2026 and Prev. 4,004.0E 3,667.7E 3,386.9E 3,984.2E

an incremental ~$50M+ in annualized savings in FY'27. EBITDA, Adj

2025 192.7A 183.3A 180.9A 162.3A

Negatives: 1) Soft 2Q top line guide - Mgmt guided F2Q net sales to 2026 253.1A 211.8E 223.6E 211.9E Prev. 248.4E 213.3E 231.1E 213.8E

+6.3-7.3% modestly below cons. +8.3%, contributing to a FY'26 guidance 2027 279.8E 256.3E 266.4E 246.4E

cut. 2) 2Q margin noise - At the midpoint, CHWY guided to ~50 bps of y/ Prev. 317.3E 263.7E 247.2E 256.8E

y EBITDA margin expansion to 6.35% for 2Q. Mgmt flagged that 2Q will 2023 actuals adjusted due to Chewy Pharmacy KY, LLC becoming a wholly owned

lap a difficult gross margin compare resulting in a modest contraction and subsidiary of the company.

muted adjusted EBITDA expansion. Recall, 2Q YAG (which delivered +83 AllPricedvaluesas ofin priorUSD unlesstradingotherwiseday's marketnoted.close, EST (unless otherwise noted).

bps of expansion) benefited from MAP pricing dynamics and nonrecurring

vendor pricing tailwinds. While the team sounded confident that FY'26

gross margin expansion is achievable, the path there will be increasingly

dependent on a 2H recovery as it normalizes to typical seasonality. Layered

on top of that, the team is embedding a ~MSD million dollar fuel cost

impact in Q2 and for the remainder of the year along with a modest