Chewy's Stock Surges Following Strong Q2 Earnings Boasting 6 New Vet Clinic Locations

Chewy Inc. (CHWY) saw its stock surge by 14% on Wednesday after the online pet retailer reported fiscal second-quarter earnings that far exceeded expectations and issued an optimistic outlook for the rest of the year.

The Plantation, Florida-based company reported a net income of $299.1 million, or 68 cents per share, for the quarter ending July 28, a significant increase from the $20.2 million, or 5 cents per share, reported during the same period last year. When adjusted for one-time items, earnings per share (EPS) came in at 24 cents, well above the 2-cent consensus forecast by FactSet.

Chewy’s revenue rose to $2.859 billion from $2.785 billion a year earlier, aligning with FactSet’s consensus estimate of $2.858 billion. CEO Sumit Singh noted that sales hit the high end of the company’s guidance range, with Autoship customer sales—representing automatic deliveries—growing by approximately 6%, double the overall company growth rate, and accounting for 78% of total sales.

The company now has 20 million active customers, with net sales per active customer (NSPAC) reaching a record $565. Singh attributed this growth to a stronger mix of repeatable categories and increased demand for premium products, including high-end pet food and Chewy Health offerings. Additionally, the company’s upgraded mobile app has helped boost customer engagement.

Chewy's gross margins improved to 29.5%, up 120 basis points from the previous year, with further expansion expected as higher-margin businesses contribute more to overall revenue.

Since the last earnings call, Chewy has opened two more veterinary care clinics—one in the Denver area and another in South Florida—bringing the total to six locations. Singh highlighted that these clinics are exceeding expectations in attracting new customers and encouraging cross-category shopping behavior, further supporting the NSPAC growth.

The company’s sponsored ad business is also on track to achieve the lower end of its long-term goal of contributing 1% to 3% of net sales by 2024.

Despite the strong financial performance, Chief Financial Officer David Reeder mentioned that full-year customer additions are expected to remain roughly flat. For the third quarter, Chewy projects sales between $2.84 billion and $2.86 billion, representing a year-over-year growth of about 3% to 4%, compared to the FactSet consensus of $2.74 billion.

For the full year, Chewy now anticipates sales to range between $11.6 billion and $11.8 billion, surpassing FactSet’s expectation of $11.1 billion. The company also raised its full-year guidance for adjusted EBITDA margin to between 4.5% and 4.7%, with the midpoint indicating a year-over-year expansion of approximately 130 basis points.

Year-to-date, Chewy's stock has risen by 24.5%, outperforming the S&P 500's 18% gain over the same period.