Chewy delivered results that outpaced the broader pet category by approximately 2x to 3x during the quarter, with performance anchored by a recurring revenue model. Autoship sales expanded 9.3% and now represent 84.6% of total net sales, providing a stable revenue foundation.
The company achieved triple-digit revenue growth in its Chewy Vet Care segment and triple-digit unit growth in fresh and frozen offerings. The equine and farm business marked its seventh consecutive quarter of mid-double-digit growth. Product mix continued shifting toward higher-margin categories including health and pharmacy, which helped maintain gross margins amid consumer spending constraints. Operational improvements driven by artificial intelligence-enabled productivity contributed to a 70 basis point year-over-year improvement in SG&A leverage.
Management indicated the consumer environment has stabilized compared to earlier trends, with no additional deterioration observed. The company framed its growth trajectory as dependent on scaling strategic platforms and expanding wallet share rather than requiring a broader macroeconomic recovery. Full-year guidance reflects assumptions of consistent consumer conditions without expectations of meaningful improvement.
The company completed its acquisition of Modern Animal for $400 million during the quarter, which currently creates modest margin pressure during integration. SmartPak contributed 43,000 unique customers to the active count, while Modern Animal is expected to add 40,000 to 50,000 net new customers to Chewy. Both acquisitions are performing ahead of initial expectations, prompting a slight upward revision to full-year revenue guidance.
Chew plans to launch a redesigned Chewy Plus program integrating health benefits to deepen customer engagement. Artificial intelligence initiatives are projected to generate low tens of millions in cost savings for fiscal 2026, scaling to approximately $50 million annually in fiscal 2027. The company’s AI assistant Kai currently resolves roughly 30% of customer service chats through self-service. Management indicated savings would likely offset normal cost pressures or support growth investments rather than flow entirely to bottom-line results.
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