CHWY Q2 Deep Dive: Autoship, Chewy+ and Private Brands Drive Share Gains Amid Margin Investments

E-commerce pet food and supplies retailer Chewy (NYSE:CHWY) reported Q2 CY2025 results beating Wall Street’s revenue expectations, with sales up 8.6% year on year to $3.10 billion. Its GAAP profit of $0.14 per share decreased from $0.68 in the same quarter last year.

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StockStory’s Take

Chewy’s results for Q2 reflected top-line growth ahead of Wall Street’s expectations but were met with a sharply negative market reaction. Management credited the quarter’s performance to increased penetration of its Autoship subscription program and strong growth in both the hard goods and health categories. CEO Sumit Singh highlighted the strength of Chewy’s Autoship offerings, which now account for a record share of sales, and ongoing improvements in customer quality and engagement. Management also pointed to gross margin expansion, driven by sponsored ads and a higher mix of premium products, as a key profitability lever.

Looking ahead, Chewy’s forward guidance is shaped by investments in growth initiatives such as Chewy+, continued expansion in private brands, and scaling of its veterinary care network. Management expects these programs to drive incremental share gains, even as they acknowledge ongoing cost pressures from inventory, fulfillment, and wage increases. CEO Sumit Singh noted, “We see the second half of 2025 as an opportunity to further accelerate market share gains in the U.S.” The company remains focused on leveraging its supply chain investments and customer programs to support long-term margin expansion, while closely monitoring macroeconomic risks and competitive dynamics.

Key Insights from Management’s Remarks

Chewy’s management attributed Q2 performance to growth in subscription-based sales, increased customer engagement, and expansion in premium and health-focused categories.

• Autoship program strength: Autoship sales represented a record 83% of total revenue, with program growth outpacing overall sales and contributing to higher customer retention and repeat purchasing.
• Hard goods recovery: The hard goods segment grew over 15% year-over-year, driven primarily by increased product assortment, high in-stock levels, and onboarding over 1,500 new brands.
• Gross margin expansion: Gross margin gains were attributed to greater premium product mix, sponsored ads growth, and disciplined pricing, with management citing 30.4% gross margin as a new high.
• Chewy+ membership ramp: Chewy+ members demonstrated higher spending and engagement, with the program accounting for 3% of monthly sales and management projecting further revenue incrementality as penetration grows.
• Private brand launch: The introduction of Get Real, a Chewy-exclusive fresh dog food brand, received strong early customer feedback and is positioned to capture share in the fast-growing fresh and frozen pet food segment.

Drivers of Future Performance

Chewy’s outlook centers on scaling new customer programs, optimizing supply chain investments, and navigating ongoing cost pressures to drive sustainable growth.

• Investment in growth initiatives: Management is prioritizing expansion of Chewy+ and private brands, expecting these to deliver incremental revenue and customer engagement, even if near-term gross margin rates for these programs lag company averages.
• Operational leverage and fulfillment: Efforts to automate fulfillment centers and scale inventory management are expected to drive future SG&A leverage, with management projecting nearly half of volume to be automated by next year.
• Cost headwinds and pricing: Chewy is proactively managing higher inbound processing, wage expenses, and inventory costs, and may selectively invest in pricing or absorb tariff-related costs to support share gains in a competitive market.

Catalysts in Upcoming Quarters

In coming quarters, our analysts will watch (1) the pace of Chewy+ membership adoption and its impact on overall revenue, (2) margin realization from ongoing fulfillment automation and inventory strategies, and (3) competitive positioning as the company absorbs or passes through cost pressures. The evolution of private brands and veterinary care offerings will also be critical signposts for Chewy’s long-term growth trajectory.

Chewy currently trades at $35.35, down from $42.09 just before the earnings. In the wake of this quarter, is it a buy or sell? See for yourself in our full research report (it’s free).

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