Chewy (3HH) AI Stock Analysis

Company Guidance

For fiscal year 2026, Chewy expects total net sales of $13.46 billion to $13.57 billion, representing year-over-year growth 6.8% to 7.7%, including organic net sales growth of 5.5% to 6.3%, with the midpoint not assuming any meaningful improvement in the consumer environment; adjusted EBITDA margin guidance is 6.7% to 6.8%, from 6.6 to 6.8%, implying over 100-base-points of year over year adjusted EBITDA margin expansion and $912 million of adjusted EBITDA at the midpoint. For the third quarter, net sales are expected at $3.323 billion to $3.358 billion, representing reported year over year growth of 6.6% to 7.7% and organic net sales growth of 5.3% to 6.2%, adjusted EBITDA margins of 6.6% to 6.7%, roughly 85-basis-points of year over year expansion at the midpoint, and adjusted diluted earnings per share of around $0.39; full-year guidance also includes share based compensation expense, including related tax taxes, broadly flat to last year, weighted average diluted shares outstanding of approximately 410 million shares, net interest expense of $10 million to $15 million, capital expenditures of 1.5% to 2% of net sales, an effective tax rate of 24% to 26%, full year gross margin expansion at a more moderate pace than fiscal 2025, a mid single digit million dollar fuel headwind, and full year free cash flow through of roughly 80%. AI related initiatives are expected to generate low-tens of millions of dollars of cost savings in fiscal 2026, scaling to approximately $50 million on an annualized basis in fiscal 2027.