David Moadel
5 min read
Quick Read
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Chewy dropped 9% after free cash flow fell 15% to $89.5M despite beating revenue estimates, while Petco slid 6% on sector contagion.
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Freshpet bucked the sector weakness, rising 2% on 15.5% revenue growth and a raised 2026 sales outlook.
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Chewy’s Autoship sales hit 84.6% of revenue with 21.7 million active customers, anchoring the bull case for its multi-quarter reinvestment cycle.
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Chewy (NYSE:CHWY) stock is down 11% midday on Wednesday to $20.68 after the online pet retailer reported fiscal Q2 2027 results that carried a free cash flow shortfall large enough to swamp a raised full-year outlook. The setup is unusual because both the revenue and the adjusted earnings landed close to where analysts had expected.
The selling is spreading across pet-retail stocks. Petco Health and Wellness (NASDAQ:WOOF) stock is down 6% to $2.45, extending a rough stretch for the brick-and-mortar chain. Meanwhile, Freshpet (NASDAQ:FRPT) stock is moving slightly higher against sector weakness, up 0.41% to $67.55, as the premium fresh-food maker looks insulated from Chewy’s specific issues.
The broader market backdrop offers no cover either. The SPDR S&P 500 ETF Trust (NYSEARCA:SPY) is down 0.4% in the same session, a modest pullback that highlights how idiosyncratic the pet retail move looks today.
Free Cash Flow Miss Overshadows Raised Guidance
Chewy’s adjusted diluted EPS of $0.36 came in line with the $0.3614 consensus, and revenue of $3.33 billion beat by 0.4% and grew 7.3% year over year. Management then raised the full-year outlook, guiding fiscal 2026 net sales to $13.46 billion to $13.57 billion and lifting the low end of adjusted EBITDA margin guidance by 10 basis points.
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The problem sits on the cash line. Chewy’s free cash flow of $89.5 million declined 15.5% year over year, with capital expenditures surging 71.1% to $47.9 million as the company absorbs integration costs tied to SmartPak and the $400 million Modern Animal veterinary acquisition. CFO Chris Deppe told analysts the shortfall was “entirely timing-related,” and reiterated a full-year free cash flow conversion target of “roughly 80%.”
