Chewy expands margins as sales growth slows
The online pet-supplies retailer reported a net margin of 2.8% for the first quarter.
Chewy (CHWY) reported a rise in profitability for the first quarter, though revenue growth slowed compared to previous periods.
The company focused on margin expansion and customer retention during the quarter, offsetting a deceleration in top-line growth. This shift toward efficiency follows several quarters of steady improvement in operating margins.
Net sales grew 7.7% year-over-year to $3.36 billion. This represented a deceleration from the 8.3% growth reported in the third quarter of 2025.
Profitability metrics improved across the board. Gross margin expanded 50 basis points year-over-year to 30.1%, continuing a trend of growth from 29.8% in the third quarter of 2025 and 29.4% in the fourth quarter of 2025. Adjusted EBITDA margin increased 130 basis points year-over-year to 7.5%, up from 5.8% in the third quarter of 2025 and 5.0% in the fourth quarter of 2025. Net margin rose 80 basis points year-over-year to 2.8%, compared to 1.2% in the fourth quarter of 2025.
Growth in the customer base remained modest. Active customers increased 3.6% year-over-year to 21.497 million. Net sales per active customer rose 2.4% year-over-year to $597, up from $591 in the fourth quarter of 2025. The company's subscription model continued to gain traction, as Autoship customer sales as a percentage of net sales rose to 84.4%.
Free cash flow increased 45.4% year-over-year to $70.8 million, though this was a sequential decline from $232.0 million in the fourth quarter of 2025. The company reported a cash outflow of $174.8 million for the acquisition of a business during the quarter.
Chewy accelerated common stock repurchases to $200.0 million, compared to $23.1 million in the same period last year. The company also appointed Chris Deppe as Chief Financial Officer on February 24, 2026.