CHWY Is Leveraging AI & Automation to Enhance Operational Efficiency
Chewy, Inc.CHWY is expanding the use of artificial intelligence ("AI") and automation across its business to enhance customer service and improve operational efficiency. During the first quarter of fiscal 2026, the company built the infrastructure required to deploy AI at scale and began integrating these capabilities across multiple functions to support its long-term growth strategy.
Chewy is applying AI and automation across customer service, pharmacy operations, fulfillment and marketing workflows. Management noted that these initiatives are helping lower the cost of serving customers by improving workflow speed, service quality and productivity. The company is utilizing AI to enhance search relevance, personalization and marketing effectiveness.
Chewy expects AI-driven initiatives to generate efficiency benefits in the low tens of millions of dollars during fiscal 2026, with a more meaningful contribution anticipated in 2027 and beyond. In the first quarter, the company delivered roughly 90 basis points of year-over-year SG&A leverage, supported by fulfillment productivity gains, operating discipline and early benefits from technology, automation and AI-enabled initiatives.
At the same time, Chewy continues to invest in strategic growth initiatives, including expanding Chewy Health, scaling Chewy Vet Care, optimizing its fulfillment network and strengthening customer acquisition capabilities. Management emphasized that investments in AI infrastructure and automation are designed not only to improve near-term productivity but also to reinforce the company's long-term competitive positioning.
Looking ahead, management believes continued investments across health, AI, automation, fulfillment and customer experience will strengthen the Chewy ecosystem. The company reiterated the long-term adjusted EBITDA margin target of 10%, reflecting confidence in the operating model as it balances innovation, automation and disciplined execution.
CHWY’s Price Performance, Valuation & Estimates
Chewy, which competes with BARK, Inc. BARK and Petco Health and Wellness Company, Inc.WOOF, has fallen 28% over the past three months against the industry’s growth of 5.5%. Meanwhile, BARK's shares have declined 5.4% and Petco has dipped 1%.
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From a valuation standpoint, CHWY trades at a trailing price-to-sales ratio of 0.63X, below the industry’s average of 2.10X. It has a Value Score of A. CHWY is trading at a premium to BARK (with a trailing 12-month P/S ratio of 0.21) and Petco (0.13).
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The Zacks Consensus Estimate for CHWY’s fiscal 2026 and 2027 earnings implies year-over-year growth of 20.5% and 21.9%, respectively. Estimates for fiscal 2026 and 2027 have been revised downward by 9 cents and 13 cents, respectively, over the past 30 days.
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Although the company continues to invest in AI, healthcare and fulfillment capabilities to support long-term growth, short-term challenges remain. Management expects margin expansion to moderate amid difficult comparisons, higher transportation-related costs and continued strategic investments. A softer consumer spending environment and a more cautious outlook for discretionary categories could limit revenue growth and operating leverage in the near term. CHWY currently carries a Zacks Rank #5 (Strong Sell).
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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