Chewy’s Numbers: A Little Bit of Smoke and Mirrors

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So, Chewy. $3.1 billion in revenue last quarter. Impressive, right? They’re awfully keen on you knowing about their ‘Autoship’ program – the one where you basically surrender your bank details and hope enough dog biscuits arrive to justify the automatic payments. They tell you 84% of revenue comes from ‘Autoship customer sales.’ Sounds…sticky. Like a good subscription should be. Except, and this is where it gets a little bit awkward, it’s not quite what it sounds like. Honestly, I’ve seen clearer accounting from my grandmother trying to explain her lottery winnings.

They want you to think this metric represents actual recurring revenue. That most of their money is predictable, dependable, the kind of stuff that makes investors drool. It’s a lovely thought. A comforting narrative. But it’s a narrative carefully constructed, shall we say, with a generous helping of creative accounting. It’s less ‘recurring revenue’ and more ‘a really good story they’re telling.’ And I’m paid to see through those.

It’s Not What You Think (Trust Me)

You won’t find the definition of ‘Autoship customer sales’ splashed across their earnings releases, oh no. That would be far too straightforward. You have to go digging. SEC filings, the tiny footnotes in their investor presentations… it’s like a treasure hunt for the truth. And frankly, I’d rather be auditing a brewery.

Here’s the kicker: an ‘Autoship customer,’ in Chewy’s world, is anyone who’s had a single order shipped via Autoship in the last 364 days. Any order. And ‘Autoship customer sales’ includes…wait for it…sales from all purchases, both through Autoship and outside of it, by those same customers. So, let’s say someone signs up for Autoship, gets one bag of cat food, and immediately cancels. Suddenly, every single thing that person buys from Chewy for the next year is lumped into this ‘sticky’ revenue figure. It’s… ingenious, in a slightly terrifying way.

Does this measure the percentage of genuinely recurring revenue? Absolutely not. I’m not even sure what it measures, beyond Chewy’s ability to spin a good yarn. They could argue these ‘Autoship customers’ are the most engaged. Sure, they’re engaged… in cancelling subscriptions after a single purchase. It’s a stretch, even for me, and I once convinced my boss I needed a company-funded trip to ‘research’ artisanal cheese.

It would be infinitely more useful if they just told us the actual sales through Autoship. Or even the number of customers actively using the program. But no. We’re left with a metric that tells us very little, except that Chewy is very good at marketing. And maybe slightly evasive.

Is There Still a Bull Case? (Don’t Ask Me to Be Optimistic)

The fact that this ‘Autoship customer sales’ figure doesn’t actually represent actual Autoship sales does, shall we say, dampen the bullish enthusiasm. But look, there are other things to like. The number of active customers is still rising – 21.2 million last quarter – and they’re spending a bit more. And their foray into veterinary care could, eventually, be something. Maybe. I’m trying to be positive, honestly.

The valuation has become a little more attractive, too. The stock has taken a beating since mid-2025 – down over 40% from its 52-week high, and nearly 80% from its pandemic peak. It’s trading at around 20 times estimated 2026 earnings. Which, let’s be real, is still a bit rich for a company growing at this pace.

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Cheaper, yes, but still sluggish growth and weak profitability. Revenue rose only 8.3% in the third quarter of 2025. And the core business remains a low-margin affair. GAAP operating margin was a paltry 2.1%. Free cash flow looks better, but that’s largely thanks to a hefty dose of stock-based compensation. They’re essentially paying people to believe in the company. It’s a tactic. A bold one.

At the right price, Chewy could be a decent investment. But this ‘Autoship customer sales’ metric should give investors pause. They’re trying to portray themselves as a recurring revenue powerhouse, but it’s not entirely clear how much of their revenue is genuinely… well, recurring. Perhaps, someday, management will provide a clear answer. Until then, I’ll be over here, questioning everything. It’s what I do.

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2026-02-22 14:22