Episode Details

Chewy (CHWY) Q2 FY2026 — CHWY closed at $20.75 on September 9, down 10.83% from the prior close despite raised full-year guidance. Chewy increased operating profit and raised its outlook, but quarterly free cash flow fell. The new $600M term loan nearly offsets cash and securities, while recurring stock compensation creates a large claim between adjusted profit and owner cash. THE CALL: HOLD (3/5, MODERATE) — base-case value ~$18.00 vs ~$20.75 today. KEY METRICS: - Revenue $3,330.2M, up 7.3%; growth excluding SmartPak and Modern Animal 5.7% - Operating income $92.0M vs $69.7M; gross margin 30.4% - Adjusted EBITDA $226.7M, up 23.7%; adjusted diluted EPS $0.36 - Q2 free cash flow $89.5M vs $105.9M, down 15.5% - Cash and securities $612.2M; debt principal $600M; net cash $12.2M computed - Trailing FCF $568.1M less SBC $297.9M = $270.2M owner-cash proxy - FY2026 sales guidance $13.46–$13.57B; adjusted EBITDA margin 6.7%–6.8% What to watch: Reassess positively if trailing FCF less SBC exceeds $325M, acquisition-excluded growth reaches at least 6%, and net cash remains nonnegative; reassess negatively if net debt exceeds $200M while owner cash falls below $250M. Full research packet: https://chargedalpha.com/research/chwy-q2-fy2026 Also on YouTube: @ChargedAlpha DISCLAIMER: For informational and educational purposes only. Not financial advice. Do your own research before any investment decision.