CHWY

Chewy is the largest pet e-tailer in the United States, partnering with roughly 4,000 brands and offering ~190,000 products through a sticky Autoship subscription model. The operating fundamentals are improving: FY2026 revenue grew 6.2% to $12.6B, gross profit rose 8.3% to $3.75B (gross margin 29.8%), and operating income more than doubled to $254M (+125.8%) — evidence that the business is finding genuine operating leverage as it scales its e-commerce and adds higher-margin services like veterinary clinics (25 locations). Operating cash flow grew 16.0% to $692M and cash climbed 44.4% to $860M, so the underlying engine generates real free cash.

The headline that gives pause is the 43.3% drop in net income to $223M and the fall in diluted EPS to $0.52, even as operating income surged. FY2025's $393M net income evidently benefited from items below the operating line, so the year-over-year net comparison is unflattering despite the stronger core. Net margin remains thin at 1.8%, and the balance sheet is highly geared: liabilities/equity of 5.76x and a deeply negative -$1.36B retained-earnings deficit, with current liabilities ($2.30B) exceeding current assets ($2.04B). The eye-catching 44.7% ROE is a function of the very small $498M equity base rather than rich profitability, so it overstates the quality of returns.