The news
Chewy now routes more than half of its order volume through automated fulfillment centers, CFO Chris Deppe said on the company’s fiscal second-quarter call on September 9.
“We’re north of 50% of our volume flowing through automated states, and we’ll continue to grow that over time,” Deppe said.
The last figure Chewy gave was under 50%, in late 2024. The company’s stated target is more than 70% of volume through automated buildings.
The milestone showed up in the cost line the same quarter. Selling, general and administrative expense fell to 18.4% of net sales from 19.1% a year earlier. Deppe credited fulfillment center utilization, lower variable cost to serve, headcount discipline and automation for the improvement.
What changed
Chewy has been moving volume from manual buildings to automated ones since it opened its first goods-to-person site in Archbald, Pennsylvania, in October 2020. In those buildings, product travels to stationary pickers on conveyors and sortation, instead of workers walking the aisles of a warehouse built for 50-pound bags of dog food.
The company added automated sites in Belton, Missouri; Reno, Nevada; and Nashville, Tennessee. It closed two of its oldest manual buildings in Pennsylvania and Nevada once the new sites had taken the volume. About 30% of volume ran through automated buildings by late 2022. By late 2024 the figure was still under 50%, per Supply Chain Dive.
Chewy said in 2022 that an order from an automated building cost 18% to 20% less to fill than one from a legacy site, mostly on labor. It also travelled about 25% less distance, because the automated network sits closer to customers.
Crossing 50% means the majority of Chewy’s orders now carry that lower cost.
How it works
Chewy’s automated buildings are goods-to-person sites. Product comes to the worker instead of the worker walking to the product. Mike Gilbert, then Chewy’s vice president of operations, described the setup to Supply Chain Dive when Archbald opened.
Storage: Inventory sits in zones sorted by how fast each item sells. Each zone gets its own handling equipment.
Movement: Conveyors and pneumatic rollers carry product to pickers at fixed stations. High-speed sortation routes each order through the building.
Robots: One zone in each building uses robots to bring items to pickers, who place them in containers that convey on to packing.
Packing: Box-on-demand machines cut cartons to the dimensions of each order.
Software: Third-party warehouse management systems with extensive custom code on top.
Integration: Chewy stitches together equipment from several vendors rather than buying one turnkey system.
The heavy bags are still picked by people. In November 2024, Chewy and MassRobotics launched a contest for a robot that can lift 40-pound-plus bags and pails of food and litter from mixed pallets, work in aisles as narrow as 20 inches, and place items into open cartons. Black-I Robotics won in June 2025 with a mobile base, a six-axis arm and custom grippers, per The Robot Report.
By the numbers
Net sales rose 7.3% to $3.33 billion, per Chewy’s release. Gross margin held at 30.4%.
SG&A improved 70 basis points year over year, to 18.4% of sales, Deppe said on the call. In the first quarter it improved 90 basis points, to 17.7%.
Adjusted EBITDA margin was 6.8%, up 90 basis points. CEO Sumit Singh said on the call that the company’s confidence in a long-term path to 10% or more is stronger.
Capital spending was $47.9 million in the quarter, against $28.0 million a year earlier. Chewy guided full-year capital spending to 1.5% to 2% of sales on the call.
Chewy runs 17 leased fulfillment centers covering about 9.9 million square feet, per its most recent 10-K.
The backdrop
Chewy’s automation has always run on a predictable order flow. Autoship subscriptions were 84.6% of net sales in the quarter, up from 84.4% in the first quarter, so most of the volume arriving at the automated buildings is scheduled rather than forecast. The scheduled volume lets Chewy size its automated buildings and run them at capacity.
The retailer has also kept the real estate off its balance sheet. All 17 buildings are leased. Chewy bought the automation that went inside them. Capital spending stayed between 1% and 2.3% of revenue through the entire build.
What’s next
Deppe said the automated share will keep rising toward the 70% target. Chewy guided its fiscal third quarter to 6.6% to 6.7% adjusted EBITDA margin on net sales of $3.32 billion to $3.36 billion. The company reports third-quarter results in early December.
