Chewy's net sales per active customer grew 1.9% last quarter, down from 4.6% in the first quarter and below the rate of inflation — so in real terms, Matt Frankel says, they fell.
Both Chewy and Casey's General Stores reported numbers somewhere between okay and good and both fell by double digits at their worst. The panel's argument is that the same headline hid two different problems.
"On a real basis, you can say that Chewy sales actually declined."
Frankel and Jon Quast are longtime Motley Fool contributors and Tyler Crowe has been an analyst at the firm for 14 years, so the discussion is three people who cover these companies for a living disagreeing about what the market saw.
I listened to the full episode so you can skip it. 28 minutes of audio, 18 minutes of reading.
Here are the 10 takeaways that matter.
👤 Guests: Jon Quast and Matt Frankel, both longtime Motley Fool contributors
🎙️ Host: Tyler Crowe, a contributing Stock Market Analyst at The Motley Fool who has worked there for 14 years
📰 Published: 10 September 2026 on the Motley Fool Money feed, as an episode of Motley Fool Hidden Gems Investing
🟣 Apple Podcasts | 🔗 Episode page | ⏱️ 28 min | ✅ Time saved: 10 min
Key Takeaways
Chewy's problem is not profitability, it is that spending per customer is now growing slower than inflation
Net sales per active customer grew 1.9%, against 4.6% in the first quarter
Auto-ship sales fell quarter on quarter in a business Quast says has no seasonality
Casey's headline beat was fuel, and the part of the business that actually drives profit decelerated
Revenue up 23% and earnings up 28%, while inside same-store sales grew 3.2% against 4.3% a quarter earlier
Casey's was priced at roughly double its own long-run multiple going into the print
It has touched 30 times earnings only a handful of times since 2000, and traded as high as 48 times this year
Both contributors picked Chewy over Casey's, and both had reservations about the same acquisition
Quast called the horse-marketplace deal an overpay; Frankel said it nearly changed his answer
Foldable phones have been on sale in the US for seven years and are still a rounding error for everyone selling them
Analysts have the Duo at 5% to 10% of Apple's iPhone sales for fiscal 2027, so even the bull case is a tenth of the line
The real change at the launch may be a financing program rather than a product
$58 a month for a Duo, cheaper than financing it over 24 months, with Klarna behind it and a guaranteed upgrade at the end
Apple's launch events lost their charge because the steps between generations got smaller, not because the products got worse
Nothing announced tells you anything about the new CEO yet, because everything shown was developed while Tim Cook was still running the company
Quast reads the Mac mini refresh as the strategically interesting announcement, on the view that local AI becomes a major trend in the next few years
A serial-acquirer strategy works in fragmented, mature industries and rarely anywhere else
Crowe's example is insurance brokers and car dealerships, and the company he named as the model is Arthur J. Gallagher
1. Chewy's Real Number
Tyler Crowe opened on a pattern he said had run through the whole quarter: a company posts results between okay and good and the stock falls hard anyway. He picked two — Chewy and Casey's General Stores, both down about double digits at their worst — and started with the pet retailer.
Quast's first move was to take profitability off the table. "These bottom line numbers look pretty good", with margins fine and nothing to worry about, and the item that matters most intact: "It's maintaining that gross margin in particular, and that's really key for a low margin marketplace such as this"
The problem is the sequential comparison, not the year-over-year one. Sales grew year over year but fell slightly against the prior quarter, and the fall showed up specifically in auto-ship, the customers who have a recurring shipment set up and are supposed to be the locked-in, loyal base
His reason that matters more than it sounds is that the business has no seasonality. "Your cat needs to eat food regardless of the quarter, right?" — so a quarter-on-quarter dip cannot be explained away by the calendar. "So to see that small pullback in the Chewy sales on a quarterly basis is a little bit concerning"
Frankel's number is the one that turns a soft quarter into a real-terms decline. "It was up 1.9% this quarter. That's down from a growth rate of 4.6% in the first quarter." And then: "And not only that, 1.9%, that's lower than the rate of inflation. So on a real basis, you can say that Chewy sales actually declined"
He reads that as a macro signal rather than a company one, and said so from his own position as an owner of two dogs: "There are a lot of things I would cut back on before I stopped buying treats and all kinds of goodies for my dogs"
The discretionary layer inside a non-discretionary category is where he sees the pullback. Pets have to eat, but a new leash every few months does not have to be bought, and that is the spending going away — part of a discount-heavy season he says has also shown up across apparel
His explanation for the share price is a valuation argument, not an earnings one. "The stock's down big year to date because investors are not willing to pay for Chewy's exceptional margins at a time when top line growth is decelerating"
Crowe's own framing was a trade-down rather than a stop. Customers moving from premium cat food to the bulk warehouse version, which makes Chewy slightly more discretionary than a convenience store but not actually discretionary
2. Casey's Beat Was All Fuel
Crowe put the second company as a puzzle: if Chewy is the discretionary one, why did a convenience-store chain selling gas and takeout pizza get the same reaction?
Frankel's answer is that the two reports are nearly identical once you look past the top line. "You wouldn't realize how similar these companies' earnings reports were"
The headline numbers are strong and they are one thing. "So on the headlines, I mean, Casey's revenue was up 23% year-over-year. Earnings were up 28% year-over-year. It was all fuel"
Fuel is the genuinely non-discretionary part, and fuel prices did the work. "People have to put gas in their cars no matter what", and "So fuel margins exploded year-over-year. That's where that earnings beat came from"
Inside the stores, which is the food business, growth slowed. Same-store inside sales rose 3.2%, and "That was a deceleration from a 4.3% growth rate a quarter ago" — a rate he allowed could be read as slightly ahead of inflation, but not as people spending more
The cut is in the same place as at Chewy: the optional item next to the mandatory one. "When we stop at a convenience store, my kids want candy. We don't have to buy that", and he says people are cutting back on that kind of purchase more and more
His conclusion ties the two companies together. That discretionary pullback, not the headline growth, is what is worrying investors in both names
3. Why Casey's Fell Hardest
Quast added the piece that explains the size of the reaction rather than its direction, and it is about what the stock had already been paying for.
Chewy's valuation is undemanding on his read. "Chewy actually looks like a decent value here, trading at roughly 14 times forward earnings"
Casey's had almost no history at the multiple it was carrying. "Casey's has only touched 30 times earning, a valuation of 30 times earnings a handful of times" since the year 2000, and usually trades around 20 times earnings or less
This year it went far past that. "In 2026, it has traded above 40 times earnings and has even touched 48 times earnings right before it released this earnings report. That is roughly double its long-term valuation average"
The combination is what produced the fall. Expectations running that high, against softness in the inside sales that are traditionally the profit driver, made a sharp drop unsurprising to him
4. Which One They'd Buy
Crowe put both contributors on the spot: given the choice between the two at current prices, which is the better buy.
Quast took Chewy and said so first. "I think that Chewy is the better buy here of the two", on optimism about the business and the loyalty it has built: "I do believe that its customers truly love the business and kind of that personalized care that they give it"
His reservation is the acquisition record, not the operations. "I will say I'm not a huge fan of some of the acquisitions that the company has made recently" — the pet-healthcare deals he thinks are strategically smart but have not yet paid off the way management hoped
One deal he singled out as an overpay. "More recently, it acquired a horse, online marketplace kind of a company. And to me, it's really overpaying for that"
Frankel agreed on the answer and joked about nearly changing his mind. "See, I was going to say Chewy as well until you said horse marketplace"
His case is the resilience of the spending itself, from the inside. "Only pet owners understand how resilient this type of spending is. People treat their dogs like they're their babies", and he says he cannot leave a pet store without buying three bags of treats
The comparison he lands on is a business-quality one. "Compared to the inside sales at Casey, I think that Chewy has a more resilient business"
Crowe's closing observation was about the year rather than either company. The 2026 theme has been a consumer getting squeezed, and the durability of both of these businesses is being tested harder than in years past
5. The iPhone Duo's Ceiling
After the break Crowe turned to Apple's product launch, framing it through a saying he credited to a former colleague, Bill Barker: "It's good to come in under low expectations when you come in as a new CEO." John Ternus, he said, does not get that luxury following Tim Cook.
Crowe's setup was that Apple has not shipped a trajectory-changing product in years. The business is extremely profitable and growing, but "And it hasn't really released a product that could alter the company's trajectory" — which is why the iPhone Duo, a nearly $2,000 phone at the base level, is the test
Frankel's first point is that the category is not new and has never worked. "So foldable phones are not new. This is not a new aha invention." They have been on sale in the US for seven years, and "No one's been able to successfully get the market's interest in this"
His evidence is build quality and his own neighborhood. He has seen exactly one foldable in the wild, a Samsung his neighbor owns, whose phones had to be replaced twice for the same problem that killed the first few generations
The analyst range he cites caps the upside before it starts. The Duo is expected to account for about 5% to 10% of Apple's iPhone sales in fiscal 2027, depending on the analyst. "So even the bull case is assuming about a 10% share of its revenue. It doesn't need to be a smash hit to make investors happy. It's not going to be their new iPhone moment, which that's fine"
What he thinks actually moves the model is price, not units. With the iPhone 18 Pro and a Pro Plus launched alongside it and no base Pro, "So the average selling price of Apple phones could be higher, which I think is the big takeaway here"
6. Apple's Missing Product
Quast agreed the Duo is not the moment and used the question to explain why Apple launches stopped landing, which he treats as a problem of arithmetic rather than of design.
He separated craft from consequence. "I mean, there's a difference between building a beautiful product and being a product that is actually going to make a big difference in the company"
On the craft he was complimentary and specific. "You look at the engineering on the hinge in particular", and the screen, which he called the sort of detail an Apple product is expected to have
The reason the events lost their charge is that each step got smaller. Early in a product's history every generation is a real step forward; the steps shrink as the product matures. "And I think that's why kind of the oxygen has been sucked out of the room for the Apple launch events"
What would restore it is a new category, and he does not think anyone knows what it is. "Maybe that's in a portable AI device" — but he said he does not think the consumer knows what it wants from one, and does not think Apple knows what it will offer
The cautionary case is Apple's own. "The Apple Vision Pro was truly beautiful and a very interesting product", and it still did not find consumers, which is his evidence that inventing a category is hard even for Apple
7. The Leasing Change
Frankel's contribution to the Apple segment is the one the panel treated as genuinely new, and it is not a product at all.
The irony he pointed out is that the product guy's biggest change is operational. Ternus is supposed to be the product executive, and the most consequential thing announced may be the leasing program
The number is the argument. "You can get a duo for $58 a month at the base level. That's a lot cheaper than it would be to just finance it over 24 months"
He disclosed a preference before making the case. "I'm a little bit biased. I like Klarna", which is the company powering the program
The problem it addresses is the one Apple has actually been struggling with. "One of the things Apple's been kind of wrestling with in recent years is people are hanging on through their phones longer. The upgrade cycle has extended"
A lease with a guaranteed upgrade at the end attacks that directly. The customer hands the phone back and takes a new one: "It could create shorter upgrade cycles, smoother hardware revenue, and really be the biggest needle mover out of yesterday's release"
8. Ternus Inherits Cook's Work
Crowe asked whether the launch signals a strategic shift at Apple — back toward hardware and product delight, away from the operational and supply-chain excellence of the Cook years.
Quast's first answer was about lead times. "I mean, a lot of this happened under Tim Cook's watch, probably with Ternus giving a lot of input", so he would not disassociate Cook from what was shown
He does read a hardware push in the grouping of releases. He said it is not a coincidence that the Mac mini overhaul, the iPhone Duo and Ternus's promotion arrived together: "I don't think it's a coincidence that we have seen the release of the Mac mini"
The Mac mini is the release he finds strategically interesting. "I do think it's making the right move in investing in its Mac mini business, because local AI is going to be such a big trend in the upcoming years"
He also thinks Apple is a victim of its own launch history. "And I will almost say that Apple's a little bit of a victim of their own success here", with the Steve Jobs-era events setting an expectation that every launch would be an event, and the shine wearing off after eighteen or nineteen iterations
His advice to the incoming CEO is conservative. "And I would be careful not to tinker too much with what you have going for you. If you're going to tinker, make it a new thing"
Frankel put the AI criticism bluntly and then explained the counter-positioning. "Apple's, one of their biggest problems and the biggest criticisms investors have had is that they're behind the curve on AI, which they are" — the other half of that being that Apple is not spending $200 billion a year on the buildout the way its counterparts are
Apple's answer, in Ternus's own framing, is the device rather than the model. "Ternus, he said that the iPhone is the best personal device for AI", with privacy, security and build quality as the differentiator
Frankel set the date for judging the new direction, and it is not this launch. "So ask me again at their next big product launch, what the new direction of the company is, because that'll be the one where things were actually developed under Ternus's leadership"
Crowe defended calling it early anyway. Making predictions a few days into somebody's tenure and checking them later is, he said, the whole point of doing this
9. Acquisition Red Flags
The mailbag question came from a listener named Evan: "I have a small stake in a microcap drone company that is aggressively acquiring small businesses. It's done 26 in the past year", and he asked when acquisition-led growth becomes a red flag. Crowe framed the answer before handing it over — "It's a very binary outcome when it comes to acquisition-based growth" — either done extremely well or extremely poorly.
Frankel does not object to the strategy, he objects to not knowing the motive. "The key question for me is why they're making the acquisitions, you know, 26 and a year is a lot, and how they're paying for it"
The funding structure is the first thing he checks. Cash, or continuous share issuance, or convertible notes — "Are they issuing convertible notes, which is really a form of delayed dilution?"
The test he applies to the share count is arithmetic, not judgment. "If they're making all these acquisitions and tripling their revenue, but their share counts up by 500 percent, that's a net loss for shareholders"
His other flags are the balance sheet and who is on the other side of the deal. How much of the assets are goodwill and intangibles, whether any growth at all is organic, and "Are there related party transactions going on, which is a big red flag and is very common among the microcap companies?"
He singled out one instrument as disqualifying at this size. "Convertible notes in particular with early stage microcaps are a red flag for me"
A legitimate reason to buy does exist in this industry. Acquiring intellectual property or a patent portfolio in a new field could be the case here, he said, without knowing more about the company
Quast agreed the strategy can work and gave the canonical success. "I would just point to one of the greatest ones of all time was Disney buying out Marvel" — premier intellectual property bought by a distribution platform, which could grow it far beyond what Marvel could alone. "So that is a good example of one plus one equals three"
He then said the example proves the rule rather than the pattern. "But I would say that's more of the exception than the rule"
His objection to a small tech acquirer is what the buying reveals. "If you're a tech company needing to acquire other businesses, to me that is a tell that your product is not as innovative as you need it to be" — the company is going outside to buy innovation it should be generating
For a small consumer-facing company his objection is different. What that business needs is brand and mind share, and buying other companies does not build either
The integration risks come last and he listed them together. "So when you're acquiring other businesses, you're probably overpaying because you have to pay up a little bit of a premium", plus the chance of failed integration, missing synergies, culture problems and debt that takes years to pay down and robs future shareholder returns
His summary is a default, not a verdict. "I'd be suspicious with a small cap company acquiring other companies"
He also declined to identify the stock. He said he could probably narrow down which company Evan meant and deliberately did not look, because the show does not give personalized investing advice
10. When Roll-Ups Work
Crowe closed by pushing back on his own guests, saying a small group of serial acquirers has done spectacularly for investors and that the difference is which industry they operate in.
The condition he names is fragmentation plus maturity. Industries with thousands of regional operators and mom-and-pop owners — his examples were insurance brokers and car dealerships
The acquirer's edge is structural rather than strategic. A corporate umbrella brings "we've got a cost of capital advantage" and the ability to take back-office administration in house, which is where the synergies come from
The purchase price works in the buyer's favor for demographic reasons. Buying from an owner who is retiring usually means buying at a good price
The company he put forward as the model is an insurance broker. Arthur J. Gallagher, which he named with its ticker as an example of a business that has run that playbook well: "So companies that have that playbook have done extremely well"
He kept the listener's own company out of the endorsement. "Whether or not a $150 million drone company can do it is yet to be seen" — but "And there are companies out there that can do it well", and finding them can make good long-term investments
The panel's shared conclusion across all three segments is that the reported number is rarely the thing that moved the stock: Chewy and Casey's both fell on what the optional purchases inside them were doing, Apple's launch matters most for a financing term rather than a hinge, and a roll-up is worth owning only when the industry it is rolling up is fragmented enough to make the arithmetic work.
Bonus Insights
Crowe's opening observation was about the quarter, not the companies. Several firms reporting in the previous 36 hours had posted results between okay and good and been sold off, and he said he could have run the same discussion with any of them
Quast could not remember how many iPhone generations there have been, noting the number skips in places — which was itself his point about how routine the numbering has become
Frankel's disclosure habit is worth noting. He declared the Klarna preference before making the argument for the leasing program, and declared the two dogs before making the argument about pet-spending resilience
The show's compliance close is unusually direct about its own limits. Quast said out loud that he had chosen not to identify the listener's stock, and the closing disclosure notes that people on the programme may own the stocks they discuss and that the firm may have formal recommendations on them
Products, Companies & Tools Mentioned
Chewy (The quarter both contributors picked as the better buy, on resilient pet spending and about 14 times forward earnings, despite sales per customer growing below inflation)
Casey's General Stores (The same-shaped quarter with a fuel-driven headline beat, priced at up to 48 times earnings going in)
Apple (The iPhone Duo, iPhone 18 Pro, Mac mini and Apple Watch Ultra launch, and the argument over whether any of it signals a new direction)
Apple Vision Pro (Quast's evidence that inventing a product category is hard even for Apple: beautiful, interesting, and not something consumers took to)
Klarna (The company powering the Duo's $58-a-month leasing program, which Frankel thinks is the biggest change in the launch)
Samsung (The only foldable Frankel has seen in use, and the one whose repeated failures he says set the category back)
Disney and Marvel (Quast's example of an acquisition that worked: premier intellectual property bought by a distribution platform)
Arthur J. Gallagher (Crowe's model serial acquirer, from the fragmented insurance-brokerage industry where he says the playbook actually works)
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