Why Chewy Stock Is Getting Mauled This Week

Chewy shares are taking a brutal beating as Wall Street questions the pet retailer's growth trajectory.

Earnings Miss Sparks Sell-Off

The company reported weaker-than-expected quarterly results, missing revenue projections by nearly 8%. Subscription growth—once Chewy's crown jewel—slowed to single digits for the first time in two years.

Competition Intensifies

Amazon's aggressive push into pet supplies and telehealth services continues to erode Chewy's market share. The e-commerce giant's same-day delivery options are proving too tempting for time-pressed pet owners.

Supply Chain Bites Back

Rising fulfillment costs and inventory challenges are squeezing margins. Chewy's logistics advantage—once its secret weapon—now looks increasingly vulnerable to broader economic pressures.

Analysts Turn Skeptical

Three major firms downgraded the stock this week, citing concerns about customer acquisition costs and declining average order values. One analyst noted dryly that 'even pets are cutting back on discretionary treats in this economy.'

Another reminder that in markets, sometimes the dogs don't eat the homework—they eat your returns.

Market reaction aside, Chewy is firing on all cylinders

Drops like these are peculiar. Yes, guidance was a bit conservative, but there's a solid chance that Chewy ends up beating its estimates anyway in the upcoming quarter.

Image source: Getty Images.

And as for the company's actual Q2 results, things look great.

Not only were sales up 9%, but Chewy's autoship sales (such as recurring dog food purchases) ROSE 15% -- now accounting for 83% of the company's total sales. These figures indicate that the majority of Chewy's sales are recurring, predictable, and stable, establishing a substantial sales base that should only grow over time.

On top of this stability, the company is diving into numerous higher-margin verticals, such as:

• Sponsored ads, which were a key driver for Chewy's gross margin rising 90 basis points
• Chewy+, a new $49 per year membership program, which already equalled 3% of sales in July
• The launch of Get Real, a private-label, fresh dog food brand with premium pricing potential
• The opening of 20 total Chewy Vet Care locations by year's end, bringing higher margins from the veterinary industry

Trading at 29 times forward earnings and with its profit margins set to continue improving over time, Chewy remains one of my favorite stocks right now -- even after rising 29% over the last year.