Chewy Inc. CHWY has experienced a steep decline over the past three months, with its shares tumbling 45.3%, underperforming the industry’s dip of 0.2%. The company also trailed the Retail - Wholesale sector’s 1.9% return and the S&P 500 index’s 11% rise.
CHWY’s Past 3 Months’ Performance
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Chewy’s stock has come under pressure as a softer consumer environment has weighed on discretionary spending and premium product purchases. Lower customer spending growth and a reduced fiscal 2026 sales outlook have raised concerns about near-term growth momentum. Macroeconomic headwinds have limited the impacts of the company’s growth initiatives. Despite these challenges, Chewy continues to gain market share and expand profitability.
Chewy has also underperformed its peers, including Central Garden & Pet Company CENT, Petco Health and Wellness Company, Inc. WOOF and BARK, Inc. BARK.
Shares of Central Garden & Pet have increased 31.7%, while Petco Health and BARK have declined 10% and 24.8%, respectively, over the past three months.
CHWY vs. Peer Performances
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Closing at $17.77 yesterday, the CHWY stock stands 59.5% below its 52-week high of $43.84 reached on June 26, 2025. Chewy is trading below its 50 and 200-day simple moving averages of $23.06 and $29.98, respectively, signaling bearish sentiment in maintaining the recent performance levels.
CHWY Trades Below 50 & 200-Day Moving Averages
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The recent slide in the stock has contributed to Chewy’s discounted status. This leading online retailer of pet products and services is currently trading at a compelling discount relative to its industry. The CHWY stock trades at a trailing 12-month price-to-sales (P/S) ratio of 0.58, lower than the industry’s average of 2.22.
CHWY’s Valuation Picture
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This valuation is especially notable when compared with peers such as Central Garden & Pet, which has a trailing 12-month P/S of 0.83X, Petco Health at 0.13X and BARK at 0.21X.
What’s Behind Chewy’s Dismal Stock Run?
Chewy’s stock has struggled as the company faces slowing growth expectations despite delivering solid operating results. Management lowered its fiscal 2026 net sales guidance to $13.40-$13.55 billion from the previous $13.60-$13.75 billion, reflecting a softer consumer environment and weaker category growth assumptions. The revised outlook raises concerns about the company's near-term revenue trajectory.
Consumer spending trends have emerged as another key headwind. Management noted growing pressure on premiumization and product attachment rates among existing customers, indicating that pet owners are becoming more selective with discretionary purchases. As a result, growth in net sales per active customer, a critical driver of Chewy's long-term growth story, is facing pressure. The company also expects active customer additions to trend toward the lower end of the previously stated 150,000-250,000 per quarter.
Investors are also concerned that several growth initiatives are not producing the acceleration management initially anticipated. Efforts such as Autoship enhancements, improved customer engagement tools and digital advertising initiatives are generating benefits, but their impacts have been muted by the challenging macroeconomic backdrop. Consequently, management no longer expects a meaningful acceleration in consumer spending to support growth during the remainder of fiscal 2026.
Margin-related concerns add another layer of caution. While Chewy maintained its full-year adjusted EBITDA margin outlook, the recently acquired Modern Animal business is expected to create a modest profitability drag in fiscal 2026.
The company is also incurring acquisition and integration expenses related to SmartPak and Modern Animal, and recently launched a $600-million Term Loan B transaction that will increase interest expenses and leverage. Combined with management's warning that consumer spending conditions could deteriorate further, these factors have weighed heavily on investor sentiment and contributed to the stock's sharp decline.
CHWY’s Downward Estimate Revisions Raise Concerns
The downward revision in earnings estimates has added to investor concerns surrounding the stock. The Zacks Consensus Estimate for earnings per share (EPS) has moved down over the past seven days. Estimates for the current quarter have decreased 3 cents to 37 cents per share, while estimates for the next quarter have declined 2 cents to 39 cents.
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Chewy’s Game Plan to Overcome Current Challenges
CHWY continues to benefit from its highly recurring Autoship business, which remains a key source of revenue stability. In the first quarter of fiscal 2026, Autoship sales increased more than 10% year over year and accounted for 84.4% of the total net sales. The strength of this subscription-based model supports customer retention, revenue visibility and ongoing market-share gains, helping Chewy navigate a softer consumer spending environment.
The company is also expanding its presence in the attractive pet healthcare market through Chewy Vet Care and the acquisition of Modern Animal. Management expects the combined clinic network to reach roughly 60 locations by the end of fiscal 2026, creating opportunities for customer acquisition, higher wallet shares and long-term revenue growth. Healthcare remains one of Chewy’s largest growth avenues and strengthens the company's competitive positioning beyond traditional pet retail.
In addition, Chewy is leveraging AI, automation and operational efficiencies to strengthen profitability and offset macroeconomic pressures. The company is embedding AI across customer service, pharmacy, fulfillment and marketing operations, while benefiting from growth in sponsored advertising, supply-chain improvements and operating leverage. These initiatives are helping Chewy expand earnings and generate a strong free cash flow despite a challenging consumer backdrop.
How to Play CHWY Stock: Buy, Hold or Sell?
Chewy continues to benefit from its recurring Autoship business, growing pet healthcare platform and investments in AI-driven efficiencies. However, these strengths are being overshadowed by slowing customer spending, weaker premiumization trends, a reduced fiscal 2026 sales outlook and downward earnings estimate revisions. Acquisition-related costs, higher interest expenses and a challenging consumer environment add uncertainty to the near-term growth outlook.
Given these headwinds, existing investors may consider reducing exposure or waiting for clearer signs of growth stabilization, while prospective investors may prefer to remain on the sidelines. Chewy currently carries a Zacks Rank #4 (Sell).
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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Central Garden & Pet Company (CENT): Free Stock Analysis Report
Petco Health and Wellness Company, Inc. (WOOF): Free Stock Analysis Report
Chewy (CHWY): Free Stock Analysis Report
BARK, Inc. (BARK): Free Stock Analysis Report
This article originally published on Zacks Investment Research (zacks.com).