Chewy’s Dogged Dilemma: When Growth Isn’t Enough to Fetch the Market’s Favor

What do you call a company that delivers double-digit revenue growth, expanding margins, and a loyal customer base—yet sees its shares tumble nearly 15% in a single week? In today’s market, you call it Chewy, Inc.

The Paradox of Positive Numbers

Chewy (NYSE: CHWY) has reported what most would call enviable progress. Net sales for Q2 2025 leapt 8.6% year-over-year to $3.1 billion, active customers nudged up 4.5% to 20.9 million, and the celebrated Autoship program now accounts for a whopping 83% of revenue. Adjusted EBITDA margin is up to 5.9%, and the company is converting an impressive 80% of adjusted EBITDA to free cash flow. For a firm in the often-thankless e-commerce sector, these are numbers that should inspire, not deflate, investor spirits.

Yet, over the last five days, Chewy’s shares have slid a sharp 14.7%, wiping out nearly all the gains made in the past quarter. How does a company go from Wall Street darling to market mutt?

When Good News Isn’t Enough: The Shadow of Expectations

The answer, as so often in modern markets, lies in the chasm between “good” and “good enough.” Chewy’s own guidance, projecting full-year sales between $12.5 and $12.6 billion and a steady EBITDA margin, landed just a whisker below the highest analyst hopes. In a momentum-driven market, even a hint of moderation can trigger a stampede for the exits.

Meanwhile, the company’s net income margin—a crucial marker for long-term sustainability—has improved to 3.2% over the trailing twelve months, but net income for the most recent quarter fell to $62 million, down 6.7% year-over-year. The same quarter last year saw a net income of $299 million, a stark reminder of how quickly the terrain can shift in the e-commerce jungle.

The CFO’s Leash Slips Off

Nothing spooks investors quite like executive turnover, and Chewy’s announcement that CFO David Reeder will be departing for a semiconductor CEO gig did little to soothe nerves. The timing—fresh off a quarterly earnings call—has raised questions about continuity, vision, and whether a deeper shake-up is brewing at the top. For a company that prides itself on predictable delivery, sudden departures invite uncertainty.

Short Sellers Smell Blood

Another ingredient in this curious recipe: mounting short interest. As of August 31, 2025, short interest climbed to 16.46 million shares, or nearly 4% of the float, up almost 4% from the previous month. In a market skittish about e-commerce profitability, the scent of even minor disappointment is enough to attract the bears.

Competition at the Water Bowl

Chewy’s territory is increasingly crowded. Amazon, Walmart, and Target continue to muscle in on the pet category, while legacy rivals like Petco and PetSmart are reinventing themselves with omnichannel strategies and in-store services. Even as Chewy expands its own offerings—like the Chewy Plus membership and new private label “Get Real” fresh dog food—the fight for loyalty is intensifying, not abating.

Macro Headwinds and the Consumer’s Leash

The broader pet care industry is still growing, with U.S. pet ownership hitting 66% in 2025. But the macroeconomic backdrop—a cocktail of uncertain consumer spending, volatile logistics costs, and global supply chain aftershocks—means even the most loyal customers are sniffing around for value. For a company that relies on recurring revenue from pet parents, any sign of belt-tightening can spook the herd.

Behind the Curtain: Numbers Don’t Lie, But They Do Whisper

Chewy’s trailing twelve-month gross margin stands at a robust 29.2%, and the company remains debt-free with $592 million in cash. Free cash flow to sales is up to 3.7%, and return on equity has soared to 76.2%. These are not the metrics of a company in distress. Yet, in a stock market that punishes even the faintest whiff of deceleration, Chewy is a reminder that narrative often trumps numbers—at least in the short run.

For now, Chewy’s collar is a little tighter, its tail a little lower. But in the wild world of pet retail, fortunes can turn as quickly as a dog chasing a squirrel. Investors, for their part, would be wise to keep both eyes open and one hand on the leash.