CHWY Is Still Down 34% This Year: Did CHWY Stock Just Find a Bottom?

Shares of Chewy (NYSE:CHWY | CHWY Price Prediction) are up 6% today to $21.75, a rare bright spot in a year that has otherwise punished the pet retailer. Chewy stock is still down 34% year to date (YTD), and one strong session doesn’t reverse that.

The rebound has revived the question of whether Chewy has finally found a floor. Chewy stock trading near its lows has attracted bargain hunters looking for a recovery trade, but the fundamentals behind the year’s slide haven’t fully turned, and the setup that produced the decline is still in place.

Chewy’s business is still growing, and Chewy’s guidance moved up rather than down after the latest report. The question is whether that growth widens margin or only lifts the top line, and today’s bid has to answer that. Chewy stock had already priced in a lot of skepticism before this bounce.

Earnings Frame the Year

The September 9 report from Chewy is the cleanest explanation of the year. Sales at Chewy rose 7.3% year over year, meeting the consensus estimate, and Chewy raised its full-year revenue and profitability outlook. Active customers at Chewy grew 3.8% to 21.7 million, and Autoship reached 84.6% of net sales.

Gross margin at Chewy was unchanged at 30.4%, because cost of goods sold (COGS) rose at the same rate as sales. A retailer whose COGS climbs in step with revenue keeps margin flat as volume grows, and flat gross margin alongside a raised revenue forecast tells investors that the extra sales arrive at the same profitability as before.

The second reason for the selling was liquidity. Chewy ended the quarter with $611 million in cash, down from $860.1 million at fiscal year-end, after closing the $400 million Modern Animal acquisition and repurchasing shares. Chewy CEO Sumit Singh attributed the raised outlook to “the durability of our recurring revenue base, continued customer growth, and disciplined execution.”

Chewy’s full-year outlook now points to net sales of $13.46 billion to $13.57 billion, with the low end of adjusted EBITDA margin nudged up 10 basis points. Management at Chewy said the guidance does not assume a meaningful recovery in the pet consumer, so the upside depends on execution alone.

Pet Care Trails the Broad Market

The broader pet-care corner has lagged all year, with Chewy leading the decline. The ProShares Pet Care ETF (CBOE:PAWZ) is down 10% year to date through the last settled close. For broad-market context, the SPDR S&P 500 ETF Trust (NYSEARCA:SPY) is up 12% year to date.

Chewy is down roughly three times as much as its own theme fund, so Chewy’s year is a company issue stacked on top of a sector problem. Management at Chewy said the company continues to outperform the broader pet category by two to three times, which suggests the operating trajectory and the share reaction have parted ways this year. That gap is what today’s rally begins to test for Chewy.

The peer group diverges from Chewy’s move. Petco (NASDAQ:WOOF) stock is down 12% year to date, closer to the sector than to Chewy stock’s slide. Freshpet (NASDAQ:FRPT) stock is up 6% year to date, marking the group’s outlier and a providing a reminder that not every pet name has struggled alongside Chewy.

What to Watch Next

Chewy’s bull case rests on continued growth. Sales are still rising, the full-year outlook moved up rather than down, and Chewy stock trading at roughly two-thirds of where it began the year has priced in a fair amount of disappointment. Recurring Autoship revenue gives Chewy a predictable cash base even inside a soft pet market, and management said the outlook doesn’t require the consumer to bounce back.

Against that view, the bear case for Chewy is that gross margin sat flat while costs climbed with sales, which is what a retailer without pricing power looks like, and Chewy’s cash balance moved the wrong way in the same quarter. A stock that has fallen by a third over a year doesn’t establish a bottom in one session.

Whether Chewy has found a bottom turns on which side of that trade the next quarter settles. Investors can watch for whether margin expansion returns when Chewy reports Q3 2026 results, and they may want to size their positions with that binary in mind. One strong session only hints at demand for Chewy and falls short of proving a turn.

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