Chewy Stock: Is the Pet E-Commerce Leader Built for the Long Run?​

The good news for Chewy (NYSE: CHWY) investors is that people love their pets in both good and bad economies. The bad news for Chewy investors is that, despite having a profitable business with low customer churn, the stock has declined nearly 70% in the past five years.

There's also fierce competition for Chewy, as both Amazon and Walmart offer low-priced pet supplies and convenience through their online platforms as well.

So is now the time to buy Chewy, or should investors stay away?

Image source: Getty Images.

Chewy breeds loyalty

For Chewy bulls, it is a market leader in e-commerce pet supplies, and its customers consistently rate the company highly for its convenience, service, and warm personal touches. In fact, Chewy sent me a lovely, handwritten card when my 14-year-old Labrador passed away a few years ago. That level of customer appreciation is rare to find these days, and it keeps people coming back.

The pet market itself has also grown substantially in recent years. In the U.S., the pet industry is currently valued at around $152 billion annually. This market is expected to grow with a compound annual growth rate (CAGR) of 6% through 2028, reaching $192 billion, according to Packaged Facts' U.S. Pet Market Outlook 2025-2026.

It's a dog-eat-dog world

Despite this positive news, Chewy stock has struggled over the past few years. There are a few reasons for this. First, Chewy operates in a business environment characterized by thin margins and intense competition. Shipping is expensive, and Chewy is competing with the world's largest retailers, Amazon and Walmart, which offer aggressively low prices for pet supplies.

Packaged Facts also reports that Amazon leads the online pet market, capturing nearly half of all e-commerce sales in the category. Chewy is second at 41%, and Walmart is third at 33%.

Chewy's gross margin is just 29.8%, and its net margin is 1.9% as of its latest earnings release. These margins are a marked improvement from the prior year, when they were in the negative. Still, these numbers aren't impressive compared to other massive e-commerce businesses. Amazon's gross margin is around 50%.

Chewy's fundamentals are improving, however. In the third quarter of 2025, the pet supplier reported net sales of $3.12 billion, representing an 8.3% year-over-year increase. Chewy is also expanding into pet insurance, veterinary telehealth, and pet prescriptions. This should further strengthen its margins.

Pet owners love Autoship

The real star of Chewy's business is its Autoship program. In Q3 2025, Chewy reported that 84% of its net sales could be attributed to the Autoship program. Autoship provides predictability in cash flow and customer retention.

Chewy needs to expand its footprint -- or, rather, its paw print -- outside the United States. If competitors continue to claw away at market share, Chewy's stock might not recover. Chewy also needs to continue to innovate to keep pace with its mega-competitors.

If you're bullish on Chewy, the company won't offer hyper-growth, but it is a solid business with steady long-term prospects in a vast industry. It's a low-risk stock, but also low-reward in the long run.

Catie Hogan has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Amazon, Chewy, and Walmart. The Motley Fool has a disclosure policy.