Chewy: Not Putting on a Clinic Yet

Research evidence excerpt

Chewy: Not Putting on a Clinic Yet

11 June 2026

Chewy

We reiterate our Buy rating given risk/reward at current levels and believe upside

from the clinics strategy is underappreciated.

Given the increased macro sensitivity and evidence of slower pet replenishment

trends at the category level, we are taking a more cautious stance on the multiple,

moving to 13x our 2027E EBITDA. Our 2026/27 EBITDA estimates move 3%/9%

lower and accordingly we are lowering our price target to $32.

Macro backdrop more cautious driven by multi-pet households

The macro backdrop remains the key risk, in our view, with both external data and

company commentary pointing to a more cautious and uneven pet category

environment that is proving somewhat more cyclical than we had previously

appreciated. Industry search data suggests pet food and supplies impressions

declined YoY, while Chewy continues to outperform on a relative basis, with mid-

single-digit growth in engaged sessions driven primarily by direct, non-paid

traffic, underscoring strong brand affinity and consumer consideration. Gross

customer adds remain above pre-pandemic levels, but are tracking modestly

below prior expectations. Encouragingly, churn, reactivation, and cohort quality

(NSPAC) remain healthy, pointing to stable underlying engagement. Beneath the

surface, category trends highlight macro-driven behavior shifts, with flat

adoption trends YTD and a widening divergence between cats (more resilient)

and dogs (more pressured) -- particularly within multi-pet households, where

consumers are increasingly delaying replacement events. Taken together, we

view the current softness as driven by slower replenishment and macro pressure,

albeit with Chewy still outgrowing the category (likely ~2-3x) given its share gains,