Chewy’s Strategic Expansion Amid Market Pressures

While Chewy Inc's stock has faced persistent downward pressure in recent months, the pet supply retailer is launching an ambitious strategic transformation. The company aims to overcome its challenging market performance through price adjustments, acquisitions, and market diversification. The critical question remains whether these initiatives will successfully restore investor confidence.

Chewy delivered solid second-quarter 2025 results, reporting revenue of $3.10 billion—an 8.6% year-over-year increase that exceeded market expectations. Earnings per share reached $0.33, matching analyst projections. Despite these positive figures, investor response remained tepid, suggesting market expectations had been set exceptionally high.

The company continues to demonstrate robust growth, with both EBITDA and earnings per share advancing at approximately 20%. Management has consequently raised its full-year 2025 guidance, now forecasting revenue between $12.5 and $12.6 billion.

Strategic Initiatives Driving Growth

A significant component of Chewy's strategy involves premium pricing adjustments. The company has increased the annual fee for its Chewy+ membership program from $49 to $79, representing a substantial 61% hike. This bold pricing move is expected to support margin improvement during the latter half of fiscal 2025.

Beyond pricing, Chewy is aggressively expanding its market presence through strategic acquisitions and new ventures. The recent purchase of SmartEquine positions the company to capture market share in the lucrative equine healthcare sector. Simultaneously, Chewy is making substantial inroads into veterinary services through its CVC initiative, with plans to establish 20 clinics by year-end.

Should investors sell immediately? Or is it worth buying Chewy Inc?

Product diversification represents another growth vector. The successful launch of the "Get Real" private label brand has enabled Chewy to establish a foothold in the fresh pet food market, creating additional revenue streams beyond its traditional e-commerce operations.

Institutional Confidence Versus Valuation Concerns

Despite retail investor hesitation, institutional players are demonstrating strong conviction in Chewy's strategy. Geode Capital Management significantly boosted its position during the second quarter, increasing its holdings by 88.1% to reach approximately $174 million in value. Piper Sandler maintained its "Overweight" rating with a $48 price target, signaling analyst optimism about the company's direction.

However, valuation metrics continue to present challenges. Even after recent corrections, Chewy shares trade at a premium with a P/E ratio of 96.22 and an EV/EBITDA multiple of 57.49. These elevated valuations necessitate sustained above-average growth to justify current price levels.

The strategic foundation has been established—now Chewy must demonstrate effective execution to meet the market's elevated expectations and translate its initiatives into sustainable shareholder value.