Growth Stock Down 68% to Buy Right Now: Chewy

In the volatile world of growth stocks, it's not uncommon to see significant price swings. One such stock that has caught investors' attention is Chewy (CHWY), the online pet supply retailer. After a meteoric rise and subsequent decline, Chewy's stock has fallen by a staggering 68% from its 2021 peak. But is this a buying opportunity, or should investors steer clear? Let's dive into the factors contributing to Chewy's decline and assess its potential for a turnaround.



Chewy's significant decline can be attributed to several factors:

1. Post-pandemic downturn: The pandemic led to a surge in pet adoptions, which boosted Chewy's sales. However, as the pandemic subsided, pet adoptions slowed down, and Chewy's growth rate decreased.
2. Increased competition: Chewy faced intense competition from established retailers like Amazon and brick-and-mortar stores. As the market became more competitive, Chewy struggled to maintain its market share.
3. Operational challenges: Chewy faced operational issues, such as inventory management and supply chain disruptions, which negatively impacted its customer experience and sales.
4. Slowing customer spending: As the economy recovered from the pandemic, consumers became more cautious with their spending, which affected Chewy's sales.

However, recent developments suggest that Chewy's outlook may be improving:

1. Rising sales growth: Chewy has seen an increase in sales growth, driven by higher spending among existing customers and increased pet adoption rates.
2. Chewy+ membership program: The company's paid membership program, Chewy+, has gained popularity, encouraging customers to shop more frequently on the platform.
3. International expansion: Chewy began expanding internationally in 2023, entering the Canadian market. This move brings growth potential, although it also presents challenges and concerns.
4. Improved operational efficiency: Chewy has been working on improving its operational efficiency, addressing issues like inventory management and supply chain disruptions.

Chewy's international expansion, particularly in Canada, has shown promising signs of growth and potential financial benefits. The company began selling in Toronto and surrounding areas in 2023, and although it has not yet separated results for Canada, it has expressed its intention to continue adding new markets outside the U.S. This move brings both growth potential and serious concerns, especially in terms of competition and market saturation. However, the company's focus on customer experience and unique offerings may help it differentiate itself in the Canadian market.



In conclusion, Chewy's significant decline from its 2021 peak can be attributed to several factors, including post-pandemic downturn, increased competition, operational challenges, and slowing customer spending. However, recent developments, such as rising sales growth, the success of the Chewy+ membership program, international expansion, and improved operational efficiency, suggest that the company may be on the path to recovery. While there are still concerns and risks to consider, Chewy's potential for a turnaround makes it an attractive growth stock to buy right now. As always, investors should conduct thorough research and consider their risk tolerance before making any investment decisions.