On September 14, the two most-watched public companies in pet retail shared the same Goldman Sachs stage and offered very similar messages from very different starting places. Chewy, Inc. (NYSE:CHWY) is attempting to persuade investors that it has outgrown the term “online pet retailer” entirely, while Petco Health and Wellness Company, Inc. (NASDAQ:WOOF) is aiming to convince them that its lengthy turnaround has finally reached the growth phase.
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Chewy’s Platform Pitch, Delivered Under Pressure
Chewy CEO Sumit Singh’s fireside chat was focused on a platform narrative, not a retail one. He pointed to a long-running structural margin story: gross margins have expanded from 18% at Chewy’s IPO to around 30% today, driven by the company’s Autoship subscription program, health services expansion, and supply chain improvements. Chewy Health, the company’s push into veterinary clinics, pharmacies, and insurance, was framed as a major growth engine layered on top of the core retail business, and represented about $4 billion, or 44%, of Chewy’s $9 billion in incremental revenue over the past six years, in addition to newer investments in artificial intelligence and automation.
Singh was also open about the headwinds, recognizing that the company is dealing with a harder consumer environment and lower spending on discretionary pet items while food and medications remain resilient and Chewy continues to gain share in several health-related categories. The appearance carried extra weight given the timing:Chewy, Inc. (NYSE:CHWY) shares had fallen roughly 12% from their September 8 close through September 11, including a sharp post-earnings selloff, while Evercore ISI and JPMorgan both downgraded the stock.
Petco’s Turnaround Enters “Phase Three”
Petco’s presentation, headed by CEO Joel Anderson and CFO Sabrina Simmons, focused on a specific inflection point: two consecutive quarters of positive comparable store sales, which management sees as a credible signal for turning its strategic focus away from cost-cutting and toward growth. The company represented itself as being in “Phase Three” of a multi-year turnaround called “Reach for the Sky,” with preceding phases focusing mostly on cost-cutting and business stability.
Anderson made it clear that Petco Health and Wellness Company, Inc. (NASDAQ:WOOF) has no intention of competing on price with Amazon or Walmart, instead positioning the company as a specialty retailer competing on service depth, integrated in-store veterinary and grooming offerings, and staff expertise, while promising to stay “close to price” without making price leadership the primary strategy. He also mentioned owned brands as a specific lever for margin growth heading into 2027, but declined to offer detailed forward guidance on margins that far out.
A Shared Story With Different Starting Points
Both companies are telling investors the same underlying story: the future winners in pet retail will be those who go beyond transactional product sales to include services, health, and recurring revenue connections with pet owners. Chewy’s pitch is based on established scale and rising margins, while Petco’s is based on proving that a turnaround is durable enough to shift gears from defense to offensive.
Institutional Positioning
Institutional positioning diverged between the two names heading into the conference. Petco Health and Wellness Company, Inc. (NASDAQ:WOOF)’s hedge fund ownership remained steady at 22 funds in both the first and second quarters, with short interest at an elevated 13.12% of float. Chewy, Inc. (NYSE:CHWY) saw hedge fund ownership fall from 53 to 44 funds during the same period, with a still-significant 10.54% short interest.
The Bull Case
Chewy’s pitch is based on numbers that are already showing up in results: a margin expansion from 18% to 30% since its IPO is not a projection, and Chewy Health’s roughly 44% contribution to incremental revenue over six years shows diversification away from a pure e-commerce retail model that is already in place. Petco’s case is in its early stages, but it has concrete recent data to back it up: two consecutive quarters of positive comps, indicating an inflection after a long period of stabilization-focused turnaround work, and its decision not to compete on price against larger rivals gives it a clearer, more differentiated positioning than attempting to directly match Amazon or Walmart.
That said, Chewy, Inc. (NYSE:CHWY) faces a deteriorating discretionary spending backdrop, which is already reflected in analyst downgrades and price target decreases. Petco Health and Wellness Company, Inc. (NASDAQ:WOOF)’s turnaround, while making significant progress, is still only two quarters into demonstrating sustainable growth, and the margins have already improved, but some of the latest gross-margin benefit came from tariff refunds, while additional gains from owned brands and other self-help initiatives still have to be proven over the coming quarters.
The Verdict
Investors in Chewy, Inc. (NYSE:CHWY) should keep an eye on whether the recent wave of downgrades is a temporary reaction to sector-wide softness or a more serious reassessment of growth prospects, and Chewy Health’s continued contribution to incremental revenue as the clearest sign that the platform diversification story is intact. For now, Chewy remains the more proven growth story. Investors in Petco Health and Wellness Company, Inc. (NASDAQ:WOOF) should keep an eye out for a third consecutive quarter of positive comparable sales, which would strengthen the case that Phase Three is a long-term shift rather than a one-time positive stretch, as well as whether owned-brand margin initiatives show measurable progress heading into 2027.
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