BUSINESS

“It wasn’t an ACA plan, but it was meaningfully cheaper than anything I could find on the ACA exchange.”

If you own a dog or a cat, you almost certainly have a Chewy box somewhere in your house.

Chewy has spent years building a loyal, subscription-driven customer base of pet owners who buy food, medicine, and supplies automatically, month after month.

You might be that loyal customer. But the problem right now is that even loyal pet owners are watching their budgets.

Morgan Stanley reviewed Chewy’s Q2 fiscal 2026 results in a note titled Managing Through the Treat-cession, which it shared with TheStreet on Sept. 9.

The firm cut its price target to $36 from $37 while maintaining its Overweight rating. CHWY closed the Sept. 9 earnings day down 11%. 

The stock is down 36.22% year to date and 39.96% over the past year, according to Yahoo Finance. If you have been holding Chewy for five years, you are down a massive 71.89%.Based on 17 Street analysts offering 12-month price targets for CHWY in the last three months, the average price target is $29, TheStreet noted.

“Treat-cession” is a wry description of the tougher macro backdrop facing pet spending in 2026.

Also Read: Chewy Inc. Latest News and Stories

What the Chewy quarter showed, and why the 11% sell-off was overdone

Chewy raised both its fiscal year 2026 revenue and EBITDA guidance. That should be a positive. But the market disagreed, selling the stock 11% in the session following the report.

Morgan Stanley’s note said the sell-off was an overreaction, but only partially, because the surface-level beat masked a more complicated underlying picture.

Q2 net sales of $3.33 billion grew 7.3% year over year, as noted in Chewy’s Q2 fiscal 2026 results. But strip out the inorganic contributions from SmartPak and Modern Animal acquisitions, and organic growth was 5.7%, decelerating approximately 120 basis points from Q1. 

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The EBITDA beat included roughly $15 million in one-time items that will not recur. Excluding those, the midpoint of fiscal year 2026 EBITDA guidance actually decreased by approximately 6 basis points. Stock-based compensation jumped 17% quarter over quarter, giving bears another talking point to question earnings quality.

“Given underlying fundamentals were in-line, we think the -11% move is overdone,” Morgan Stanley wrote in the note. “But it’s hard to argue for a meaningful re-rating until we see positive organic estimate revisions.”

The sell-off was too severe, but the stock will need evidence, not reassurance, to recover.

The pet macro that is weighing on Chewy’s whole story

The Covid pandemic sent pet adoptions soaring, and of course, consumers followed their new companions with their wallets. Pet spending had one of the most remarkable runs of any consumer category through 2020 to 2022, the American Pet Products Association reported.

That time is gone. And household budgets are getting tighter lately. Costs of everyday essentials, including food, housing, and utilities, are rising.

As a pet owner, you are likely to spend less or more carefully, trading down in some categories or even stretching the interval between purchases in others, if that’s your priority. But I don’t think anyone would bring in another companion when they don’t have enough in the fridge for themselves.

Related: Team Dog or Team Cat? What Pets Reveal About Retirement

Morgan Stanley’s view is that the weakness has stabilized at an organic growth rate of approximately 6% year over year. It treats it as the right baseline for the business, given current macro conditions. It seems to be more of a holding pattern, waiting for something to break the range.

Well, there’s some good news for Chewy bulls, according to Morgan Stanley. Remember, Chewy expanded its pet healthcare and services ecosystem by acquiring the veterinary platform Modern Animal in April 2026 and the equine health brand SmartPak (SmartEquine) in late 2025.

The acquisitions added $100 million and $80 million in fiscal year 2026 revenue, respectively, according to Morgan Stanley’s modeling. 

Veterinary clinic expansion continues. The healthcare business, which carries higher margins and stickier customer relationships than commodity pet food, is growing.

Chewy expanded its pet healthcare and services ecosystem by acquiring the veterinary platform Modern Animal in April 2026 and the equine health brand SmartPak (SmartEquine) in late 2025.Kirk Fisher Via Shutterstock

Chewy+ redesign, the catalyst Morgan Stanley is watching

The most interesting forward-looking element in Morgan Stanley’s note is the redesigned Chewy+ membership program. Management described it as launching “very shortly.”

The program’s redesign is the one idiosyncratic catalyst in the story that is not dependent on macro improvement. 

If Chewy+ demonstrates promising early adoption in the second half of 2026, Morgan Stanley believes the company could lean into the program aggressively in fiscal 2027 to drive top-line acceleration — even accepting a near-term margin offset to do so.

Fiscal 2027 is where we have the real debate. Morgan Stanley estimates Chewy will target approximately 15% to 18% incremental margins in fiscal 2027, translating to roughly 50 to 70 basis points of EBITDA margin expansion at the firm’s estimated 6.4% revenue growth. 

That expansion rate is below the approximately 100 basis points Chewy has been adding, which means the market needs to see either faster revenue growth or higher margin expansion before re-rating the stock.

Morgan Stanley’s DCF points to a $36 price target, based on 7% revenue growth through fiscal 2030, long-term EBITDA margins of roughly 10%, and an 8.5x fiscal 2027 EBITDA multiple that the firm considers attractive.

The bull case gets to $55, but Chewy would need to deliver 8% revenue growth, successfully scale Chewy+ and its clinics, and expand margins to 13%. The bear case falls to $14, assuming just 4% revenue growth and continued competitive pressure.

At around $21, Chewy trades at an estimated 8.5x fiscal 2027 EBITDA, while Morgan Stanley expects EBITDA to grow at a 16% CAGR through 2029. In other words, the stock appears priced for continued underperformance, not the recovery implied by Morgan Stanley’s Overweight rating.

The catch is that a meaningful re-rating likely requires organic growth estimates to start moving higher. Chewy’s provision of that catalyst in the second half of 2026 could determine which of these scenarios ultimately plays out.

Related: Pet costs are soaring — and owners can’t keep up

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Americans love a treasure hunt, at least when it comes to clothes. Retailers such as Marshalls, TJ Maxx, Ross Dress for Less, and other similar chains have been growth stories, while many other retailers have struggled.

That might be because consumers actually seem to enjoy shopping at stores that use a treasure-hunt model.

“Dwell times at off-price retailers were significantly longer than those of the overall apparel segment, suggesting that these stores drive engagement by encouraging customers to linger and hunt for treasures,” according to Placer.ai.

These chains have benefited from a customer base looking to save money.

“This segment has thrived for the past few years, defying the overall trends facing the apparel sector. A significant part of this success may stem from the segment’s inherent ‘treasure-hunt’ experience — off-price shopping cultivates a browsing mentality, encouraging visitors to linger and explore the constantly changing inventory,” added Placer.ai.

That model has worked outside of apparel as well, with Costco and Sam’s Club driving sales using treasure-hunt-style tactics. But one furniture chain trying to leverage the same concept has struggled and is shutting down stores.

The Dump closing multiple stores

The treasure-hunt model may be harder to sell when the purchase costs thousands of dollars.

To put a personal perspective on it, I might buy a shirt or a bag of candy by myself, but I’m not going to purchase a couch just because it’s a good price. That doesn’t mean off-price furniture sales won’t work, but it’s a harder sell than what Marshalls, Costco, and other treasure hunt retailers offer.

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The Dump, the off-price furniture retail concept operated by Haynes Furniture Co., described its business model on its website.

“Great finds don’t show up by accident. They come from knowing where to look, who to call, and when to move. We work with top designers and manufacturers to find new home furnishings through closeouts, overstocks, canceled orders, showroom samples, and one-of-a-kinds, then bring them to you for less,” the company shared.

Now, the company has decided to close its locations in Atlanta, Tempe, Chicagoland, Houston, and Dallas, according to Furniture Today.

The notice was sent directly to vendors by Brian Woods, CEO of The Dump and Haynes Furniture Co.

The company said the decision followed an “extensive evaluation of strategic alternatives.” The affected locations will remain open during their respective wind-down periods and will conduct store-closing sales.

Final closing dates have not yet been announced.

“We recognize the impact this decision has on our associates, customers, and the communities we have proudly served,” Woods said in the notice. “This was not a decision made lightly. After carefully considering every reasonable alternative, we concluded that this was the right business decision.”

The Dump offers no-frills furniture sales.Shutterstock

Furniture stores have struggled

While consumers are looking for discounts, which The Dump delivered, furniture purchases are also something that can be delayed during times of economic struggle.

Furniture sales have been running below year-ago levels throughout 2026, with the category down 3.9% to 4.5% early in the year and still roughly 1.2% below last July, according to data from the Federal Reserve of St. Louis.

Consumer Edge’s U.S. transaction data revealed that elevated interest rates, limited housing turnover, and ongoing affordability concerns were key drivers weighing on overall home and garden spending last year, ultimately pushing many households to postpone major home investments.

Additional trends include:

Affluent and budget-conscious consumers both pull back: Spending slowed across income groups late in 2025, with the sharpest declines among households earning under $40,000 and those earning over $150,000, signaling a broader reallocation of discretionary spending away from home-related categories.

Home furnishings prices continued to rise even as demand slowed: Across the home furnishings category, pricing pressure persisted throughout 2025, even as demand softened. Inflation remained a factor across the category, as average transaction sizes increased across a majority of leading brands, with companies such as Pottery Barn, West Elm, Crate & Barrel (and CB2), and Ashley Furniture among those reflecting this broader trend.

Home improvement spending stabilized around repairs and maintenance: While overall home improvement spending softened for a third consecutive year, demand remained higher than before the pandemic. Retailers tied to everyday repairs and maintenance continued to perform better than the broader category, including Ace Hardware, Sherwin-Williams, Menards, and Rural King.

“What we’re seeing isn’t a collapse in home spending, but a reset of priorities,” Consumers Edge Vice President Michael Gunther said.

“Consumers are pushing pause on large, discretionary purchases while continuing to invest in repairs and upkeep. That dynamic is also evident in home furnishings, with consumers delaying big-ticket purchases like furniture and mattresses while continuing to spend on lower-commitment upgrades, such as small décor and kitchen product purchases.”

Issues impacting The Dump are part of a broader economic equation.

“The furniture market isn’t suffering from a complex macroeconomic paradox — it’s just running into basic arithmetic. When mortgage rates keep housing turnover frozen, nobody buys a new sectional. Meanwhile, consumers are cutting big-ticket discretionary items to pay for shockingly expensive groceries,” RTM Nexus CEO Dominick Miserandino shared.

What’s next for The Dump?

The Dump will be winding down the impacted stores, but remains open in Norfolk and Richmond, Virginia.

“The company said customers with existing orders, warranties, financing arrangements or service needs will continue to receive support. Additional information regarding individual store closing timelines and customer service resources will be released as it becomes available,” Furniture Today reported.

The chain described its business in very similar terms to clothing chains that use a treasure-hunt model.

“Furniture retailers spend a lot of money convincing you their prices are a deal. We prefer actually saving you money. We start with a real deal so you end with one. We buy luxury home furnishings off-price, skip the inflated markups and unnecessary overhead, and pass the savings directly to you. That’s how more than two million shoppers have saved an average of $1,500 per visit at The Dump,” it shared on its website.

The company’s website, which makes no mention of the impending closures, does not sell any merchandise.

ALSO READ: Popular women’s clothing chain closes 177 stores

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Why we love this deal

Some spaces seem prone to mess, and garages are one of them. When you’re storing so many items in such a small area — in addition to automobiles — it’s easy for the clutter to feel out of control. Landscaping equipment, machinery, tools, bikes, and so much more can quickly pile up and leave you with an overwhelming space where it’s hard to find anything. Organizers and bins can go a long way in tidying things up, but for more unusually-shaped items like shovels, ladders, and hoes, something like the Workpro Garage Organizer certainly works better.

The wall-mounted organizer is made for gardening tools, but it can hold and store a whole host of items. Right now, it’s on sale as part of a Walmart deal for 43% off. The $65 heavy-duty rack is now $37, saving you $28 and the stress of having no space for all your garage items now that you can lift them up and out of the way. 

Workpro Garage Organizer, $37 (was $65) at Walmart

Courtesy of Walmart

Shop at Walmart

Why do shoppers love it?

A lot of the items in your garage are for heavy-duty projects, so it only makes sense that you need a heavy-duty storage mechanism to keep them organized and out of the way. This wall organizer is made with polyvinyl chloride (PVC)  and steel to deliver you a durable, long-lasting piece of equipment. The rack, which comes in four 16-inch pieces, is made of the lightweight PVC material, while the hooks are made of steel and coated with rubber. Both materials are corrosion-resistant and waterproof, so when exposed to heat, humidity, or moisture, there’s no risk of damage or deterioration. 

Because the rack comes in four pieces, you can assemble the organizer in a variety of ways. Some folks prefer one long continuous 64-inch strip while others arrange the pieces on different walls or in different places to spread it out a bit. You can easily adjust these according to your preference with the included installation kit, which comes with the rack pieces, eight storage hooks, and an assortment of fasteners. The hooks come in four sizes and snap on the rail easily. You can move them around and change them out, which is perfect when you’re dealing with differently-sized items. They lock firmly in place, and can hold up to 75 pounds per linear foot, but they will release easily when necessary. 

Related: Craftsman’s 26-piece tool set comes with a ratcheting screwdriver and bits for only $16

As a wall-mounted unit, this organizer can be installed on drywall, wall studs, or masonry. It’s suitable for hanging sports equipment, garden tools, small furniture, chairs, strollers, rakes, shovels, ladders, and so much more. 

What to expect from a $37 garage organizer: Pros and cons

Pros

Weight-bearing: It can support 75 pounds per linear foot.

Customizable: Because the rack comes in 4-inch pieces, you can arrange it and set it up in an assortment of designs to best suit your needs and tools. 

Heavy-duty: The steel hooks and PVC rack pieces are resistant to corrosion and water damage. 

Cons

Assembly required: An installation kit is included with your purchase. It includes four pieces of 16-inch racks, eight hooks in four sizes, and an assortment of fasteners. 

Shoppers are thoroughly impressed with this organizer. It’s simple to put together and the customized hook placement is a favorite with purchasers. “The quality is well made, and it is a fraction of the cost compared to Home Depot or Lowes,” one shopper said. It’s also very sturdy and can hold quite an amount of weight. “In addition to garden tools, we were able to suspend a weed eater and a leaf blower to make extra room on shelves and the floor,” another shopper said. 

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Workpro Large Workbench, $299 (was $599) at Walmart

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Workpro 24.5-Inch 5-Drawer Rolling Tool Chest, $180 (was $390) at Walmart

Although a good garage cleanout is always helpful, you don’t need to toss half of your tools, machines, and toys just to free up some garage space. With the Workpro Garage Organizer, you can utilize space you already have and free up clutter by lifting items up and out of the way.

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Kohl’s is expanding a key partnership in its stores as its customers tighten their budgets and gravitate toward other retailers. 

In the second quarter of this year, the department store chain’s comparable sales dipped 0.9% year over year, while its operating income decreased 6.5%, according to its latest earnings report. Recent Placer.ai data also revealed that overall customer visits in its stores dropped by 1.4% year over year.

On an earnings call in August, Kohl’s executives revealed that low- to middle-income customers are making trade-offs in their discretionary spending by increasingly opting for lower-priced brands. 

“Our customers remain under financial pressure, and they are becoming increasingly choiceful, actively seeking value in every purchase,” said Kohl’s CEO Michael Bender. 

Kohl’s brings Babies”R”Us to more stores

In an effort to win over customers, Kohl’s is expanding its Babies”R”Us partnership, which first launched in March 2024.

The department store chain is adding Babies“R”Us shops to an additional 56 existing stores this month, featuring new brands and products, according to a new press release. 

This includes 25 Kohl’s locations in California, 20 in Texas, two in New York, two in Illinois, and one location each in Arizona, Colorado, Idaho, Nebraska, New Jersey, Oregon, and Pennsylvania.

Related: Kohl’s has a customer problem that’s proving hard to fix

Kohl’s states in the press release that the new shops will “feature a thoughtful lineup of go-to products from popular brands, including strollers, car seats, feeding supplies, toys, and nursery decor.”

This includes the addition of Hallmark gift sets, Millie Moon diapers, and seasonal books and stroller toys.

The company also said that it is rolling out a Babies“R”Us gifting assortment in all of its stores this fall, with more baby gift options under $25. 

The move from Kohl’s comes after CEO Michael Bender said on last month’s earnings call that the company will be building its infant and baby apparel business after seeing “solid” second-quarter sales growth in baby gifts and accessories. 

The partnership expansion also takes a page from Target’s playbook. In March, Target launched “Baby Boutiques,” which offer almost 2,000 new baby products, in roughly 200 of its stores. 

After the rollout, Target revealed in its latest earnings report that its comparable sales rose 3.8% year over year during the second quarter, citing sustained growth in its baby category. 

Kohl’s is rolling out Babies“R”Us shops to an additional 56 of its stores in September.NoDerog / Getty Images

Kohl’s faces growing competition from off-price retailers

Kohl’s latest move to boost customer demand comes at a time when off-price retailers are gaining popularity. 

As consumers look to savings amid economic uncertainty, more are shying away from shopping at department store chains and are instead flocking to Ross Dress for Less, dd’s Discounts, Marshalls, and TJ Maxx.

For instance, a recent Placer.ai report revealed that traditional apparel retailers saw a 3.5% year-over-year decline in customer visits in the second quarter of 2026.

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However, visits to Ross Dress for Less increased 16.4%, and dd’s Discounts spiked by 8.4%, while TJ Maxx and Marshalls saw visits hover around last year’s levels, still outpacing traditional apparel. 

“Off-price apparel has spent the past four years gaining traffic share from department stores as shoppers have cut back on discretionary spending and looked for more ways to stretch their dollars,” said Ephraim Fruchter, insights content writer at Placer.ai, in the report.

“In the first half of 2026, that growth became increasingly concentrated at the value end of the segment, with Ross leading the way,” he continued. 

Amid this shift in consumer behavior, Neil Saunders, a retail analyst and managing director at GlobalData Retail, said in a Reuters report in August that Kohl’s continues to lose market share across major categories, a trend that is raising concerns.

“The fact that comparable sales ​remain in decline — the eighteenth consecutive quarter when they have dipped — does not convince us that Kohl’s is a business in full recovery,” said Saunders.

Related: Ross Stores customers will soon feel a notable change in stores