What happened

Shares of Chewy (CHWY 0.09%) continued to fall on Thursday morning, dropping 3.1% as of 10:36 a.m. ET, as the broader market itself adjusts to the likelihood of an official recession being declared in the months ahead. The S&P 500 was trading 1% lower.

The retail sector had wildly divergent results this week, with Walmart reporting surprisingly good earnings as even wealthy shoppers were buying groceries at its stores, while Target says its customers are being slammed by inflation.

Walmart's stock had jumped 6.5% on its report, but Target's stock cratered over 13%, and Chewy's has fallen in sympathy with the latter.

A person petting a dog.

Image source: Getty Images.

So what

The dichotomy shows how the sector is playing out. Walmart is a consumer staples stock whose products are deemed essential to the daily lives of individuals. Target, on the other hand, is a consumer discretionary business whose merchandise is more nice-to-have rather than must-have.

Because Chewy falls more into the latter camp with Target, its stock is being dragged down as well. Shares of the online pet supplies store are down 5% since the Monday close, which is the highest price Chewy stock had reached since August.

Now what

Though pet supplies are nominally a discretionary purchase, Chewy's merchandise, especially pet food, is not a "luxury" item. The humanization of pets has made pets a part of the family, and many if not most owners would cut back on other purchases than ones for their pets.

Inflation is certainly a hurdle it will need to get over, and investors may find consumers did skimp on toys and treat purchases when it reports earnings next month, but food is likely to be as strong a category as ever.