Chewy shares experienced a significant rally after Roaring Kitty, also known as Keith Gill, posted a cryptic image resembling the online pet food retailer’s logo on a social media platform. This tactic, widely used by Gill to stir up trading in speculative names such as GameStop, initially drove up Chewy shares by as much as 34%. However, these gains were short-lived as the stock later dipped back into negative territory during Thursday’s session.
The intertwining relationship between meme stock GameStop and Chewy is further highlighted by GameStop CEO Ryan Cohen’s significant role in both companies. Cohen, who was the founder and CEO of Chewy, played a pivotal role in PetSmart’s acquisition of Chewy in 2017 and its subsequent IPO in 2019. His involvement with GameStop, along with other Chewy executives, fueled the initial GameStop rally. Cohen’s transition to GameStop CEO in 2023 marked a turnaround for the brick-and-mortar video game retailer.
Pet retailers like Chewy and Petco experienced substantial spikes in sales during the pandemic as consumers adopted pets in record numbers. This surge in adoptions led to increased purchases of pet accessories such as beds and leashes. However, as the pandemic waned and people resumed normal activities, adoption rates declined, resulting in decreased demand for discretionary pet items with higher profit margins than pet food.
Despite consistent strong sales in pet food categories, Chewy and Petco have encountered challenges in generating revenue from higher margin products. The shift in consumer behavior post-pandemic has impacted the demand for non-essential pet items, affecting the overall profitability of both companies.
Keith Gill, a former marketer for Massachusetts Mutual Life Insurance, gained prominence for his role in encouraging retail investors to buy GameStop shares and call options in 2021, causing a seismic shift in the market dynamics. His actions led to a series of congressional hearings focusing on brokers’ practices and the growing trend of “gamification” in retail trading, exemplifying the power of social media influencers in shaping stock market trends.
The volatile nature of meme stocks, coupled with the influence of social media personalities like Roaring Kitty, continues to impact traditional market dynamics. As investors navigate the changing landscape of retail trading, it is imperative to understand the underlying factors driving these fluctuations and the long-term implications for the financial markets.