A rally in shares of online pet supplies retailer Chewy (CHWY -3.31%) ran out of steam midway through August, and they ended down 11.5% for the month, according to data provided by S&P Global Market Intelligence.
Chewy and meme stocks generally had been rising since May, but they picked up speed the first week of August, with a basket of 37 meme stocks tracked by Bloomberg rallying 10% for the period. However, AMC Entertainment and Bed Bath & Beyond (BBBY -0.92%) surged much further, rising 65% and nearly 200%, respectively. Chewy’s own stock was up almost 15% for that week.
They got a further push when Chewy founder Ryan Cohen filed a report with the Securities & Exchange Commission that seemed to suggest he thought the home goods retailer had potential to surge six-, seven-, or eightfold in value. But it was not to be.
The statement Cohen filed was actually for options he had purchased when he established his stake earlier in the year. Rather than having a belief in Bed Bath & Beyond’s ability to rise, Cohen was preparing to sell.
He began dumping his shares the very next day, and two days later had completely exited his position in the retailer. Bed Bath & Beyond’s stock cratered, but other meme stocks, including those with ties to Cohen, like Chewy and video game retailer GameStop, also tumbled.
Chewy’s stock, which had risen to almost $52 per share on the rally, began steadily falling, and after it released second-quarter results on Aug. 30 that missed Wall Street expectations, the online pet store fell further.
While Chewy’s stock defied the market indexes earlier in the month, it was also pressured by their decline as August wore on. In the last two weeks of the month, the S&P 500 and Dow Jones Industrial Average were down 7% and 8% respectively. Coupled with the added deflation meme stocks suffered over that time frame, Chewy’s shares lost 30% of their value.
Chewy’s business is still growing, but much slower than it anticipated, and it has cut its full-year sales growth guidance from range of 15% to 17% down to 11% to 12%.
The online pet supplies retailer is still solidly profitable, and margins are even expanding, but the miss for the past quarter, lower-than-expected third-quarter guidance, and cuts to full-year sales guidance was enough to keep the pressure on its stock.