chwy-20221030

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended October 30, 2022

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ____ to ____

Commission File Number: 001-38936

CHEWY, INC.

(Exact name of registrant as specified in its charter)


Delaware						90-1020167
(State or other jurisdiction of incorporation or organization)						(I.R.S. Employer Identification No.)
7700 West Sunrise Boulevard, Plantation, Florida						33322
(Address of principal executive offices)						(Zip Code)

(786) 320-7111

(Registrant’s telephone number, including area code)

N/A

(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Class A Common Stock, par value $0.01 per share	CHWY	New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act:


Large accelerated filer	☒	Accelerated filer	☐
Non-accelerated filer	☐	Smaller reporting company	☐
		Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒


Class						Outstanding as of December 1, 2022
Class A Common Stock, $0.01 par value per share						112,160,071
Class B Common Stock, $0.01 par value per share						311,188,356

CHEWY, INC.

FORM 10-Q

For the Quarterly Period Ended October 30, 2022

TABLE OF CONTENTS


		Page
	PART I. FINANCIAL INFORMATION
Item 1.	Financial Statements (Unaudited)	2
	Condensed Consolidated Balance Sheets as of October 3 0 , 2022 and January 30, 2022	2
	Condensed Consolidated Statements of Operations for the Thirteen and T hirty-N ine Weeks Ended October 3 0 , 2022 and October 3 1, 2021	3
	Condensed Consolidated Statements of Stockholders’ Equity (Deficit) for the Thirteen and T hirty-Nine Weeks Ended October 3 0 , 2022 and October 3 1, 2021	4
	Condensed Consolidated Statements of Cash Flows for the Thirteen and T hirty-Nine Weeks Ended October 3 0 , 2022 and Oc tober 3 1, 2021	6
	Notes to Condensed Consolidated Financial Statements	7
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	17
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	25
Item 4.	Controls and Procedures	25
	PART II. OTHER INFORMATION
Item 1.	Legal Proceedings	26
Item 1A.	Risk Factors	26

Item 6.	Exhibits	26
	SIGNATURES	27

PART I. FINANCIAL INFORMATION

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains forward-looking statements about us and our industry that involve substantial risks and uncertainties. All statements other than statements of historical facts contained in this Quarterly Report on Form 10-Q, including statements regarding our future results of operations or financial condition, business strategy and plans and objectives of management for future operations, are forward-looking statements. In some cases, you can identify forward-looking statements because they contain words such as “anticipate,” “believe,” “contemplate,” “continue,” “could,” “estimate,” “expect,” “forecast,” “intend,” “may,” “plan,” “potential,” “predict,” “project,” “seek,” “should,” “target,” “will” or “would” or the negative of these words or other similar terms or expressions. These forward-looking statements include, but are not limited to, statements concerning our ability to:

•successfully manage risks related to coronavirus (“COVID-19”), including any adverse impacts on our supply chain, workforce, facilities, customer services and operations;

•sustain our recent growth rates and manage our growth effectively;

•acquire and retain new customers in a cost-effective manner and increase our net sales per active customer;

•accurately predict economic conditions and their impact on consumer spending patterns, particularly in the pet products market, and accurately forecast net sales and appropriately plan our expenses in the future;

•introduce new products or services, improve existing products and services, and expand into new offerings;

•successfully compete in the pet products and services retail industry, especially in the e-commerce sector;

•strengthen our current supplier relationships, retain key suppliers and source additional suppliers;

•negotiate acceptable pricing and other terms with third-party service providers, suppliers and outsourcing partners and maintain our relationships with such parties;

•mitigate changes in, or disruptions to, our shipping arrangements and operations;

•optimize, operate and manage the expansion of the capacity of our fulfillment centers, including risks from the spread of COVID-19 relating to our plans to expand capacity and develop new facilities;

•provide our customers with a cost-effective platform that is able to respond and adapt to rapid changes in technology;

•maintain and scale our technology, including the reliability of our website, mobile applications, and network infrastructure;

•maintain adequate cybersecurity with respect to our systems and ensure that our third-party service providers do the same with respect to their systems;

•successfully manufacture and sell our own private brand products;

•maintain consumer confidence in the safety and quality of our vendor-supplied and private brand food products and hardgood products;

•preserve, grow, and leverage the value of our reputation and our brand;

•comply with existing or future laws and regulations in a cost-efficient manner;

•attract, develop, motivate and retain well-qualified employees; and

•adequately protect our intellectual property rights and successfully defend ourselves against any intellectual property infringement claims or other allegations or claims that we may be subject to.

You should not rely on forward-looking statements as predictions of future events, and you should understand that these statements are not guarantees of performance or results, and our actual results could differ materially from those expressed in the forward-looking statements due to a variety of factors. We have based the forward-looking statements contained in this Quarterly Report on Form 10-Q primarily on our current assumptions, expectations and projections about future events and trends that we believe may affect our business, financial condition, and results of operations. The outcome of the events described in these forward-looking statements is subject to risks, uncertainties and other factors described in the section titled “Risk Factors” in our annual report on Form 10-K for the fiscal year ended January 30, 2022, our subsequent quarterly reports, and elsewhere in this Quarterly Report on Form 10-Q. Moreover, we operate in a very competitive and rapidly changing environment. New risks and uncertainties emerge from time to time, and it is not possible for us to predict all risks and uncertainties that could have an impact on the forward-looking statements contained in this Quarterly Report on Form 10-Q. The results, events and circumstances reflected in the forward-looking statements may not be achieved or occur, and actual results, events or circumstances could differ materially from those described in the forward-looking statements.

In addition, statements that “we believe” and similar statements reflect our beliefs and opinions on the relevant subject. These statements are based on information available to us as of the date of this Quarterly Report on Form 10-Q. While we believe that information provides a reasonable basis for these statements, that information may be limited or incomplete. Our statements should not be read to indicate that we have conducted an exhaustive inquiry into, or review of, all relevant information. These statements are inherently uncertain, and investors are cautioned not to unduly rely on these statements.

The forward-looking statements made in this Quarterly Report on Form 10-Q relate only to events as of the date on which the statements are made. We undertake no obligation to update any forward-looking statements made in this Quarterly Report on Form 10-Q to reflect events or circumstances after the date of this Quarterly Report on Form 10-Q or to reflect new information or the occurrence of unanticipated events, except as required by law. We may not actually achieve the plans, intentions or expectations disclosed in our forward-looking statements, and you should not place undue reliance on our forward-looking statements. Our forward-looking statements do not reflect the potential impact of any future acquisitions, mergers, dispositions, joint ventures or investments.

Investors and others should note that we may announce material information to our investors using our investor relations website (https://investor.chewy.com/), SEC filings, press releases, public conference calls and webcasts. We use these channels, as well as social media, to communicate with our investors and the public about our company, our business and other issues. It is possible that the information that we post on these channels could be deemed to be material information. We therefore encourage investors to visit these websites from time to time. The information contained on such websites and social media posts is not incorporated by reference into this filing. Further, our references to website URLs in this filing are intended to be inactive textual references only.

Item 1. Financial Statements (Unaudited)

CHEWY, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands, except share and per share data)


	As of
	October 30, 2022		January 30, 2022
Assets	(Unaudited)
Current assets:
Cash and cash equivalents	$	378,227	$	603,079
Marketable securities	296,784		—
Accounts receivable	126,963		123,510
Inventories	679,149		560,430
Prepaid expenses and other current assets	39,433		36,513
Total current assets	1,520,556		1,323,532
Property and equipment, net	467,055		367,166
Operating lease right-of-use assets	437,926		372,693
Other non-current assets	65,626		22,890
Total assets	$	2,491,163	$	2,086,281
Liabilities and stockholders’ equity
Current liabilities:
Trade accounts payable	$	991,951	$	883,316
Accrued expenses and other current liabilities	790,092		761,563
Total current liabilities	1,782,043		1,644,879
Operating lease liabilities	485,774		410,168
Other long-term liabilities	59,391		16,498
Total liabilities	2,327,208		2,071,545
Commitments and contingencies (Note 5)
Stockholders’ equity:
Preferred stock, $0.01 par value per share, 5,000,000 shares authorized, no shares issued and outstanding as of October 30, 2022 and January 30, 2022	—		—
Class A common stock, $0.01 par value per share, 1,500,000,000 shares authorized, 111,906,751 and 108,918,032 shares issued and outstanding as of October 30, 2022 and January 30, 2022, respectively	1,119		1,089
Class B common stock, $0.01 par value per share, 395,000,000 shares authorized, 311,188,356 shares issued and outstanding as of October 30, 2022 and January 30, 2022	3,112		3,112
Additional paid-in capital	2,127,371		2,021,310
Accumulated deficit	(1,967,647)		(2,010,775)
Total stockholders’ equity	163,955		14,736
Total liabilities and stockholders’ equity	$	2,491,163	$	2,086,281

See accompanying Notes to Condensed Consolidated Financial Statements.

CHEWY, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except per share data)

(Unaudited)


	13 Weeks Ended				39 Weeks Ended
	October 30, 2022		October 31, 2021		October 30, 2022		October 31, 2021
Net sales	$	2,532,122	$	2,212,161	$	7,391,460	$	6,502,375
Cost of goods sold	1,811,945		1,627,320		5,320,666		4,734,304
Gross profit	720,177		584,841		2,070,794		1,768,071
Operating expenses:
Selling, general and administrative	543,532		466,434		1,564,798		1,310,326
Advertising and marketing	177,079		150,335		465,959		466,738
Total operating expenses	720,611		616,769		2,030,757		1,777,064
Income (loss) from operations	(434)		(31,928)		40,037		(8,993)
Interest income (expense), net	2,745		(313)		3,091		(1,215)
Other income (expense), net	—		—		—		—
Income (loss) before income tax provision	2,311		(32,241)		43,128		(10,208)
Income tax provision	—		—		—		—
Net income (loss)	$	2,311	$	(32,241)	$	43,128	$	(10,208)

Earnings (loss) per share attributable to common Class A and Class B stockholders:
Basic	$	0.01	$	(0.08)	$	0.10	$	(0.02)
Diluted	$	0.01	$	(0.08)	$	0.10	$	(0.02)
Weighted-average common shares used in computing earnings per share:
Basic	422,898		417,847		421,665		416,587
Diluted	428,125		417,847		427,223		416,587

See accompanying Notes to Condensed Consolidated Financial Statements.

CHEWY, INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (DEFICIT)

(in thousands)

(Unaudited)


	13 Weeks Ended October 30, 2022
	Class A and Class B Common Stock			Additional Paid-in Capital		Accumulated Deficit		Total Stockholders’ Equity
	Shares	Amount
Balance as of July 31, 2022	422,647	$	4,226	$	2,083,123	$	(1,969,958)	$	117,391

Share-based compensation expense	—	—		45,530		—		45,530
Vesting of share-based compensation awards	448	5		(5)		—		—

Tax withholdings for share-based compensation awards	—	—		(3)		—		(3)
Tax sharing agreement with related parties	—	—		(1,274)		—		(1,274)
Net income	—	—		—		2,311		2,311
Balance as of October 30, 2022	423,095	$	4,231	$	2,127,371	$	(1,967,647)	$	163,955

	13 Weeks Ended October 31, 2021
	Class A and Class B Common Stock			Additional Paid-in Capital		Accumulated Deficit		Total Stockholders’ Equity
	Shares	Amount
Balance as of August 1, 2021	417,762	$	4,178	$	1,985,800	$	(1,914,925)	$	75,053

Share-based compensation expense	—	—		18,804		—		18,804
Vesting of share-based compensation awards	153	1		(1)		—		—


Tax sharing agreement with related parties	—	—		4,404		—		4,404
Net loss	—	—		—		(32,241)		(32,241)
Balance as of October 31, 2021	417,915	$	4,179	$	2,009,007	$	(1,947,166)	$	66,020

See accompanying Notes to Condensed Consolidated Financial Statements.

CHEWY, INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (DEFICIT)

(in thousands)

(Unaudited)



	39 Weeks Ended October 30, 2022
	Class A and Class B Common Stock			Additional Paid-in Capital		Accumulated Deficit		Total Stockholders’ Equity
	Shares	Amount
Balance as of January 30, 2022	420,106	$	4,201	$	2,021,310	$	(2,010,775)	$	14,736

Share-based compensation expense	—	—		109,701		—		109,701
Vesting of share-based compensation awards	2,949	30		(30)		—		—
Tax withholdings for share-based compensation awards	(53)	(1)		(2,474)		—		(2,475)
Distribution to parent	93	1		(1)		—		—

Tax sharing agreement with related parties	—	—		(1,135)		—		(1,135)
Net income	—	—		—		43,128		43,128
Balance as of October 30, 2022	423,095	$	4,231	$	2,127,371	$	(1,967,647)	$	163,955

	39 Weeks Ended October 31, 2021
	Class A and Class B Common Stock			Additional Paid-in Capital		Accumulated Deficit		Total Stockholders’ Equity (Deficit)
	Shares	Amount
Balance as of January 31, 2021	415,046	$	4,150	$	1,930,804	$	(1,936,958)	$	(2,004)


Share-based compensation expense	—	—		63,688		—		63,688
Vesting of share-based compensation awards	2,776	28		(28)		—		—
Distribution to parent	93	1		(1)		—		—

Tax sharing agreement with related parties	—	—		14,544		—		14,544

Net loss	—	—		—		(10,208)		(10,208)
Balance as of October 31, 2021	417,915	$	4,179	$	2,009,007	$	(1,947,166)	$	66,020

See accompanying Notes to Condensed Consolidated Financial Statements.

CHEWY, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

(Unaudited)


	39 Weeks Ended
	October 30, 2022		October 31, 2021
Cash flows from operating activities
Net income (loss)	$	43,128	$	(10,208)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation and amortization	60,696		38,141
Share-based compensation expense	109,701		63,688
Non-cash lease expense	29,286		24,467
Other	840		434
Net change in operating assets and liabilities:
Accounts receivable	(3,453)		(28,014)
Inventories	(118,719)		(93,290)
Prepaid expenses and other current assets	(6,237)		(42,462)
Other non-current assets	(44,220)		(3,635)

SEC Form 10-Q filed by Chewy Inc.