chwy-20230730

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 July 30, 2023

☐ 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 August 23, 2023
Class A Common Stock, $0.01 par value per share						119,141,916
Class B Common Stock, $0.01 par value per share						311,188,356

CHEWY, INC.

FORM 10-Q

For the Quarterly Period Ended July 30, 2023

TABLE OF CONTENTS


		Page
	PART I. FINANCIAL INFORMATION
Item 1.	Financial Statements (Unaudited)	2
	Condensed Consolidated Balance Sheets as of July 3 0 , 2023 and January 29, 2023	2
	Condensed Consolidated Statements of Operations for the Thirteen and Twenty -Six Weeks Ended July 3 0 , 2023 and July 3 1, 2022	3
	Condensed Consolidated Statements of Stockholders’ Equity for the Thirteen and Twe nty-Six Weeks Ended July 3 0 , 2023 and July 3 1 , 2022	4
	Condensed Consolidated Statements of Cash Flows for the Twenty-Six Weeks Ended July 30, 2023 and July 3 1 , 2022	6
	Notes to Condensed Consolidated Financial Statements	7
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	18
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	27
Item 4.	Controls and Procedures	28
	PART II. OTHER INFORMATION
Item 1.	Legal Proceedings	28
Item 1A.	Risk Factors	28

Item 5.	Other Information	28
Item 6.	Exhibits	29
	SIGNATURES	30

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:

•sustain our recent growth rates and successfully manage challenges to our future growth, including introducing new products or services, improving existing products and services, and expanding into new offerings;

•successfully manage risks related to the macroeconomic environment, including any adverse impacts on our business operations, financial performance, supply chain, workforce, facilities, customer services and operations;

•acquire and retain new customers in a cost-effective manner and increase our net sales, improve margins and maintain profitability;

•manage our growth effectively;

•maintain positive perceptions of our company and preserve, grow and leverage the value of our reputation and our brand;

•limit operating losses as we continue to expand our business;

•forecast net sales and appropriately plan our expenses in the future;

•estimate the size of our addressable market;

•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;

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

•limit our losses related to online payment methods;

•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;

•maintain consumer confidence in the safety, quality and health of our products;

•limit risks associated with our suppliers and our outsourcing partners;

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

•compete with other retailers and service providers;

•utilize tax attributes, net operating loss and tax credit carryforwards, and limit fluctuations in our tax obligations and effective tax rate;

•adequately protect our intellectual property rights;

•successfully defend ourselves against any allegations or claims that we may be subject to;

•attract, develop, motivate and retain highly-qualified and skilled employees;

•predict and respond to economic conditions, industry trends, and market conditions, and their impact on the pet products market;

•reduce merchandise returns or refunds;

•respond to severe weather and limit disruption to normal business operations;

•manage new acquisitions, investments or alliances, and integrate them into our existing business;

•successfully compete in the pet insurance market;

•manage challenges presented by international markets;

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

•raise capital as needed; and

•maintain effective internal control over financial reporting and disclosure controls and procedures.

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 29, 2023, 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 such information provides a reasonable basis for these statements, this 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/), filings with the Securities and Exchange Commision (“SEC”), 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
	July 30, 2023		January 29, 2023
Assets	(Unaudited)
Current assets:
Cash and cash equivalents	$	457,103	$	330,441
Marketable securities	448,323		346,944
Accounts receivable	162,681		126,349
Inventories	738,204		675,520
Prepaid expenses and other current assets	48,080		41,067
Total current assets	1,854,391		1,520,321
Property and equipment, net	511,755		478,738
Operating lease right-of-use assets	434,805		423,423
Goodwill	39,442		39,442
Other non-current assets	63,621		53,152
Total assets	$	2,904,014	$	2,515,076
Liabilities and stockholders’ equity
Current liabilities:
Trade accounts payable	$	1,119,316	$	1,030,882
Accrued expenses and other current liabilities	880,072		738,467
Total current liabilities	1,999,388		1,769,349
Operating lease liabilities	488,767		471,765
Other long-term liabilities	51,230		60,005
Total liabilities	2,539,385		2,301,119
Commitments and contingencies (Note 6)
Stockholders’ equity:
Preferred stock, $0.01 par value per share, 5,000,000 shares authorized, no shares issued and outstanding as of July 30, 2023 and January 29, 2023	—		—
Class A common stock, $0.01 par value per share, 1,500,000,000 shares authorized, 118,530,123 and 114,160,531 shares issued and outstanding as of July 30, 2023 and January 29, 2023, respectively	1,185		1,141
Class B common stock, $0.01 par value per share, 395,000,000 shares authorized, 311,188,356 shares issued and outstanding as of July 30, 2023 and January 29, 2023	3,112		3,112
Additional paid-in capital	2,280,748		2,171,247
Accumulated deficit	(1,920,416)		(1,961,543)

Total stockholders’ equity	364,629		213,957
Total liabilities and stockholders’ equity	$	2,904,014	$	2,515,076

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				26 Weeks Ended
	July 30, 2023		July 31, 2022		July 30, 2023		July 31, 2022
Net sales	$	2,777,769	$	2,431,011	$	5,562,444	$	4,859,338
Cost of goods sold	1,990,996		1,748,214		3,984,216		3,508,721
Gross profit	786,773		682,797		1,578,228		1,350,617
Operating expenses:
Selling, general and administrative	619,202		516,983		1,202,868		1,021,266
Advertising and marketing	185,491		144,159		369,224		288,880
Total operating expenses	804,693		661,142		1,572,092		1,310,146
(Loss) income from operations	(17,920)		21,655		6,136		40,471
Interest income, net	8,928		690		16,944		346
Other income, net	29,242		—		20,354		—
Income before income tax provision	20,250		22,345		43,434		40,817
Income tax provision	1,304		—		2,307		—
Net income	$	18,946	$	22,345	$	41,127	$	40,817

Earnings per share attributable to common Class A and Class B stockholders:
Basic	$	0.04	$	0.05	$	0.10	$	0.10
Diluted	$	0.04	$	0.05	$	0.10	$	0.10
Weighted-average common shares used in computing earnings per share:
Basic	428,618		421,690		427,735		421,048
Diluted	431,576		426,833		431,024		426,772

See accompanying Notes to Condensed Consolidated Financial Statements.

CHEWY, INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(in thousands)

(Unaudited)


	13 Weeks Ended July 30, 2023
	Class A and Class B Common Stock			Additional Paid-in Capital		Accumulated Deficit		Total Stockholders’ Equity
	Shares	Amount
Balance as of April 30, 2023	427,108	$	4,271	$	2,217,456	$	(1,939,362)	$	282,365

Share-based compensation expense	—	—		65,996		—		65,996
Vesting of share-based compensation awards	2,517	25		(25)		—		—
Distribution to parent	93	1		(1)		—		—
Tax withholdings for share-based compensation awards	—	—		(5)		—		(5)
Tax sharing agreement with related parties	—	—		(2,673)		—		(2,673)
Net income	—	—		—		18,946		18,946

Balance as of July 30, 2023	429,718	$	4,297	$	2,280,748	$	(1,920,416)	$	364,629


	13 Weeks Ended July 31, 2022
	Class A and Class B Common Stock			Additional Paid-in Capital		Accumulated Deficit		Total Stockholders’ Equity
	Shares	Amount
Balance as of May 1, 2022	420,606	$	4,206	$	2,046,707	$	(1,992,303)	$	58,610

Share-based compensation expense	—	—		38,377		—		38,377
Vesting of share-based compensation awards	1,948	19		(19)		—		—
Distribution to parent	93	1		(1)		—		—
Tax withholdings for share-based compensation awards	—	—		(4)		—		(4)
Tax sharing agreement with related parties	—	—		(1,937)		—		(1,937)
Net income	—	—		—		22,345		22,345
Balance as of July 31, 2022	422,647	$	4,226	$	2,083,123	$	(1,969,958)	$	117,391

See accompanying Notes to Condensed Consolidated Financial Statements.

CHEWY, INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(in thousands)

(Unaudited)


	26 Weeks Ended July 30, 2023
	Class A and Class B Common Stock			Additional Paid-in Capital		Accumulated Deficit		Total Stockholders’ Equity
	Shares	Amount
Balance as of January 29, 2023	425,349	$	4,253	$	2,171,247	$	(1,961,543)	$	213,957

Share-based compensation expense	—	—		114,549		—		114,549
Vesting of share-based compensation awards	4,276	43		(43)		—		—
Distribution to parent	93	1		(1)		—		—
Tax withholdings for share-based compensation awards	—	—		(5)		—		(5)
Tax sharing agreement with related parties	—	—		(4,999)		—		(4,999)
Net income	—	—		—		41,127		41,127

Balance as of July 30, 2023	429,718	$	4,297	$	2,280,748	$	(1,920,416)	$	364,629


	26 Weeks Ended July 31, 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	—	—		64,171		—		64,171
Vesting of share-based compensation awards	2,501	25		(25)		—		—
Distribution to parent	93	1		(1)		—		—
Tax withholdings for share-based compensation awards	(53)	(1)		(2,471)		—		(2,472)
Tax sharing agreement with related parties	—	—		139		—		139

Net income	—	—		—		40,817		40,817
Balance as of July 31, 2022	422,647	$	4,226	$	2,083,123	$	(1,969,958)	$	117,391

See accompanying Notes to Condensed Consolidated Financial Statements.

CHEWY, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

(Unaudited)


	26 Weeks Ended
	July 30, 2023		July 31, 2022
Cash flows from operating activities
Net income	$	41,127	$	40,817
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	56,672		37,678
Share-based compensation expense	114,549		64,171
Non-cash lease expense	22,053		19,203
Change in fair value of equity warrants and investments	(20,244)		—
Other	793		604
Net change in operating assets and liabilities:
Accounts receivable	(36,332)		(20,295)
Inventories	(62,684)		(147,491)
Prepaid expenses and other current assets	(16,860)		(13,861)
Other non-current assets	(1,975)		2,067
Trade accounts payable	88,434		166,074
Accrued expenses and other current liabilities	131,796		(7,343)
Operating lease liabilities	(11,045)		(9,592)
Other long-term liabilities	864		(427)
Net cash provided by operating activities	307,148		131,605
Cash flows from investing activities
Capital expenditures	(79,213)		(124,212)

Cash paid for acquisition of business, net of cash acquired	(367)		—
Purchases of marketable securities	(442,769)		—
Proceeds from maturities of marketable securities	350,000		—
Other	—		(1,400)
Net cash used in investing activities	(172,349)		(125,612)
Cash flows from financing activities


(Payments for) proceeds from tax sharing agreement with related parties	(7,606)		533
Payment of debt modification costs	(175)		—
Principal repayments of finance lease obligations	(351)		(333)

Payments for tax withholdings related to vesting of share-based compensation awards	(5)		(2,472)
Net cash used in financing activities	(8,137)		(2,272)

Net increase in cash and cash equivalents	126,662

SEC Form 10-Q filed by Chewy Inc.