Chewy (CHWY) 30 Aug 232024 Q2 Earnings call transcript

Good afternoon. Thank you for attending today's Chewy Second Quarter FY '23 Earnings Call. My name is Hannah, and I will be your moderator for today's call. [Operator Instructions] I would now like to pass the conference over to our host, Jen Hsu, Head of Investor Relations.

You may go ahead.

Thank you for joining us on the today to discuss our second quarter 2023 results.

CEO, and Chewy's Bowman. CFO, are me Sumit Interim Singh; Stacy Joining

Reconciliations forward-looking the of not our and earnings results. shareholders, today, for release our filed results statements by statements subject non-GAAP to the Such are today, today's Chewy's based industry measures to during SEC to note disclaim results uncertainties discuss to available which on business earnings These in our provided shareholders, forward-looking statements a to and are this we are We call investments, has that these strategies intended considered we and report website Form most non-GAAP future to this from Relations were non-GAAP of Also the in the posted are Our as substitute forward-looking successfully materially GAAP forward-looking obligation to measures. our with letter risks. those will us except any Litigation measures respond differ concerning financial our directly as Securities today. the and and in will on which on of reports, Investor financial certain Act statements, could items are which to be statements. release update Factors the comparable GAAP SEC XX-K to to the performance. letter any be statements, contemplated under and were our website, our Relations should considered on required cause investor.chewy.com. On indication future Reported date. by forward-looking of an as filed of not ability making call, Reform titled described with been information law. Also statements prospects, Private risks, and Risk and Investor actual call section annual results, section including quarterly other other trends XXXX factors certain earlier financial subsequent

are the Additionally, of results quarter against XXXX. accordingly of to today second all discussed noted, otherwise refer the second quarter unless comparisons XXXX and

Finally, on now this be call call being webcast to this Investor website Sumit. over shortly. I'd investor turn A call also in its to available the relations entirety on replay Relations website. like is our of will our

Thanks, for Jen, and thank us you the today. joining on all call

I Chief Before we introduce Officer. begin, Bowman, to want Stacy our Accounting

XX, a As leader previously is is serving than more July our years announced, for and Stacy. who while our permanent Chewy X systems She on continue Mario deeply interim a processes. as and CFO, familiar organization, to respected search with has retired Marte, is we for Welcome, with CFO Stacy CFO. been and finance

Now let's begin.

in our and revenue the This recurring Chewy's to X% quarter. adjusted reflecting continue trends billion guidance our strong active the high exceeding was where Our sequential sales from at across ecosystem. Consistent a remains visibility our Autoship quarter $X.XX positive basis as predictability our increasing active second strength by $XXX In while delivering XX% growth QX QX, faster driven up net momentum margin. reached per participation results, streams broadly expectations, on sales underpinned or EBITDA business NSPAC, their while customer engendering with flat sales XX% customer, by customers profitability. net and increase. Net a XX% the enabling grow net key of we we sales, the were share carried of second model, total a reported mid-teens in of well a evident a Autoship, sales areas, in loyalty. to differentiator our customers of on pace many robust underscoring including as line growth focus ever-increasing saw Chewy than was top

discovery also are driving of our Chewy platform. we Health Additionally, successfully

Elsewhere XX% teams across nearly represents CRM customer now pharmacy are enhancing into capability, improving customer continuously penetration strong and base. cross-category Chewy, engagement. targeting our our supporting active example, For of our overall

Gross broadly robust P&L. another of quarter XX.X% margin delivered was down in We line Moving the profitability. with expectations.

first As quarter activity quarter. the anticipated, higher in was promotional than in the second

the remains remains our in impact margin on and the whole rational. Adjusted offset X% benefiting by quarter, cost launch. for margin for our largely gross the came track a expansion, including Canada environment strong EBITDA growth exciting fulfillment agencies, promotional However, from our of QX trends the at which investments on

to during self-fund these As initiatives. we continue portion our of cash free to earnings QX call, we growth a our indicated utilize growing meaningful flow

Additionally, them facilities fifth of to automated both of XXXX. Combined, Two source a efficiency ramping operating driver years. expect provide opening a site as of we future X improvement as our automation continued be still to automated in additional is are continue in our the well upside. efforts margin to our date and early

Before sensing out are of share is months. their at more spending months, the trusted of the these by particular, in summer and in consumer wallet past over to driven higher how a on with discernible pet retailer the Coming at initiatives, a same mindset time to more passed the industry let fluid environment, impact which macro of been of their share perspective high in we our to choice. consumer XX customers a willingness active levels have behavior including time, towards business consolidate inflation, NSPAC This behavior and being me and industry, Chewy. on the shift may trends

in sales our our pet base, mix XX% given of customer with businesses, insulated from confirms the At pressures high-quality consumables QX. that are, we dialogue these our industry. these drove trends and care are the net in our nearly suppliers many of throughout Chewy, ways, health Our which permeating

devices, best-in-class and competitive and Autoship our of experience, health service, powerful unparalleled care convenience promise service. customer overall subscription Our

of recognize record demonstrate sustainable track growing this existing customers, our significant our wallet as key robust potential differentiators continue to point, ordering turn, which, to continues see NSPAC customers of to attributes continue behavior in these by we strong loyal and with Our Further share support expansion. performance. evidenced to strong our

year grown XX% in this $XXX approximately As around up to IPO we preceding you have may recall, that NSPAC time. our the over quarter, $XXX from

While driven the our our NSPAC from Autoship spends to our of the over potential have as This ecosystem, such with modest and increasing industry majority large price benefit and that uptake as saw well we pet outperform of expansion. customer increases, more base program the us time, growing a sustainability Health efforts record ongoing underscores track and the of our growth. as deliver profitable strong Chewy

facing current make forecast some as to of These this during consideration, fact household net a mindset into to the expecting are continue we're Taking trends, be while see muted. industry. are now period year. more challenging of from continues of I outcomes. potential fully for to insulated consumer the half we But a wider Pet not we returning Now, range currently formation pet consumer pressures we light remains recent than second And pressured. the behavior. this in relatively above, environment exempt the mentioned adds the taken growth together others, potential

the these customer and specific industry-wide Chewy. forecast factors are are net believe to And make trends not to adds, consumer patterns drive we While trends I it just as well we dynamics described active improved normalize. macro behavior to challenging positioned

to like strategic our update I Now provide of initiatives. would on some an

XXXX. the track category, bar the service enjoy. We business. to our come. and same on selection, ramp remain and continue to and In customers represents the over We prospective and the we upcoming remain sponsored market vectors, at a the Our ads, track the our our high into map we'll of delivery compelling road remains pet we this executing by you look on second work on our teams as growth of quarters Canadian the convenient experience large opportunity and the to are program update one ensuring margin-accretive to half QX that against hard progress and year. for encouraged fast-growing expansion into a progress U.S. year of forward are Canada scale finalizing ahead sharing throughout

will Yet our pet are I'm as potential later and both excited basis by net turn Investor We to strong Day engagement strength Chewy sharing of X,XXX to and billion, to that a unveiling once of ecosystem a just our our margin margin deep significant results forward well come in we with started since the as announce broader Lastly, dive growth call nearly we basis runway a tripled to demonstrated our to XXXX expanded outperform again durability over nearly customer recalibrating consumer host having I'm Chewy to our in that sales growth the of the strong our and with has north year. closing, considerable by high that, have secular long $XX margin proud operate highly industry our reflect that XXX platform. With getting look and I particularly IPO, clear ahead expectations platform. In gross integrated adjusted pet points We we map expansion. drive QX. and achieved still resiliency QX believe in on way and exciting see points. EBITDA financial and category showcased to road the Stacy. this the we upside we the of levels long-term first our

points. aggregate I or on top to billion. billion, $X.X sales customer flat by continued many of to basis collectively representing to line the Thank, sales. Autoship XX% Active in forward contribute now quarter, Autoship XX.X% $XXX total to finished XX.X QX you net in second look XXX up Sumit. were sequential at growth engaging of continue customers million categories net grew this approximately with to a almost Nondiscretionary broadly quarter remain sales care and $X.XX health basis customers second XX.X% sales. consumables net and and the quarter, growth million. new outpace represent XX.X% role. In meaningfully of

$XXX. highs. However, sales measure yet grew customer our reached to and customer again NSPAC, new engagement, both Notably, record Autoship of NSPAC primary XX.X%

sponsored ads the sales The This increase expense of cost temporary initiatives, marketing partially corporate such expected X.X% net associated was sales. our initiatives. QX deleveraging continued As XX net where reached by of Continuing and The the million consistent related expectation efficiencies by certain advertising into supported net or we totaled expectations our to filings to to net growth compensation points realizing as margin XXXX. SEC applicable, expense XX.X% of adjustments well my of discussion refers discussion on to P&L, XX-basis taxes of disclosed financials, $XXX.X XX.X% point excluding outlook. Gross in reflects note for move our share-based quarter. and OpEx, same please where to compensation applies financial Canada, relevant. share-based our our as quarter to with the SG&A X% was consistent sales, driven our automation the largely of ahead X% that guidance fulfillment metrics, other related was a broadly compared with down million as or $XXX.X and SG&A related growth. mitigated of payroll expansion QX, in to expansion increases sales, of and which second and basis by taxes, excluding my deleveraging

net Second quarter $XX.X income an of million, was adjusted increase $X.X million.

Second quarter of $X.X EBITDA margin adjusted up implying reached million, million, $XX.X adjusted an EBITDA X.X%.

net automated cash provided million, ongoing and activities million comprised expenditures. flow fulfillment $XXX.X technology quarter in cash reflecting was free Second million investments, and Capital $XXX.X by $XX.X projects. expenditures primarily were in capital center operating of

As from a in reminder, we regularly see quarter-to-quarter. intensity fluctuations CapEx

our first and remain X.X% in availability nearly time the $XXX of Following and recap. we second below concludes at in and and $XXX.X intensity net on cash finished QX cash Overall, CapEx in debt-free. of on QX, second capital in CapEx stood this cash the between our expect we range million increased the year, of balance quarter equivalents billion. remain marketable end At the securities, X% quarter. hand, to quarter, the XXXX to my ABL, sales. higher average at securities We $X.X That with spending marketable expenditures than liquidity million last

third and our guidance. XXXX year So cover now quarter let full me

our customer on always, view of economic incorporates model a As evolving engagement reflects along the guidance business the latest outlook. the and strength with that balanced our views

billion to representing sales $X.XX and of $X.XX X%. billion, net quarter year-over-year growth to third expect approximately We between X% be

billion XXXX. compared We are year of XX% of reiterating $XX.XX sales to to XX% net our XXXX billion, year approximately outlook to full full growth $XX.XX representing

also full year our of X%. outlook approximately EBITDA are adjusted We XXXX margin reiterating

that note, free the flow X.Xx flow expect year year be although our approximately for free you cash XXXX XXXX. to we generated in As models, update your full full we cash

sustainable, call and strong our deliver our we call We reflect the the that as macro Chewy reiterate quarter in I'll resilience exceptionally model the execution ahead of open of Before equipped believe to an I'd over to the our earnings well environment. questions. evolving is that driving operating road strong the with grounded questions, to navigate that, is our growth. And performance operator like to philosophy profitable operating in for turn second

of line Anmuth [Operator from is with Doug Our first JPMorgan. question the Instructions]

not Sumit, math half. guidance big hardgoods-driven in X% for how if XX%, much outcomes business. of is though feels it's the piece you could talk here, the wider Curious range right, back pretty even more your is acquisition factors customers is of to And my about around the wide. of active range if which XQ a

at Just hoping what's understand you both can of those happening help us extremes.

Okay.

Just talking range somehow to you're about, or clarify range guidance customer revenue guidance the guidance range?

implied Revenue, revenue range yes, for the XQ. guidance

about just we're -- certainly that's to estimating communicated while of not half in year. seeing provided, We we good engagement how address we're the the platform. we sort the of of net back from growth head customers our ordering possible, a of wide be the modeling and to of on thinking. given we're a but range not wider. strength that, feel on so That's on, those couple actually Okay. customers the the back want outcomes expect that's from types reiterate pretty to clearly that that on adds of bit I that that guidance we which We're scenarios, different the And

wide me on let color that of the active the the why we've or of net having and outcome a of couple ads or go range in conversation Now been back quarters. we're kind on last give you projecting wider adds kind

So I happening short the provide details what's in here. happy version, will to essentially, a dive is,

we've with diminish half previously half adds seen And reached cohorts consistent a COVID were So of during second majority for the customer. cohorts. At now what expect out June. of did impact communicated, in a what this mark the more we the the it time, where discernible to to that large much July than the May headwind for started year, we've coming more of same these that net continue in is to and we've really QX, slightly X-year it in us first

play just enough through. to time so haven't had And we for this

simply or projecting pressures that now customers have the have by Chewy just more experience under, have is magic. of for proving we their we're we're believe distracted and had whose forecast, behavior And recently the to to we and we are pressure, -- trust, kind seeing newer what because -- the I what high to current work earn they the given it right acquired harder to harder So that work is the of we the they haven't will forward. is, to difficult they're inflation, cohorts yet macro to more given cycles

seeking that we that So loyal have even that term we in value execute cohorts customers the sharply to are them the of to such much deliver we are more with the to know winning to customers value we win as with that near Chewy. already are as

"Hey, to driving should July the causing be with loyal projected tale half, winning expansion. And stay cities. a is so of seeing confident really way, of slightly the share it's a this back we're what's through kind far, by holding pretty us, in of that and which, say, X loyal consolidating -- into aperture that half we guidance, they're widen is So we're our range of about cohorts But a Yes. on the of wallet sensitivities." The us year. the August their back recent play position NSPAC delivering the the the in maybe going is here to or share and trend

and you Can just help up like-for-like out could of NSPAC. if between what's on and follow And pricing? XQ I parse happening kind just XQ inflation us

sure. Yes,

to ]. of increases So also 'XX, pricing on benefited back right, pricing, 'XX. wants [ ways, some through the what Stacy if provide in the that first you're But half essentially, from half, impact came we them to to cost is in the different in XH of is going and going see color X she hear can

price can back combination, the our provided years inflation So what towards has going as revenue into our pack is past not the a or NSPAC, the -- that NSPAC, decomposed is composition modest half, a growth and we've over deconstruct is our as driven overweighted state price. volume we benefit. weighted On confidently net and

NSPAC seeing kind health in that development et cetera. is of So development cetera, X/X of plus Autoship benefit organically development, the the XX% of greater we're et growth than plus north to cohort

a that. given accretive. generally the transactional on all compressions obviously, And more place ASP holiday expect kind it's time little season of So and that QX, take the we like

QX. transaction So bit in more it's a

Our is next question Goldman from Sheridan Sachs. Eric with

elements want I refresh some could year. Maybe business Maybe to this the potential, And into or next be key learnings the on trying the later of year business coverage us end with line ad working the of come more to debating up ad the and about fiscal you're rollout. both ahead partners back [ and had to that year? from ads on you to advertiser you've within how of of ] launch this should the thinking we response just wider

Sure.

also. that So make the that opening we is platform supply that that our the team -- customers far quality The the make tale overrun of well doesn't this is essentially have organic behind we have the a proves thoughtful get product is sure launching. guardrail supply. in -- kind we're is up supply that point up come to a by to is cities which of suppliers, that sort the obviously sure making experience limited right, enjoy, now we're as just to sure The the exceeding of want conviction of the opened very to on opening that of right as product X the demand the on

the in on plan for this and to So track XH, that. we're ramp has always up been

X% X.X% aperture as of sort thinking thinking to In of hold program forecast and coming the we kind squarely are of We we range perspective this into widen our kind kind original that takes of we'll opportunity that of se. had fact, program the X%, in as were per of now scales. the the X% as

So to are our participating the particularly therefore, the sure ROIs that appropriate type of teams bar response quality that as customer deal are and nature our seeing the our experience focused, and or high, appropriately make suppliers least is rate execution at subscription is right believe The basis high. ROIs of platforms business, there. strength rather with per are transaction of vendors forums seeing manner. are build go-to-market most you we allow run compelling onetime of of and brand it in market to the will kind is and an more to that se, of which that into an been even a suppliers ad platform our kind always we aware their the have convert LTV the the in Chewy than

next question Our Citi. is the of from Steven line with Zaccone

versus you the Stacy, hoping a Are the guess summer smaller more seeing seeing in congrats new trend these role. down? when some you Are new should implications? at a trade I that about bit you And little changing harder the what just consumer it's mean commentary more makes has more was gross a out the with need margin could on baskets the assume customers? period Sumit, new you elaborate we the say promotional X-month these on end does customers, concerned you of start, that summer. you like the I work from at months. to

sure, Yes. sure. Sure,

great So question. it's a

yet. are really, concerning So trends? seeing we not Not

more a observing by So we're the what do I discernible. consumer to bit mean saying, become

of gained an dry not For of out more and raise bells to more value-seeking yet little really insulated. is out they've treats traction fairly we're we right? back It's July, actually back of generally bit. a pulled not food. wet we're They that any come in believe the We're kind and because material July, time out coming noticed also first indication of coming of seeing out particularly QX, slightly and in towards pull in alarm XXXX shift food behavior. of a we And kind QX

So give color kind what's happening. let on me you of

of I the really sort gain and think context to the like here. gains aperture we've color, broadened in

to dealing 'XX XXXX, So was the pandemic. all from about with the storyline

showing prices. Supply XXXX impact. have been way period unprecedented these And stabilized, but costs up and coming to high year the became are now chain of the recovery. last of right, industry-wide pressures inflationary and consumer through also passed rose So of dramatically out year, on this by

pet changed Now That and half continue 'XX. recall right? that XXXX was household already muted, the formation hasn't through through first

I majority value this the consumers, winning the that combination towards to from it here, consumer these being somewhat both value convenience. We times business in addition the makes kind to current sense. and that, insulated calling therefore, at strength more full makes out we're we we of given preferences conscious am that point. And of impact And both like we this is that or sense. the In that. do consumers times convenience. them value the that value these, for offering I think behavior But convenience And and believe offer believe in indicates the model. that mean

acquired behavior recently see come for right, that customers Now Their weeks, et might cetera. order hard right? Usually, might we predict, slightly we're purchase frequency we off. to is back X customers, weeks, their be -- be X when in

we that that of we the year And extra back deployed we half we've towards are kind year. developed to be CRM towards deployed to So the going the right, this into year, more that half last of latter believe sharply those have much the be sharp. of capabilities

do, price lead to led market find to to But terms as Internally, right? we se, on not tactics promo customer. to We're value of ways stand in well. kind We're to the self-fund other we we're it we not never right, leaders ways could followers. going are So to per respond. the that be pass way. price have of doesn't the be promos, creative to going ready that as in And

the next as series retention improved continue, net hopefully, acquire I of our a provides have of that of account cohort. well both also can We into of but strategy HX road taking are to as new that recently customers kind bit in acquired color. where formulate year, as will that map the a well we as

as peer then. more of brief seen year? industry I get about Do the the what just of overall into I promotional? appreciate your said helpful. that color. very a [ to No, X as we follow-up back more you as promotional activity ] So half I curious, gets that have guess the I'm months need the was think all you've

do that. expect We

if promotionality to from call saw we greater So activity about transparent QX itself. has so been both our promotional lower in higher pandemic you than we've of relative the years, but expectation. our QX, activity QX the recall, XXXX And our expectation been and promotional far

As spend an second we be out bake we've because continued promo that into move back from half incremental first expectation half, year. is our to to of higher in the promotions in half are going

I we're to the to both protected. said, to sure but and respond that stand looking customer market, like So demand we not are ready lead make experience

with question is Andreeva from Needham. Our Anna line the next of

Great.

on Just a follow-up previous question. the

And any third given on we for the points as on to just think from follow-up, your for was investments as you this the more just about amount how gross had secondly, in should industry quarter, evenly the second year. What higher promos back we quarter? color XX the basis we should a about less or split of half. XX think Canada the comments approach the And in Just the about margin half? potentially then talked back balance the

take Stacy. gross I'll Anna, the Sure. first margin. this on question is

typical So note around because still for feel believe we we give XX% balance typically But left we is year. Longer gross some formal the for is fluctuations it the around the but level meaningful room from as don't excited you quarter-to-quarter, see margin do know, margin good margin. there this about to of we're gross and expansion. quarter expect to we gross term, remain guidance

market Health. we and new such for as accretive. mentioned So as in margin existing ad to initiatives are sponsored in and high-margin are continue Sumit Chewy also investing like we example, earlier, And share that stealing obtain verticals grow

on going EBITDA the essentially Anna, that consumes And the second guidance of make. to are question, investment we and level the implies

So verticals of going has as our we we as started baked fulfillment ads, continue result some in short-term -- promo baked the intent call, recall, of mentioned centers back through we're they on we which or continued and year, we half then of our also such are sponsored ramp promotional on if environment into launched a investments the to the kind up its ramp pace, ramping Canada in is and will year, et see cetera, into and QX in expect those talking in. started guidance. we the Also, which you QX, that. And -- that new about to that up dilution middle the finally, should is the other of

kind that guidance is half. way built of for formulates basis profit on the -- a So back the that for

next Our Dylan is Blair. Carden with William from question

wider levers the to I'm might just guidance customer reconcile the trying outcomes kind what idea keeping for positive of I'm anticipated So, a of still for year. curious of range and or albeit optionality now just net envisioning that? adds, the you be in doing

our that the basically exceeding Is own we on Dylan? plan question? How expectations,

]. customer quarter, sort sort just keeping then caution adopted in that net seem there's just guidance sort as the to on the [ third like and half incremental Well, the adds said back ideas it X try you understand of of of is where and those seems reconcile to it

it. Got

strength drawn seeing Okay. from we're that Dylan, -- customers. is balance strength essentially the open we're that the The seeing in

steady. holding good. pretty market So up holding Autoship are rates penetration sizes are up

Asset are in Autoship up holding steady.

And so our frequency ordering existing higher was customers. for

perhaps do it's as to wallet so this these, like even of they part that share of little their instead a consolidate day-to-day. during normal of their And continuing times of cross-shop bit notion customers

of year. back believe will the we continue half through that so trend And the

traction. And medication. that data as year stating today through food three, bit point verticals of build well. penetration the in to a our provided prescription, percentage driving particularly through the continues the back are benefit the bit That mobile into a the we went back se. the we here we app our half such going half see, more a are is in The engaged little that also customers Secondly, app as and health, continues of that to per that and our gain of Chewy AOE orders

backup the us essentially the now. we of are. that It in that us confidence right hold gives all deliver can the So way that we

it's more cohorts a the that value On right? deal have been conscious. more side the recent, these recent customer seeking little and If --

cetera, And understand be? behaviors being what one kind compression cetera. -- and this them so expect basket like of up, ramps and we're are as this sizes we're -- of we're want kind cohort demonstrated Is really ASP just we carefully the cohort watching repeat et to order to there rate or et

both primarily, going deploy of value So tactics as are well a serving convenience. of that to we to make kind as ourselves protecting we're series sure and

So overall, we here. from feel out good playing

of kind just kind of where one those of and of automation. Any from way quantify facilities. that in maybe kind about or seeing already you are And impact you're scale sneak utilization automation it. the the Got to

I that historically. given think you've

Yes.

that X, our So for if we one launched, track points in you of ramped in we open X have and of other share the remaining expect to retrofit we're future roughly the basis room ramping. are we recall, next excited leverage every for year ramp, you that the future And with starting we've our road are year. half us. XX actually Of that should X will launched are start of today fifth map back centers, this to that actively X of to XX the ideas the leverage left Investor to Day have we profession announced and at XX to that the fulfillment provide. will provide on center We're

on track side. on transformation always we're supply the So

Mahaney is Evercore. question next Mark Our with from

on ads. first on Canada ask and wanted the launch I to sponsored

up a in it's during launch, of the net give a -- the us of it And quarter? in quarter September we're it could the from launch know timing the only -- Like nothing. in successful, -- is it's QX. if know sense On seeing if show I quarter? would I and that that and starting should already adds start so we Canada you you successful, Or late talking

So doing I guess be on Or organically? but that? networks retail that are then media to trying working growing it small start timing. And with a are you ads, sponsored understand this third-party the internally contribution all would to just you

sponsored From this Mark. of Sure. doing we're internally, most

in Canada, and are So expecting that's of starts On version answer. that the launch ramping really short it we QX. imminently

feeling for impact materiality our start but the likely this in start would forecast we in impact QX, built the year. will we haven't So in -- any

Brian from Our Wells Fargo. with is next question Fitzgerald

follow-ups. on do NSPAC bit that and hitting can And The is spend? where eventually SKUs on that And on capture different a Can penetration much get what's maturity? add A household with at continue you think pharma of products that category to do $XXX. services? little how different a And follow-up think to couple you accelerating? XX%, you of opine going you crop the you and can as then

company, Chewy the we where is on Chewy Rx, category should in of pharmacy the top our cross believe for customer. Brian, customer one be inside priorities also a active one every Sure.

is that can closed also So years spend but ago, gap NSPAC for there's customers, year-over-year year. for the we're spend household health or of and that. NSPAC it the food us. majority has a expansion to likely on year, X a their lot about last for positive -- believe our segment has We yes, actually basis, which be Supplements an are And of us headroom credibly accelerating captured. loyal and are we and a excited for us, here contributed capturing we accelerated we today. was opportunity all pretty in

to future company base, it offline prescription both That macro be diet we goods in the the essentially to our merge goods. fact that most if food, the stronger or the that and actively share. $XX So a actually investments kind I we're because and past, And from through hard consumer's is consumer of of consumables spent of recovers today health, -- what's allocated pandemic is so until these happened our supplements, demonstrate. health $XXX online. we we the are that opinion. Long consumables remain the up we've will is given consolidating or the continues towards has the recall made emerge that for in as and will medication term, being In mindset shifted move the team and constitute $XX spend that believe in there, hard quality health, now execution continues $XX it and toppers, used and of to level or the classes out pet. truly you to where OTC it's whether on gaining believe that on

a about future. plays just -- it we're overall, we have short-term macro much bullish endure the to So connect We all as we're that through.

with Our Morgan is Stanley. next from Lauren question Schenk

versus want XX% on to [ of and little customers What pharmacy Lauren. gets much kind how of for Feather the discover about. adopt from to to more a expansion dig it Nathan vertical I the a encouraging from care ]? more just today goal Chewy It's on getting bit that Health side, the XXX%? you cost penetration SKU And of

Yes.

a customer Primary essentially primary platform So our discoverability question. it's primarily of it's winning challenge great -- and is trust. this --

data -- If don't don't have or the this visit recall, you point, customers at as mentioned in frequency. medication may if recurring pets the recurring their you United of today States X/X consume a frequency the or notice I

so current to particular an not opportunity this have And TAM in expand only the we see we that space.

to driving opportunity the been incremental of And that truly we -- the on that have how our platform. essentially also We market power has driving by go by of Autoship compliance. with customers

is even at than our customer to any by to discovery customers. it's and kind Autoship it's whether that addressed is being we're whether NPS sure friction actively are team. pharmacy eligibility platform par to or base for of of businesses, pretty a the sort serve or continues sign high, rapidly our checkout, on this remain whether innovating experience, customer proud consumables make Overall, and it's So or around large our we -- up of higher

this awareness about SKUs. less well It's is as sure being more there much just as making about discoverability. So is that

Our next Trevor Young Barclays. question is from from

more tougher a to challenged? to consistent customer that growth looks then Was cadence hard like kind likely And on compares does category make on And with expect of that Or expectations? here? Lemonade. you initiative quarter. bit and a in more returned that discerning with it stays growth and from goods improve Trupanion First, insurance that the any it do the your basis, update

now that's think available I nationwide.

Can Just maps shed that on relative expectations. light to how on your any uptake any you own there comments initial to the P&L?

Trevor, this is Stacy.

the question goods hard I'll So first. take

So historically, hard small between quarter. in our sales first the a do pullback goods have second and always seasonality we some with

by also to good the shown contributed this for behavior consumer growth softness with that that quarter. some about recently combined value-seeking Sumit spoke hard So in the

for Yes. expectations really of not changed. year the Our rest the have

goods, hard On also it's comps. easier

was low decline. QX single-digit, If you a double-digit noticed, almost a negative, last high

And our On providers you're here Lemonade. we comping insurance, so from much last year. on having Trupanion are platform. X softer super best-in-class excited about and

on has customers. to points direct expect, the policy has of various a it as drives to range would assortment, wider what open -- what you across it's choices up basis. opened proportionately done sign-up because translated correlation is expected, that price up and our and of revenue As up different it gone And rate coverages pretty of range a pretty has the you plans incremental is, to

that's and a seeing while data the itself a awareness. And our head metrics positive really This vertical we're So point. of positive in requires ton education direction.

quote Our rate quote rate conversion improving. all conversion rates or to and are to to quote call

also and This one on via providing assisted our as the because conversion. actually high therefore, customers a care insurance buy -- source the it educating powerful our these pretty hypothesis we channels customer online, you basis, driving there. buy becoming don't of Our you kind best you would expect, have is the channels, assisted and and trust was really out with of start information driving of a always insurance to team about

bit note longer. this given overall, So cycle longer that is is must consideration excited for of customers about super I on you we're that of kind what's arc the a vertical to come.

to the over we're this going term. appropriately be and -- So long play game patient we're not

is next Seth Basham with Our question from Wedbush.

to I recent you could quarters? did And trends provide year-over-year also Sumit, then you like some either on CAC on color was if in some gross relative adds XXXX wondering provide color sequentially. or

is dissatisfied We're adds. But like our softer balance, by pre-pandemic. than incredibly. we're that absolutely whether entirely is course, gross the customer mentioned pace are, think team goods the reactivations pace higher not much of adds. Net acquisition. in on pre-pandemic, gross a hard the Doug is. adds. but is contribution causing weighing It Chewy new categories than believe We executing I the muted slightly than run of of gross stronger to to on of continued ads pullback the XXXX. are the totally not by gross Yes, on are So And dissatisfied

economically. you at from of adds not -- if two, the -- come continued then those what up to were CAC stronger I changed the through color XXXX. And and because we've the last shared LTV as much is was combine the couple believe of is least overall on from that picking has everybody to increased gross I than But picking up you up. has which years, are So quite viewed has candidly, output LTV -- last CAC, the over lens of the declaring the customers also were when you intent pandemic CAC, out go then time,

my to of The intent. on customers So CAC our maintained. And an up macro remain continues and recovers, we will standpoint, now in ratios have of believe high where a we pool from opinion up marginal shallower the actually declaring go we're spending right view. spending very until is, ROI reason point there's nicely a be should a,

that targeting has and b, ago, is then years pretty be social social drives a So loss customer up higher And same that the channel of used loss a drives of clearly, rate. active the the that the up recall the a channels. few and to competition led bid yield CAC for actually to in

two. So is it's those up LTV combination a going of But appropriately.

most new follow-up, And to the That's Are appropriately up spending that adjust And the if you're a customers? to most too? of cohorts. you recent ratio just cohort LTV helpful. is as where LTV/CAC going find if customers going not, weakening is for recent for

do actually. always We

where find the to we're of tangential always fact point go where cumulative returning. actually this the profit over to to that negative what So the -- contribution trying point sits is sort becomes And we after. campaign

pick we've customers, to has been actually it's ROI And a discretionary spend experimented just and right now. trying effort to money So far, up diligent. high very team the with not

purchase. keep So really Otherwise, we spending maintain se. we're going customer quality and because drives get that per that would the never that of after spiral out not the rather of the you repeat churn money really to

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Our Bank. is Deutsche with from next Horowitz question Lee

household more order growth challenged of some return Great. meaningful pet consistent term? turn do have these you the the were costs specifically of rate, positive maybe cohort purchase repeat more that When you a cohort? in, talk user medium as acquired platform you that the Chewy modest it's caution higher to these existing users a to from that recently on seeing meaningfully base. are and Can in again, household you -- believe you these think maybe environment, more to terms flagging what raising penetration, these you basket the to that in meaningfully growth you the think and digging positive need back in pet about to maybe seeing than users Anything of And relative size structurally leads Autoship then churn in amongst these you're cohorts this bit degree users. to your to

sure. Sure,

an question important do is But the and factor it input that Well, it's first model. penetration we're the not turn need a meaningfully Household of, really it's we -- dependent into what on. not positive? On factor. a them there's certainly the to more is

is all se. for into will chewy.com, this back kind And some In year next per which we will continue fact, which half, -- -- teams our multiple of the are continue of -- expect. progressing features in across this we

which which as team and areas retention, reduce rates both will expect some progressing across examples as right? creation in detail we're conversion multiple XXXX specific friction an super which creation, and we CRM chewy.com, of about, mechanisms, expect example, our content So we're early account we've I for in to our is for next credibly launch. Our progressing or talk features we lower -- Chewy where sign-up payments, at barriers of, our excited might customer well will these be earnings of improve talked loyalty, you areas to account platform, call. But more discuss in about to

be It's macro this sitting waiting cured just has be what for notion we're right? to cannot of to idle the endured. not So recover,

avenues we acquire that absolutely is time, retain on our same So we're at which -- And and that. that. And are going the to everything question on was, second opening then improving experience focused our net is and to your endure up side, customers, their controllable frequency? is seeing penetration more is repeat essentially they slightly more recent what on value Their are seeking. what are fairly actually order seeing cohorts, that lowered frequency order the Autoship mentioning basket are because We're with was I repeat intact. earlier. you sizes in

So obviously, there. Their attach there's an rates is are taking ASP compression slightly that lower. place

size metric relative to order little per a bases. the Repeat is where more kind goes loyal impact, back So units to the of order our customer also. talk will nudge kind basket ultimately you see frequency, and that which they need of

now. baking well. we're So we're right as active that's forecast guidance into in, in, -- that adds into just guidance, and And -- we're customer the essentially that and the in watching we're the we've baking baked that into

with Forbes Steven from is question next Guggenheim. Our

just Stacy, quick Sumit, one on one X pharmacy. ownership and follow-ups, on

pharmacy years maybe over the evolved importantly, Autoship the trial time and customer adoption customers to Sumit, that net among those and has the how average on ownership, ownership your into journey right, at convert earlier customers in cycle. how cohorts number by on about first to then trending plan? like comment talk And pharmacy, of you more some customers within So usage also this the pharmacy for statistics, most rates, orders mature are of try churn can can you life on relative

Sure. done But attach powerful to they Autoship We've have that done that asking. value Autoship value passing satisfy be that continued barriers in the build by, sure curiosity to either intuition or I maximized. related customers. also payments making sure metrics you're the stating that in for the may and able that whether I'll be or to is be Autoship under a, they Autoship your lowered. We've assortment on is by whether some related to it may continues way that conversion that be relative not making customers that retention, accreting may more of to generally your full be to

then to our essentially and only discover through manner. more that get with a not and only segmentation to engines products, that kind in point speak but the cohort allow improvement will discoverability attaching of us customers attach from does we've and across invested complementary meaningful better ability meaningfully, of targeting development future. And attach Our are in view, in customers a little a sure make them

So leading they they flexibility, is, we all put program, looking trust Autoship the won't both flexible to at. Autoship they of behind trust come that of sales trust have you're and customers and essentially that a this reliability Autoship. that to the it the is -- beauty is incremental very the Autoship --

program view. but from experience high-value And only from of an point so of view, it's overall from pricing view point that not a also point a of

find is -- On the out we or care the in offer the have experience can retailers health that of best Rx of per side, there that believe can we kind se. best customers this e-commerce

in with So we our sure like is adoption time, make given always products how have our to even -- opportunity adoption have. we pharmacy a bar it these. our on metrics our high that rate at Autoship is on get higher other some better even pharmacy, in lower, same of than we're And merged classes, churn we that the is working

we're vertical. So this excited overall, about

is Our Rick question with James. the Raymond last of from Patel line

Chewy. what in new seeing not about spending by those talk that you're cohort you terms to Can of customers for are

curious in further trend growing. you're end in much we life as is how that just I'm if appreciate I seeing along about So [ But are ] their line. back spending customers cycle. think that changes

are. Yes, are. we absolutely We

our cohorts on of require older through slightly recent but nudging a -- the NSPAC more our like fact, cohort. are our little call, we've mentioned they curves In this as kind more development

maturity merged If other development, of the look right, it other of at per by way, plus followed classes cohort kind NSPAC you X health the right, Autoship mixing and factors se. is combination of which of the a kind main two, leads

kind talking intuition take without hopefully, a happy double of building if So click. to enough that's to not numbers, specific

spend are to next to strategy you marketing can How in talk couple Chewy of terms anything you the for learn about experience about Canada? And new as over also quarters Toronto? And in about how Great. customers they brand. ramp to the think of your go-to-market are going and going

sure. Yes,

very is excited this -- -- is we're this about So this.

to market so We customers, behaviors essentially, manner offering of -- are aspiration in American to brand hear our wants, to appeals efficient punch -- we keeping most that a is their the to to in Canadian I -- our that and the desires, are needs, minimalized their -- their That, up think way way, statement efficient going is, an most here the then to by is Canada try as a going that way their -- turn will not we the model a -- should will customers also them is the and as line best per se. We're the and show and that what cost manner. in the you brand, we're a are in the and be and from fulfillment self-fund the the we I of nicely. here we going States. where Those upfront going pretty going to the there senior was walking the stores the experience required, the investments be way all a be the this, our United the do to here. to a ago, We're mechanisms side end try believe delivering sort leadership There's over in them. market time, side a on the with bunch the through much of of experience weeks more few team at carry focused trusted delivery proven same that in have the about to and Canadian and we'll market. in excited. candid we to to learn and ton rest possible And

looking So growth, not overall, high-quality here. growth for we're dilutive

That time the closing have now remarks. any the Thank for you, Patel. to over will Sumit is questions. turn Mr. call all I for we

very much. you Thank

nice wish a to you. welcome again, want everybody Thank evening. Just and Stacy

Thanks, everyone.

Quarter concludes for participation. That 'XX Fiscal Chewy Year Second today's you Earnings Thank Call. your

disconnect now lines. may You your