Chewy (CHWY) 6 Dec 232024 Q3 Earnings call transcript

Hello, everyone. Thank you for attending today's Chewy Third Quarter 2023 Earnings Call. My name is Sierra, and I will be your moderator today. [Operator Instructions].

I would now like to pass the conference over to our host, Jen Hsu with Chewy. proceed. Please

joining XXXX call results. for our to on quarter third us you today the discuss Thank

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

Our the Investor were section of shareholders, earlier letter investor.chewy.com. have Relations earnings website, the today, to with SEC which posted been our release and filed to

to we statements XXXX risks, be our forward-looking Factors those cause to financial differ described in investments, forward-looking considered trends and factors by subject statements, strategies our under quarterly Securities results, statements XX-K concerning On and the Risk and Such report actual will in results of our Litigation call annual subsequent are could including to Form business on to uncertainties and successfully contemplated forward-looking statements Reform statements. respond ability which from today, our titled materially are prospects, making risks. Chewy's future and Private industry certain the section other other reports, Act

not as indication this call considered should disclaim by statements on on available information except any Reported an based update today's statements as performance. us date. to to of Also that law. any We forward-looking are results forward-looking be of note the obligation required future

and intended filed Reconciliations which we measures as our certain shareholders will non-GAAP website results. during SEC most Also call, earnings not this non-GAAP to non-GAAP of financial release the for letter were items comparable financial in a discuss our GAAP today. measures Relations on are Investor measures. GAAP these and directly the to with These substitute are provided

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

website replay will being its website. shortly. in our this Relations on entirety also call call of on our Relations webcast Investor available this Finally, is Investor be A

like to call the now to turn over Sumit. I'd

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

plan everyone December Investor inaugural on Day Before we will next be update strategic live we our our results leadership we including updates. Thursday, the our call you a our to have Relations Chewy you team XX. next to In to light Investor forward be in and deep can on business on provide financial introduce share streamline many Day tune to will which our We a dive week, road the refreshed recent excited jump to website. I'm broader comprehensive targets. week. next announced, Health seeing this map, We and hosting and our in will Investor of notable of as quarter's to senior encourage in, to on webcast, we found long-term look into focus week previously few today's person

most strategy for next leave will We innovation topics week. and

Now let's QX. review

market Chewy against quarter, sales through the to industry grew the X% continues to in in continuing return share that historical outperform up and We to billion this with present net single $X.XX low digits levels. reported gain inflation environment. an pet

strong executing Additionally, team the against another margin. is EBITDA factors as of by quarter X% reflected controllable adjusted admirably

marginally expectation the active earnings sequential call, Consistent shared with last a we customers our declined on on basis.

believe macro we to active as drive pet trends customer we environment remain term, near well the trends the formation beyond Looking household positioned recover. and improved

NSPAC, customer our engagement our customer quarter, Notably, strong. third with up active grow share to the net exceeded Throughout again sales customers we as XX%. per ability yet wallet nearly or remained demonstrated $XXX,

continues remains and with Autoship and The resiliency soundness customers loyalty the consumables health, to by subscription defensible structural their business Our our bolstered industry-leading mix service and of reinforce unabated of model. our nature changes our to ordering no Autoship spending of behavior. nondiscretionary

healthy of rate. Additionally, into customers continues Autoship a our conversion new at

representing health and continue XX% to and of and business, categories XX% of net Nondiscretionary third topline represented overall result, net were collectively outpace nearly growth sales. sales. a over quarter consumables quarter XX% As up in approximately anchor sales customer our Autoship the

continued for and We Chewy about trailing direction company pharmacy of billion based sharing now grow north represents XX is Investor the forward the on of at business more in $X overall and scale, to At the us this business Pharmacy next to with months premium a net strategic Day. you performance look America. financial our at to holistically #X pet sales. week's health

are As demand Canada September, delivery is to experience compelling healthy, of satisfaction the compelling and has end sign-up in customer customer anticipated, been Chewy is Chewy's we high. launched Initial strong. of Canada. proposition millions at bringing parents pet Autoship value rates our

of future. far While it pointing thus is early, bullish key towards progress indicators success market in with are we a our pleased with

of Turning managing to mix tightly logistics promotional in gross in new team. performance strong spend itself. gross our Strength in We record by reported reflects a benefits, and rate margin profitability. XX.X%, is which margins

adjusted for EBITDA investment. pronounced planned growth margin which in Finally, at quarter, period the during a came X% had we even in

Shifting and all Cyber gears Traffic performed year-over-year. some strong intent during this observed up customer our hard including important shopping We from in-quarter holiday categories, results, Black how on Friday I'd of and week. Monday sales exceeded were across to this rates expectation now commentary goods we like year. provide and purchasing on conversion

New than our XX% weekly QX higher was average. acquisition customer

While we Friday to pre-holiday have our seen and encouraging. Monday levels, Cyber performance return trends Black is

improve. when that to environment, industry spending consumer illustrate in consumer resonate prevail while opportunistic and loudly remains current our and will value behavior Chewy's demand inputs results continues Specifically, proposition the

Before share the couple call company-wide Stacy, developments. I some important to to of like context I a turn over regarding would

aligns of to as our head as actions our XXXX ever gain carefully and certain wins highest November, return. will most the This planning an of in our implemented strategic count In process, we and generate the efforts believe becoming business of areas considered organization. us part we disciplined ongoing which significant was company into and priorities, the customer on reduce our more focus agile part decision

in within organization, invest areas. the high-priority roles some consolidated continue we we While to other

into to As XXXX, continue to actions create investing for initiatives. we these growth room our expect head behind we us

for and members contributions transition. during their our remain committed team them supporting grateful to We are to incredibly this

us a He brings David Chief with joining Officer, be that he joins early new experience Financial CFO. excited currently us where Reeder as XXXX. GlobalFoundries, will him to in extensive from is starting across Chewy's Dave Lastly, Broadcom, to roles I'm announce Dave growth against financial with forward we compelling margin working others. across at to our Cisco GlobalFoundries, the multitude as many of opportunities and amongst and execute Lexmark, and continue I operational ecosystem. look

like interim also all would that as her to Stacy me has in support for to I thank and Chewy role done team the CFO. she

serve Dave's Stacy Chief to as Officer. Accounting will start Following our date, continue

over I With the turn that, Stacy. will to call

you Thank you, thank all for Sumit, us and today. joining

XXX came billion in growth grew Autoship sales net represent in now up billion. X.X% XX.X%. In at points $X.XX the Autoship sales total XX.X% by growth basis QX, net and $X.XX sales. almost third customer outpaced to sales total net quarter, customer of sales

XX.X with customers. We million ended active the third quarter

measure primary $XXX, grew NSPAC, year-over-year of a new Our to again, yet engagement, XX.X% record customer reaching high.

metrics please related relevant. my and refers well my As discussion SEC disclosed where filings in same to to other applies expense we that and down financials, move P&L, share-based taxes The as where outlook. our financial note of applicable, guidance excluding compensation the discussion as certain adjustments of

reached XX.X% margin in Gross QX.

for our the this to QX there margin ability meaningful continue expansion continued deliver room gross and of P&L, margin steady to time. Our believe margin over we accretion part is in gross highlights

by quarter of OpEx. XX.X% to was advertising our million was to million or points sales, of largely net basis This related X% marketing driven totaled QX deleveraging growth increase X.X% investments net SG&A sales, the or XXXX. of our with sales. $XXX.X of initiatives. of compared XX expectation $XXX.X and to Continuing third on to net expense consistent X%

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

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

Third expenditures. quarter flow of $XX.X operating million free by $XX.X strong, provided net capital million continues reflecting in to cash $XX.X in million and activities cash be

free ability quarter million to through environments. over was and sharply flow economic cash trailing execute generate our XX-month meaningful $XXX all cash third Our and flow demonstrates

automated of expenditures projects. be continue ongoing investments and technology to Capital fulfillment center comprised primarily

CapEx this investment As quarter, quarter X% of to consistent following in CapEx tapered past the above-average of the intensity net and range XXXX with to X.X% levels. in second spend expect planned, remain sales, CapEx we our

marketable remain and At between on with liquidity on We billion. ABL, stood end equivalents time and our $X.X cash at securities, the and this and nearly hand, debt-free. at of finished $XXX QX, availability million cash balance cash last our year, higher securities million marketable we QX $XXX.X than the in

That of our recap concludes quarter my third results.

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

our remain growth confident in well as of the we overall industry above as of year-end. updating guidance head the the While we deliver light topline pet category environment, to are resilience Chewy's we in ability near-term macro into average, as

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

full and be year $XX.X our year full XXXX narrowing sales $XX.XX XX% compared approximately are to growth revising outlook between representing of billion, billion We and XXXX. to net

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

in expect also free models, your free XXXX, of of for year XX%. our cash to generated EBITDA we update flow you conversion be we to adjusted X.Xx full implying cash free excess year flow in full As flow cash an rate the north that note XXXX

Chewy's the quarter current deliver in demonstrate once environment. results Our results again third to ability unique strong

We expanding encouraged trends. many remain back industry towards We forward you lie that way we seeing various of works share And taking while steady-state week. its expect and next ahead. by highly to continue the look profitability opportunities strategic pet to the

operator for With turn that, to will over I the the call questions.

Sheridan Sachs. today [Operator with Instructions] comes Our Eric question from first Goldman

QX how the promotional guidance and some revenue year terms or want should environment down effect on thinking of just of through come And much walk in versus basket just the QX? macro about I the competitive of a broader from the to side. be inflation is the and of lapping intensity the ago? for elements this back to you headwinds revenue tailwinds build we to or size Can of

Sumit. this Eric, is

I'll So it. speak to

Our expected to the growth all. is that of sales industry, first outpace guidance reflects

time So our happen last see we frame we're to commentary the when July-August continuing changes from spoke. post

more are the composition points. When shifting you here pricing a of of So revenue and out main unit year-over-year, into structural attach. and is look couple

of this comps continuing combined explains lower a that sort hard little there's year or view. no you're seeing. with year to relative discretionary point goods mix the pricing of So last from That, from year-over-year of benefit comp and

it spending non-Autoship components, So This our started most Autoship, through impact has July-August last and business time of we As components. this across impact the we consumable patterns engage a last the with the persisted. called seeing little softness a overall still guidance, discretionary steps right? to earned, them and bit quarter, tenure, some with is that the be cohorts the of relates related discretionary business, taking primarily of out to soft We're right? opportunistic. we're keeping early and the go that frame, bit is loyalty that doesn't in difficult the we are forecasting macro is that softness little in time of portion highly newer across XX% making These materially seeing customers where to continuing that coupled the customer and talked about the and

We reflected out new quarter, see persisted. the all that is these came guidance in that So we're starting trends the of to have of sort providing. trends, last

update right to it So we're this call to this the the time was guidance as time the make time. seeing at

moat through se. the current Having and that said have we a strong this, the take to Autoship a has macro of per business to remains resilient in proven Happy follow-up. all portion be

gaining. approximately additional And algorithm to next that at is Day, our our will Investor intend week's share sales expectations. midpoint share which deliver growth then I growth perspective just long-term of guidance, year-over-year, and on XX% to reiterate want 'XX the we we net And

Anmuth Doug from comes question next JPMorgan. with Your

purely got there And with Black XQ? Monday that the I help you why XQ Friday outlook Sumit, bit degree longer-term does of a for and give Is Can you guess revenue. strong little rest performance the promotional the square out Cyber just confidence? the of just us called you some driven? that color on

margins And little thinking provide -- on bit can the guidance EBITDA perhaps color down. you're then gross you Obviously, in XQ. how just implied EBITDA second, of a about is

revenue, factors few that You there we on should seasonality? promotions, other to is think mentioned about? some related a Any things but inflation, normalizing

lot hear from you, Nice there. a There's there. lot Sure. There's Doug. to a

can point Stacy decouple if me let at I by it and miss one in jump anything. any one So

promotional was Friday than Black remained So during although year, activity steeper all, prior it broadly of rational. first slightly

the business healthy mix up, that the in and to the went to what So overall offers our of when way with existing that that the we they is and mind the that we picked essentially essentially took fact to are proposition, calling with customers is specific along the engaging the customers engage customer we we right, sound signals out being right the the way market, way right do market, customers structurally, new respond. is frame, stimulated

of the it commentary, So helpful. be we speaks provided customer industry would That's we thought sort pressure the of reason the rebouncing to it those once sort tenability of abate.

that within that way gross Overall, communicating is we margin, been XX% the about hold we've we're range expect to the thinking so far.

an expect the to impact Black expect similar environment what to way margin remain Fridays, because don't typical observed with we the rational Mondays. promotional gross we we've that promotional through provide Cyber moving QX. So in Happy guardrails to other played color over to seasonal we've more forward

points QX is essentially that of of all roughly spent a seeing So last than the implied during which EBITDA year. higher approximately this dollars you're result Friday, incremental XX basis Black as was

that QX. through continuing and then in flowing QX And flow investments is component started So two, in. building to growth through our are to

levels front EBITDA healthy that, you normalize the gets essentially half for year. delivered the if of you So to to we've that in back the it of the

Stacy? to Anything add,

just holiday largely And activity. But just mentioned, investment QX usual would see we Sumit I that will investments. profitability impact expectations. and reiterate within our promotional it is growth our reflects the some Yes, as of our seasonal rational behind

So proud we're that that want growth. able the our to But to do I to EBITDA. flows are reiterate we adjusted that really self-fund through

we year. so continue the throughout to And so do

comes question Schenk Lauren from with Stanley. Morgan next Our

Can This the churn environment Or gross then for Nathan the largely you macro of worsening for a guide adds, it is and macro in is And direct Lauren. embedded stable? XQ? Feather impact is NSPAC? more each across bit into of just XQ the on dig

Sumit. is this Nathan,

drive out coming have persisted, out of QX largely that So part, persisting, the to low the in on you're spending trends seeing -- is -- a started discretionary right? seeing For discretionary of the persisting. seeing most being we macro it you're that shift in

We're So nothing seeing has downs broad trade on not changed. happen our broadly side.

premiumized aren't essentially So the engaging trading assortment are customers that down. ones with

the of stickiness discretionary, as that categories weighted egregiously per well facilitates And Autoship and more non-Autoship-driven is from the their core and of general for loyalty works all behavior seeing businesses. that intact. we're that power is within are the to treats such consumables our softness food is primarily model, in intact. categories reluctance pretty which which se. towards a including pet, switch So customers' proven The

part on to second a I had commentary question, ads. You gross your additional NSPAC, think,

Our commentary hasn't on expect wider We that a customers guided in we changed. QX necessarily outcome.

customers and basis, we've don't If our mean, doesn't been starts average, roughly you resolving. make down XXX,XXX, up XXX,XXX year-over-year an on to can course, a customer about I We expect XXX,XXX until -- change sentiment of kind on customers. macro that up of the

Black happy happy we are We're through Cyber way us Monday. health-type the that with to the Autoship, our consumables, We're categories. with played across way customers Friday, responding

Our pretty reactivation remains strong. rate

definitely and perspective, it But roughly comes seasonal down relative of has of year-over-year discretionary on trends. is discretionary So an And typically QX basis, categories. from a a a all that you are positive to roughly with mix XX%, those high XXXX, mix at look if year. last -- it's very to down compared impact.

back the well. NSPAC point go just would I as Yes. to

wallet We to share. meaningfully expand continue our

loyal show they customer to such whatnot. penetrate as categories our base to into health and and continues continue category high-margin other it our So

our as So -- are this over seeing highs demonstrated we some record there growth quarter. by

next Anna with comes Our from Andreeva question Needham.

for sensitive, from Chewy other words, topline? trade Great. remains year pull if price back and A the continue versus see promotions us. necessarily? the preserve this I pretty in the not think customer or I we down non-Autoship inflation space to guess you consumer about margins do couple you on next into how in to margins to guess would exit

but quarter? trade a follow-up during break well? to as consumer net down and Canada region just adds the a out Canada. you similar in Did are And of you behavior seeing the value sales And on terms secondly, in

Sure. Anna.

spend of So spend XX of isn't basis. first the a might promotions that an opportunity From in materially year, our all, beginning there's elevated. had said discounting/promo up this points higher year-over-year we basis we on to that

through. levels which that, that roughly patterns. relatively during our had be to it discounting/promotional And promotionality remains spend holiday XX And beyond higher discounting, spend where vantage rational so back point. environment to speaking, just where the slightly we've not very normal But period far, elevated last may now seasonal we come have seen points And our broadly basis we our of responding gone seen the than from year. had was only

it Also, gross our margin I that want the to ability of is make sure strong clear the to is small that it of through through continuous navigate kind kind might variability, however be, performances. promotional reflected

closely essentially say, supplier and ensure and market continue overall large MAP to be expect pet space, and move compliance, as would continue partners the MAP we variability to QX beyond. to with we work a our prices we which discipline degree in I high by to protects last, of the enforced And through

the was first that of So answer. part your

it's in geography, we overall open the We're business -- way come Number add and two, which Alongside X assortment has X quarters. next continuing here FY talk to will the not the impact. Canada, in in the business like 'XX, yes, a you to material to performing. a up we

So we'll well back mind. gone pulled And accordingly. consumers to stay around Boxing the our or or there, a via frame. away businesses from promotions in respond we're theme back guidances building providing actually seeing recurring And and Day it even to we've leading time numbers

and on are so heavier non-Autoship type offers. not we on Autoship So much transactional

Rick from James. with Patel Next question comes Raymond

I just had question on active customers. a

ecosystem? under that you or control. the if into more leaning to you COVID I'm can macro being think your about discounting formation, of to into levers of pet headwind? you impacted have terms to more still So household we what curious marketing extent customers as by beyond accelerate would your consider new cohorts consumers talk in are the get you are churn And and

Sure.

And continue amount looking of here, actually the seeing we're data at they is in the the well. churn settle out So highest our that cohorts. near-term just to COVID cohorts, I'm

So that in script, have picked color 'XX behavior. my cohort customers a up in in the of earnings -- provided near-term were the that little the demonstrating discretionary-type I quarter's this more bit were on around last or

settle continued stabilize. Beyond to well that, cohorts churn has to and continue out COVID rate there our

that the the we're for as Now mark past cohort 'XX, and the well. X-year 'XX for most part, the XXXX cohort

in we've consistent single-digit their essentially kind just theme high-quality stayed just lower retention that well. point to than classic our And percent sure, saying of best cohorts. consistent so been low was legacy as be And has that

customer of Will part The on accelerate to you levers second in your lean discounts you marketing? is to growth? have question what do

know, our govern with a marketing So philosophy, up point to specific as you essentially spend to the not is we profitable amount ourselves dollar see to returns. rather where

So mid more fluid empowered. funnel. and and lower into a with fully teams our A are healthy budget, of our portion mixes spend large is marketing it's funnel upper

of while is predictive a lifetime we funnel demand is basis market act budget flexible see lower So less consumer upper how value. and kind on and funnel we where based

we're muted. deltas in view into actually healthy So our that primarily optimizing of And that the a very appropriately drives is are opinion. level discretionary that point primarily. gaps from the of are categories of historical a there all we're platform, those course, The from acquisition seeing customer coming

Our premium happy we're acquisition which rates, to they cohorts. because build historical high-quality outpace businesses continue about

so a legacy why cohorts we've cohort. leaned a believed In are discounting high-quality, we And believe of as early terms reason that is in as business, late part of sticky business. 'XX. discounting, transactional in always tactics our and into not the these We 'XX building in less recurring

even be pulled that don't expect on learned, was lesson true, pretty we out, bring we've back to dramatically. to went We found good back. it that again, it, intuition and a though tested true that's So

a to follow-up. happy Yes, take

Our Citi. from next comes question with Zaccone Steven

on up follow to the discussion. wanted pricing I

be about 'XX? outlook that coming embeds So the the Is pricing way that market. to think about heard for like outlook it will more year-over-year. basically your We've food sounds to pet the initial quarter flat right supply fourth

I'm year? curious into how So just next pricing you think trends

Yes, it's a good question.

of So couple there. points a

health believe in has traditional translate been the will potential pet do do the deflation from into There's We We've grocery which the point, there and not pressure, players are in -- not the deflationary or consumables First, right? impact acknowledge near term. heard expect that food food or may market deflationary that categories. commentary the vantage pressure certain and branded. category, our pet or in consumables questions out exist we around category

jointly, vendors conventional exist are have per is in we in invested. which grocery non-branded. pricing broadly framework, And Our MAP se, motivated speaking, not protecting which significantly does

so So the there. comment that's anyway,

come there get down, pet and we and into single-digit this inflation quarter digits. be pricing down next low we benefit Second, quickly to no come running mid-single Ultimately, this continues impact from believe year. or at will no as pricing of will to very levels,

of see any kind 'XX, see price little QX benefit cost into through in 'XX, You quarter. a any the as QX you we bit of of impact benefit might will move how on pricing pricing increases came out our getting or of based but not

as to that growth. position that unit So XXXX share of majority remain means what growth structural will normalize, well. Chewy does gain as overall And the we in pricing mean? the It expect continues in the drive environment topline essentially to

Okay. Understood. a I brief have follow-up. do

cost the the just clear, around those other to the Or expect be to of do in reinvest savings some to need line? to initiatives? those flow you will So savings announcement bottom you savings,

of line. is to to, both. that Yes, reinvest. will we need the yes choose bottom some to The to Not flow will answer

for So which company to we more the about new you also that result will growth drive the future. acquisition XXXX And we will for what back we we are these leverage consider we actions, as A-list when quantify guidance. and invest priorities prudently poised of will in talk customer a in

Our from with comes Wells question Brian next Fargo. Fitzgerald

about What an and And give you on advertising are you then any what pet and the bring seeing ones. backs, pet market market the adoption for X seeing your and shelters broader Canada. broader color on the initiatives there? levels, household between the you're update in doing in there Maybe U.S. us Are differences can and rescue What two? households?

questions. of lots Brian,

them one by one. unpack Let's

which brand, about that U.S. Similar recent of love lot customers holiday period through. customer rates, pet we the centricity, et period, Broader were in Canada, are the household a the is and loudly Canadian behavior the cetera, resonating through experience, very proposition, participation experiences, I overall there. delivery customer playing most [ talked markets ]

So to that. we're happy see

see that to seeing we a surprise, a or slightly see market. as dog we're mix QX right mix We're of is mix we push obviously to cat more. is playing premium -- assortment into the higher this going from ramp population slightly even lower that We're result, going us through to in knew studying now QX. surprise. through relative something Not we're that ramp the Differences as that continue up to or a premium to not jump see going AOEs. Also Canadian that happy

in So a would We're say haven't expect know, broadly, up do. overall, some just start basic so as I start turned marketing you you we cold through would on to yet marketing, playing and Canada.

XX% we're any market And receiving curious so now. Number signals as receive and like right are are that trends. humble the Relinquishments down we do the we two, learning we're essentially we're signals, year-over-year. in the poised actively down -- and a year-over-year. manner. But X% to Adoptions

hasn't returned Fewer So X%. at same to that that the to down is tells reversed broader being the what of tune adoptions of pet time. trends back shelters pets you were

else? on advertising trend Updates initiatives. So the hasn't overall, broadly reversed. What

We the with ramp. are pleased

We supply. have essentially released more

up year, of we've was and start in ramping the ramped to Our commitment half this up back credibly. this

through where -- of playing well the supply items are In line from the seeing fact, didn't put We execution that we strong this through. that we're into and combination better and script, the our X team contribution our gross come actively performance a a discipline benefit chain logistics, it's are through work as in the of as ads, seeing. the margin,

vendor We're we So front suppliers. feedback, conversations and having out of now XXXX. the down up in to type ramp We're to as this into listening get annual to suppliers happy good poised in right overall, we're negotiations. we're

Guggenheim. Our of next Steve from comes question Forbes

Sumit, sales. on to I start wanted pharmacy

achieving LTM $X mentioned an basis. billion You on

mix And share? $X So what Sumit, from context your benefit two, the in growth then question. customer talked of margin was the sort I share isolation? pharmacy it's of in represent past in does quarter that within sort billion One, around rate terms base. of that of a What the know, the about during X-part pharmacy we've gross any in

you. nice to hear Yes. from Steve,

We Day. will when Investor you satisfy more week of we your at next see curiosity

gross premium In we through in saw in pharmacy what from mix gross higher-margin hard the -- businesses, is discretionary we And that past. saw of of essentially, pharmacy decline the margin, margin, slower delivers that seeing. margins, obviously the offsetting all gross QX we've terms pressures which given obviously, the and said as goods we overdelivering we're are

give and So and CAGRs for positions, with will now, in I'll And growth qualitative I'll leave terms commentary. presenting that of -- you week. about share rates next you more we talk that

Okay. does proposition And don't that in I right? quick during I think threshold, changes follow-up, those the lower shipping group you to some that a just about part you then threshold learnings maybe quarter. can value know help if noticed what the backdrop? current we what And maybe the informed just frame did the test decision? you you here. Why drove of to

did the of couple our how And you to like value. ways learn -- a part of the more all it's from I is -- test in value learn? customer. are into platform What all your Because It's it Yes. you and continuous framing, add can add there right?

You can you price discount shifts. really brands transactionally. don't of dilutive and to that, sort us, drive recurring becomes brand And behavior sometimes

customers. barriers is one for or testing lowering other The

so to essentially we're And while protecting across customer is we back our how we've proudly so on the directly barrier value certain without customers platform. this merge brands our built categories a that segments certain or same particular testing in time, -- at way, in of classes certain or the pass shipping partner it vendor

we If see So us. this to is be around we'll will that. shifts, continue from something that you any signal broad transparent

with fact build part, that For we've always customers trends. that On of we're around really liking us. most we're others, baskets the seeing proud the been healthy the of seasonal some elasticity

So always some brands barriers as barriers not other interact might are what you feel when Chewy. with

So it's learnings going through. that of set we're a healthy

next Horowitz Lee with from Deutsche Bank. Our comes question

this the idea entering if you remains with could. if time? And fact, household get I comfortable couple then secondly, formation the how that pressure longer thought sustained with topic than adoption at guess users in we in have a the half back you can customer how persisting And rates of year? is have driving for year, user can, Chewy A pet think pressures deeper materialized of week. all grow know this guys adoption even period that I I do you would under on services a comment on about broadly? will do adoption dive guys perhaps greater you or Chewy of But CarePlus how next

Sure.

CarePlus question of and and comprehensive We second more holistically around bring to your we engaging driving will you really update there. services The answer part week. promise a next adoption,

thank that. So for patience you your on

first around of do grow can we your active customers. question Chewy that with still the the how comfortable On idea part get

So things. I will say X

First young a we're a XX-year-old company. right? all, We are player, of

we're obviously relationships strategic we who've trends. through learning of decades. these a for pet with the category So having our vendor the played partners But of through lot have benefit

pet cetera, And and high that reason growth, formation down household Everything pet from this direction. will pressured that kind ASP data, that them expected the of no why of are abate is et the has comes abate. now, But is of so pet every it's consumers tonnage because been break muted will Right not the seeing resilient. pressures when it muted, out we believe components or sit this fact that to and cetera. industry growth, growth, to with pet understand ultimately et the times and historical points

CPT continues to X% there's pet was X%, In this when during or to up that actually through. And fact, was overall 'XX time. companionship down that element of spending play in XXXX recession, 'XX,

has at had big the last look you If a impact. premiumization years, XX

-- in been and difference through 'XX the have is 'XX that versus premiumization inflation expected level the to system of to the that XXXX versus passed The now So continue. are humanization trends unprecedented. have

it's X X recovery levels. return usually bit back So quarters, that taken taking takes to but is expected longer, has to to normal ultimately essentially a

context. So that's sort of one industry

wallet, trajectory and features into is with new care sit growing will that then you and that next recurring the fueled The Chewy. being us provide week highly, for by we an highly of acquire way value The Day, because intuition in line. we customer nature at second acquisition selling consumer we is long-term the of reason and the by you back feel into when and and highly put structural see then we our build contributing Investor proposition insurance we which to why both and share health you, share profit building consumables the evaluate your the of bottom sound of way, also that you baskets top allows on getting is but more confident complementarity of to wallet highly

of topline it fixed provides to wallet flywheels, I continue service the and that models delivering must defensible the have acquire that algorithm a So one think moat with either primarily growth. us acquisition growth, share side subscription around customers the X on or

comes last question today with Our from Parikh Rupesh Oppenheimer.

going Canada. to Just back

very there was commentary Your upbeat.

in is terms thus surprises that going? of any far Just launch how

It's a very good question.

Our surprises around have moved we always how are could faster.

ramping on behavior do sort double we more no expanding internally learnings to that up So ramp just understand How do particular ourselves. How consumer we we move can down up? regions? better. surprises. It's How we assortment faster, of

it's week good So more you. a but perhaps all your on, see things all when next those a that se, week. surprise really can I'll we appreciate see next we're of the per Thank we talk one. would time, all other. We it's I and hope we say, right little and each give focused areas to thought you just the

conference today's conclude Thank your all for you call. will participation. That

You may your now lines. disconnect