Chewy (CHWY) 20 Mar 242024 Q4 Earnings call transcript

Hello, and welcome to the Chewy Fourth Quarter FY '23 Earnings Call. My name is Elliot, and I will be coordinating your call today. [Operator Instructions]

I'd now like to hand over to Jen Hsu, Vice President and Head of Investor Relations. The floor is yours. ahead. go Please

joining our for fiscal the today call XXXX. Thank quarter us and discuss fourth for full to you on year year results

Joining and Sumit Chewy's me Reeder. David Singh; today are CFO, CEO,

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

filed the operate performance, making concerning Chewy's statements Such our other On statements. industry strategic our considered under statements, differ in trends, forward-looking our forward-looking earlier call we certain to and factors of forward-looking risks, today, SEC, Litigation in in the other filings Risk we annual including and environment with the uncertainties could to initiatives Form section are statements Private and results by results are the cause subject in. Reform will and on actual contemplated that our Factors X-K today titled report XXXX be statements which financial Act Securities materially and described and those from XX-K

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

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

period against year comparisons will be of stated, discussed otherwise the all unless fiscal Additionally, XXXX. today comparable

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

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

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

team, our Stacy Officer. our quarter key David to fourth with you interim I'm is us look Financial her thank Chief results, new thrilled him also and full year as our to Bowman to we to welcome many of a joined Dave leadership who having February Reeder, Before cover XXXX addition as role. for and I in like CFO. support engage I would his forward in

results. with share review expanding and market our year delivered full let's margins our Now XXXX demonstrating generation. finish free the our flow while growth performance, The to and fourth simultaneously cash strong quarter and team to year ability a deliver gain accelerating

our discuss our share industry in embark performance, I Dave financial followed some strategic guidance year. by XXXX. will priorities the for the perspectives our an will overview of pet greater detail results we on provide and then Chewy's on as and

XXXX billion, full $X.XX increased QX year net to in representing resulting by sales growth. sales year-over-year billion, of $XX.XX XX% X% net

Our net continues approximately pillar be a of favorable strength XXXX mix year sales. representing nondiscretionary consumables of Chewy, of to full and XX% health for categories

while our full provide delivered enhancing convenience for customer Autoship XXXX, year Autoship program, $X.X of parents subscription for continues billion to in pet customer Additionally, unparalleled stickiness Chewy. which sales

Growth XXXX. line full the for outpaced X% in quarter customer growth, nearly XX% the meaningfully top by sales in year overall Autoship and increasing

pet across runway XX%. Net We a year-over-year our significant and compelling $XXX, expansion, of to existing services our there NSPAC engagement or believe deepen delivered wallet active continue we expand for our is growth. to continue product with offerings customer, particularly We grew as further customers share platform. per and NSPAC, increase to sales approximately

the expansion Progressing proud P&L, incredibly are deliver through of our over time. ability profitability we to consistent

an full improvement XXXX, prior the representing both quarter the year margin fourth year gross Our for the exceeded over XX% and period.

activity. was the season relates including promotional as to with throughout expectations, it in line performance holiday Our

latter the our planned, supported program As sponsored to gross the performance. throughout ads year continued our and increasingly half ramp margin of also

X.X% improvement full We full adjusted the and X.X% margin for a year, quarter to the of year relative for XXXX. achieved EBITDA continued an

concurrently Our consistent results planned value reflect while and we in will initiatives growth our ability that long-term expect to deliver investing on deliver a improved even to profitability basis, shareholders. steady

coupled margins, We free flow, generate expanding our XXXX and than free million with capital spending cash Finally, free us XXXX flow. disciplined free of allowed generated cash more our cash has Xx nearly $XXX levels cash meaningful expectations flow. to exceeded of flow

substantial area and reached have cash basis. point We a exciting inflection generate free on flow expect an this in to go-forward

and XXXX, industry As view on curtain on our now Chewy's the framing moments few we me outlook. closed the let a pet spend

$XXX in Pet supplies, the and Services roughly sized billion. billion, $XX comprised at Pet roughly $XX roughly and pet of contributing market, U.S. $XX billion representing billion approximately operate We pet food Health

On key category a online. top billion and Chewy our QX been beneficiary following of expansion of participate moving has into above is strength. of this pet $XX a The XXXX, remains pet is in driver now also roughly market. that in GDP growth we that, industry increasingly Canada and Canadian the recession-resilient

unit secular As further the year, expectations growth grew single-digit new is performance. pricing predicated industry an rate annual digits. at the of in multi-decade XXXX the low premiumization characterize context in to overall to was a growth Over industry mid-single by it growth pet trend. with in we historical low enter a growth This fiscal on supported helpful period, addition single-digit the

projected to forward pet multiyear is the grow period. ahead, at Looking rate a similar a category over

is average. be to to lower in Unit XXXX, for pet is growth expected growth than levels. the household expected formation remain be that trends due industry to historical historical muted However, year-over-year below

industry, expect a a industry in most likely are inputs on of will These deflationary we the XXXX. while growth for result year anticipating pricing, to a in setting growth modest benefit for to XXXX. relates we environment, normality pricing it the industry in no material As up not return

market industry expect the XXXX. we in Irrespective continue to gain environment, of to share

profitability this backdrop. Speaking growth expectations, year, continued deliver adjusted irrespective margin and to to macro EBITDA the expect industry our of we expansion

business benefiting Retail Chewy as economies continue to initiatives margin expansion. is to from fast-growing this, business Retail of and scale. Chewy Chewy important of top such are well-established our expected sponsored foundation, a gross On As ads, drive Health our

our offset efforts leverage relative EBITDA automation in expected to efforts with full of years we flow-through in OpEx collective high our enabled increasing are of flow adjusted critical coupled Additionally, capital our efficiency, XXXX, and cash reached when XXXX expect meaningful to to levels XXXX positively SG&A free These to have infrastructure, to the and discipline by ongoing ahead. in increasing drive year expect the levels year and full respect with XXXX. delivering this we we mass our distribution generate investments, year,

will growth and on years. newer sustainable profit our commentary provide of we the future strategic in me let Now some believe initiatives that drive

to active believe such vertically potential of Care We health extension in be offering our Vet integrated the priorities a a first-party proprietary both the steady-state all connectivity margin that and us of ecosystem our and are profile about allows market, thoughtfully natural season. announced to our our approximately U.S. designed strategic and Chewy materially Chewy to another expand to while excited billion $XX recently pet time our above the of also anything $XX tech ecosystem. seamless unlike aspects platform has business thanks Vet NSPAC will which our Chewy the market. the over is drive billion as to We Care current clinics by the Chewy customer health Care entirety address TAM growth Vet clinics,

additional location scheduled slated food, and as locations for platform our our services BXC BXB open and first such opening products as X telehealth pharmacy core solutions in this fiscal our veterinary well includes clinics of anticipate to and BXC supplements, This to company X to insurance as Florida, with in emerging year, We the operations. for veterinary and their e-commerce our as practitioners half close diet our such XXXX. several first to streamline headquarters launch to

public We very already is imminently. and be family that clinic open expect to share from to excited to are we appointments it accepting and first friends, our the

plan Two include indicators track closely that demand generation. key of leading we and customer success hiring vet to

on As around to sites around hiring, as we progress staffed. year. vet it through encouraged and progress initiative by keeping already you informed recruitment our forward processes our are our relates look have early this the We the first to fully vet we signals

Canada some new XXXX given overall Elsewhere, scale. our for financials, will remain to take achieve that and to continues expectations ramp markets time immaterial to

encouraged that have we received. customer are initial response by and the supplier We

We continue increasing with for significantly since ago. expand months few customers assortment our to a our offerings launch only

positive basket we experience Canada. such metrics are metrics delivery sizes healthy, are other as speed reliability, remain the the excited of and that basket-building of The customer-facing further quarter such mobile are app forthcoming launch XXXX. by first features our customer-friendly such in success rates customer many additional we indications as We tracking in and well are for the as as sign-up mechanisms, shopping payment and and which closely, as business building providing Autoship

and In and the incredibly on of ahead the enduring convenient pet destination excited summary, are our pet partners We for opportunities across that, parents for we mission our focused for I will trusted turn while remain we positioned believe simultaneously category being everywhere. about highly innovation advancing And the over driving shareholders. are it Dave. business. significant our to we With creating value continue most to well

Thank you, Sumit.

to to results, Before I'm to so covering be explain annual our take why a and of I'd excited moment quarterly part like Chewy.

unmatched trusted wanted parent of most customers. am everywhere. convenient about loyal of Chewy to in and industry, Chewy one provides the of for I'm and service partners believe and excited level besides incredibly pet and part company's is brand, I pet that that Chewy's I destination passionate a is the opportunities. million the customers But First, that a parents being passionate about the We XX to be the company the

stream. attractive than subscription-like driven predictable, customer was billion approximately more sales highly model a revenue of resulting have $XX a Autoship sales, in We XXXX our business where by XX%

critical come. quarters my In to reached both I about adjusted excited ahead, margins know couldn't With my forward getting look our the heart many over road Chewy the I mass, now head. cash and and many summary, to infrastructure and expect higher free EBITDA more flow. you be world-class increasingly to to we appealed of having deliver to

XXXX let's to $XX.XX and results. XX.X% that guidance growth full billion, sales grew ranges net provided year-over-year our billion, representing Fourth sales quarter Now of the to financial the $X.XX our high exceeding bringing quarter. X.X% review end year last net we

in in year represented QX in XXXX, for year. a the $XX of XXX sales our consolidate reaching basis Autoship to sales Growth Autoship at $XXX, year-over-year $X.XX and and total full and XX.X% XXXX. basis new by billion by with NSPAC wallet of XX.X% in and a continued year billion XX.X% share points growth points and line Autoship Chewy in in $X.XX increase net of customer top representing outpaced sales XXX respectively. QX growth overall rate. record customer full QX sales customer came

a slightly basis on the year in $XX.X in ending QX, declined expectations, customers million. with Active sequential line at

margins of XXXX and gross basis, and a gross QX QX Moving promotional sequential reflecting points, typical reported the XX.X% full margin period. down XX.X%. for On basis surcharges P&L. decreased We gross of margin calendar the of holiday year XX by peak the

Gross expect of XXXX, sponsored sponsored the growth year by its by basis margin ads ads fourth strongest for the contribution quarter throughout points, launched XX in had initiative, which newly expanded XXXX. our aided from we continued

OpEx. in XX.X% to the taken or million associated that related sales million and Please share-based actions note with fourth $XXX.X the Moving compensation of taxes. expenses expense $XX discussion restructuring severance-related SG&A fourth quarter SG&A included in corporate of in excludes the quarter. approximately net my quarter. the SG&A of totaled

or advertising year sales. sales. X.X% million Fourth For net of quarter was SG&A the XXXX, represented $XXX net of and XX.X% marketing expense full

and advertising represented year, reported adjusted net came XXXX, net $XX.X margin net X.X% $XXX.X adjusted million. in marketing Fourth EBITDA points year the and fiscal XXXX. year million We quarter basis sales. fiscal full for expansion full of income was or expense an quarter For adjusted of X.X% margin income and of the to and million X.X% at $XXX.X XX for XXXX relative was

our ability while strategic We higher to initiatives, growth delivering margins. of in continue adjusted to invest be concurrently proud EBITDA

an exceeded million the free earlier, point fiscal cash Sumit $XXX.X Chewy fourth reached of quarter, flow flow year relates In it free free inflection cash we Xx we million of our our flow, As flow reported XXXX. and generated cash cash free in $XX.X nearly as expectations cash has generation. noted exciting and flow representing free XXXX, generation to in

free XXXX capital reflects million million and activities net cash provided cash by of year of full $XXX Our $XXX.X expenditures. flow operating

spending, driven ongoing investments to We year and and network the with were made capital our by of of representing sales, target for primarily net X.X% fulfillment remain across XXXX automation-related disciplined net CapEx center technology approximately highly respect X.X% sales. projects. expenditures slightly our to below of with X% our range Capital

securities, marketable $X.X in $XXX our over in with equivalents ending cash XXXX. year and We the ended cash billion million and higher balance than

debt-free billion. liquidity We a strong $X.X continue position of to remain and maintain

like have year XXXX I concluded our recap, quarter to year and outlook. full Now full I'd discuss our first fourth XXXX and quarter that

that degree road Let the at map high have our me December. on Chewy's and a strategic deliver Investor in financial we team by outlined in long-term to Day the the saying start of ability model confidence that

continue the term through We focused long manage to macroeconomic Chewy executing the environment. near-term are and for on

detailed our market share flow meaningful gaining we continue growth, expansion margin cash December, In delivering pathway free generation. to and

XXXX We X% expect in or anticipate This XX-week to XXXX. and these growth range fiscal be progress sales XXXX. $X.XX fully of fourth $XX.X as of year and of the sales full we approximately between approximately reflected the the across X will year-over-year first $X.XX net of week quarter in of billion net in make quarter XXrd billion billion areas year, impact did to year $XX.X X% a we between or With includes and and growth. all that, billion year-over-year coming XXXX the X%

to As household net components in the headwinds relates we pet we continued subdued active our trends, believe flat be by light formation it will expect the be driven In customers XXXX to macro primarily of expansion. of sales NSPAC growth growth, and XXXX. approximately our

Moving by approximately expansion be of both year to This anticipate driven margin X.X%. adjusted SG&A margin as leverage. will We XXXX as gross profitability well continued guidance. EBITDA full

to adjusted in expect We meaningful flow of with conversion flow-through, efforts net taken collective X.X% flow result the capital cash together our to with are continue our expected generation remaining XXXX in increasing to cash in sales, X% of range XX%. above free expenditures EBITDA

$XXX models As including for outstanding your full $XXX the mind, expense, update approximately keep to year year expect related to be you XXXX, and in compensation full basic also approximately be XXXX we taxes, for million share-based million. shares

shaping incredibly the saying execute Before such expected as throughout as cross-selling pet vectors, top we unlock industry. Strategic the I'd that well by and to like across Chewy role the optimistic are to, both we continues team as questions, ecosystem. in call Chewy's the innovate open Vet and remain broader to initiatives, strategic to line bottom and about conclude key Care time, Chewy over our opportunities benefits

ultimately increasingly and many our increasing margin-accretive us positioning expanding discipline returns flow to across verticals for and operating producing Our efforts margins, flow-through, of are deliver levels profit attractive free attractive cash shareholders. and

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

first The JPMorgan. comes from question with Instructions] Doug Anmuth [Operator

X. have I

XQ, add what First, cadence with Obviously, forward? there's in Sumit David, year. acceleration talk can perhaps talk you the and of confidence as anything can the just the in you the about 'XX about And the just you going revenue of growth? you terms starting X% through course the but drives outlook can if else quarters in go around

existing know gross us attrition you're then churn for And between I customers, you active talking give dynamics on Can customers? or what's the on flat with happening insights adds about 'XX. into and any

Yes.

not extending saw quarter you flat respect I virtually, the the script, you extrapolating that and his we outlined growth be meet to pricing work we're think to of so of the pleasure fourth we an With look year, in XXXX, environment volume where for a and XXXX. that's and coming we're is trend forward the into through as kind I progress the relatively Sumit expecting the in of certainly of that as it's lot portion quarters. through that of the Doug, person expecting as we're inflation. most So growth given in to meeting will And we trend a

year, so throughout feel year-over-year we guided growth first X this roll first With that we about into quarter. pretty remaining we quarter, to we've number as and quarter as quarters first respect to good the X% versus progress the

the fourth For the of remainder the quarter the of the year, got extra we've in benefit week.

that the that, X% If that year you math particular well million. about for percentage about and do the we're do business of would $XXX on on extra math that have high Autoship we from given as get -- you week the recurring consumables, through the growth as

do, as of anything we that? only of add to also we'll half week. would the do the extra not the that have typically believe second the seasonality you but So Sumit, we year, benefit

customers, actually. the On situation similar, quite is

much that we'd a size of you our for of back. you kind of being it's impacting directly. not roughly discretionary held so side, look I've figured the back is ads. I XXX,XXX of and kind essentially on when at of come environment for active for sense So to holding kind sized is kind you, how out get that of sort you this XXX,XXX

stabilized, to of further just we're them fully churn out behavior. from have of to continue low XXXX coming of the deterioration seeing pandemic cohort out. continuing kind cohorts. cohorts in pandemic Our any single-digit, did so And kind from not see we're the like settle we higher cohorts

rate impressively reactivation Our high remains actually.

will improved did customers reactivation point a more view, from of So reactivated we've than last add year-over-year we year. that this XX% year we roughly

So the the approach. I of wait-and-watch little year with balance, bit of into think getting a sort we're on

We to category improve are goods materially. expecting the not hard or discretionary

So we're our holding that into forecast.

as contribute then Canadian not meaningfully XXXX in right outlined. script business of expecting the to now, as sort And of the we're

In as rates businesses, are all pretty more addition consumables, remains add X our and remains premium I kind customer is strong actually think our supplements, points acquisition et whether of health, healthy. -- it's strong into I cetera, to premium of participation also as premium well Autoship would participation that, sign-up

gives some on that color customer hopefully, you So cohort analysis.

Mark ISI. with Mahaney Evercore turn now to We

endemic more? you kind advertising just on seems are Can your And you of where non-endemic about seen be? revenue you you've peel constructive make advertising the and for you could talked I that opportunities. for outlook think of where so bit know and of back year? you ask relatively could far you be? confident you maybe that you year. about And in outlook the the load a I And lessons far in drawn wanted you what are Where do where to any clear terms ad terms you've so little that think versus do the about reasonably

is Sumit. one. Mark, this take I'll that

year, out we last So of fully overall search coming into ramped product.

we recently revenue. on-site have the portion ad We And of launched ramping currently are branded product. the up

ad off-site up half ramping revenue We back of the year. portion starts the this towards of have that the

margin the off-site. split line on the on bottom the but And high the ad load off-site. the and healthy. repeat And an the are is on-site, so as on the healthy Autoship to the or well. we're then LTV And business what blended basis, comp here, you'll is that of the so so the a XX% the recurring power is kind to supplier see taking kind are which is on more ROAS obviously essentially of between pretty not participation XX% per less transaction basis, rates given pretty of on-site flow-through on itself appreciated revenue. and on We're pretty continuing

we careful, I we're progress, se. kind So consumables the What is we're completely sure be as tell per all else hard Overall, respecting that good. with business? making constraints with followed can of a to expect, goods leading you pleased little you would the regulatory there by have more and ad health, we're about response

Dylan with question comes next William Our from Carden Blair.

just you kind higher it historic churn in the some Any same of question of side, be on the visit helpful. impact and Autoship kind set I speak because be from that are. if spending cohort with the forget up they frequency. guess of site And would the to there's don't how customers kind detail same those your of NSPAC fashion don't of broad back the yield not relevant And or cohort on would levels whether and side. Sumit, the any there it could wonder to it metrics I analysis if

Yes.

year. don't will the to -- saw participation you The And in be both NSPAC be 'XX. Those the the benefit those side last are So the NSPAC of of obviously, get as we pluses. so that continued NSPAC the the driven primary are, by minuses health are in see drivers the house as that expansion you in pricing Autoship. well X

cetera, launch the essentially Autoship, average if benefit have the growth cetera. work out So on like of organic time years, the IPO in NSPAC of the came has last that XXXX improvement the of over supplements et we in in done, improvement in that XX% NSPAC of pharmacy, the you health, growth team business, the X the since back et

inflation. weight last look or at if the as on inflation kind was XX% And from But year, NSPAC has grew. of come less higher you right,

year So not [indiscernible] of this. this year, or we're in expecting the in we're not expecting pricing impact inflation this 'XX, --

so on And to health. Autoship pure going the grow of back NSPAC is and

is if pharmacy. in to will going to health likely at X expansion the we the analysis, NSPAC And add the Autoship growth direct that you subscription drive side, look business. to On of customers a north we're that of towards usual in cohort million rate addition

those So get We pricing will this benefit be a just don't combination. year. X any

with Company. Our next question & comes Andreeva from Needham Anna

two. have We

OpEx On the EBITDA, less imply you And during slightly the adjusted outlined I than think guide mentioned guys margins the some incremental the does guide XX% you Analyst the leverage. implies Day.

So year? margin more there any for helpful. should super muted we would the gains color expect be Just gross

mentioned, initiating given or And a this expect of CapEx, we as a than generation? Any the X.X% 'XX? ramping buyback it free secondly, guide came for at 'XX. below thoughts on just in for similar Should stay flow sales lower little cash to then you

speak to me We bit would, XX% let path that let that. philosophy course, EBITDA profitability corresponding take broadly and more Day, and philosophically flow free a Capital me first. from cash that at come Anna, our outlined Sure. little perhaps and our about the margin And one. of Markets

line as And leverage line, me so are XXXX, the to gross areas. operating out a let within few And expecting think we we not well. specifically, margin, profitability also gross within get the when call only on on but expense margin about

we're through able for it's Given higher at rate accretive critical incremental flow that a actually to much reached our volume infrastructure and the company. the mass, fact

that higher built out, cost if incremental will. absorption, The So on as we you we we've have get is basis. infrastructure for volume, CapEx the more fall-through a given go-forward volume, fixed moderated

we product that, mix. In also addition to have

continue within So about a perspective That we then our to accretes up health we've sponsored the product a or grow already also we up up we're mixing margin also bit. as care, have finally, ads gross And margin. that little averages into from pharmacy. spoken line, into gross

continue we We grow expect in throughout quarter, sequentially ramped the those sponsored to to XXXX. ads, those quarter-to-quarter-to-quarter fourth expect we

the And accretion occur expect margin so that we that's the to on gross line.

With the some respect to investments we are on OpEx, OpEx side. making

expect But expand We core our Canada thoughtfully of as into OpEx course, course, scale. our around to to continue then, And of entering Toronto. we in Care. long-term we're initiatives we're Vet also investing

And margin so investments we pace both rate gross OpEx. year, of those throughout as in and to but will get well be the expecting as managed profitability proceed from as the thoughtfully we're benefits

of the On points guided of CapEx sales. to X X.X term side we've long house, net the

year we slightly below were that. Last in 'XX, correct. You're

good in capital midpoint that put mentioned of we I top we've and as on script. the guidance in X% would We the meaningful good guidance think midpoint cash take line, free between midpoint the a that to and will you a X.X% flow from expect expenditure you to be our a given the generate of perspective. about spot think do

from next with Steven Our Citigroup. question comes Zaccone

And terms space. the ask worst the into I We've could heard industry. about you get Sumit, the get Dave, little think higher new of bit the you promotional wanted as competitive back and in your we activity food activity guess, pet trade-down then more to congrats this in the business? some broader pet in of year, now? through seeing Or What I we're are role. it as about on a half? think do some space And the you

me Yes. unpack There it. in a is of lot question, let kind that Steve,

start environment. let's promotional So with

was in XXXX, was XXXX. been modestly through with promo way So our line the that but we've environment than signaling all and expectations. QX higher It rational

that so the And the pickup didn't basis 'XX and see -- picked incrementality and -- up to we XX of were we did point year. kind throughout QX and XX forecasting QX, QX hadn't promotion

given we planning able were to Obviously, for we absorb that it. were it

world, that result this -- of either we've from standpoint a pandemic, as just lining sort our general pre-pandemic, we've benefit sort of of of silver float promotional through from -- sort in the generation. or returned is the post-pandemic novel normality good got demand the post-pandemic So opinion, to here a pullbacks supply of a right,

environment we're you is So the more baking expect normalized. industry, We let become me more in of at or with. look all the that move sort of of so XXXX. to trends. when industry volatile as promotional don't That's to remain shift Generally, that through assumption kind we volatile to

So and generally, and the the growth unit pet take look if food over billion mostly driven you by you been industry, past has at treats. category, when supplies decade, supplies the $XX

there's a of mainstream out the that's growth environment, more driven unit trends. getting you So inflationary coming why macro, sort pricing continue. in you all the no into of 'XX premiumization focus year. as helps of discretionary. is industry today's that context when we're we And that kind and That of 'XX cap trends, towards right? put expecting has 'XX and given kind So been by understand benefit it pricing the premiumization in limited of modest move growth in It's

pet to expect merchandising to about. with talked take grow remain that kind continue to category, continue of health winners then of both $XX kind volume expansion remaining clear trends the billion and of coupled And we where there we've Autoship NSPAC right, the when again, translating meanwhile, kind you into and,

industry. that's So general

degraded of rate. when was you new of new out pare Search pet down X% year-over-year further -- by around of look and interest XX% that at adoptions to QX. and that the somewhere year-over-year pet has at into you look XX% coming for kind you inputs further coming so adoption out down were data, pet and When down year, X%

picked there's to play. haven't up the trends year, into coming a So lot here And course, more yet. of

meaningfully categories continue so to continue or is health insured with the we coming where lagging We as bit reasonably the to from goods so and business consumables in share health, and category. XX% of a both gain consumables little that protected care given be in hard

I it. left So follow-up a Happy if I out. characterize to take that's would anything how

Feather now to Morgan We Nathan turn with Stanley.

of get And can points then drive basis for on help could on the to really EBITDA key much for So through expansion you the margins? weighing margin about international can us anything how the year, share drivers expansion what walk XX that? And there? you guided to thinking upside is

Sure.

some really it's growth the before. of with guided. about X me when there, infrastructure the gross EBITDA think first. line model. fixed start fixed of XX We've got that expansion margin we the I Let the items opportunity mentioned to get you let's out given talk the that It's about really Look, cost bps our the absorption

faster then expect grows through investment at don't ship us. It's we to throughout to that's that be have the than rate, the flow going year, volume to correspondingly going incremental same of a higher volume. we level if to benefit that the to of given So a course make

And some to going get year. that to extent the volume throughout fixed nice picks cost up absorption so the we're

In addition of to to that, health all product expand those we up are perspective. into pharmacy, as the margin mixing corporate into care, we services, business into have been from accretive a us

little the QX. final kind way have, bit QX up in really of QX I then, sponsored to bit piece of business as time, grow which that 'XX. here larger those as line. QX to expect P&L into that the way mentioned, fourth they part of that ads course, ramped to our we more to a bottom in meaningful margin XXXX in will ads, the quarter throughout so we that fall become sponsored And through then spoken the over about And a And of a we've all the

of for that is area that's well. us So accretive an growth as

the needs at side, kind I'll OpEx reiterate of made. to investments On be and will pace those that just be which pace rate investments business rate the of and those the the

growth committed Day. to also we at future. continue we that Capital do profitable have for want the we believe profitable But that to So invest growth. are to deliver We to going Markets

we free macro business kind so full plan a that a plan flow, of And of of the then, And feel to also growth like this it's for meaningful take would deliver profitable I for to continue add. irrespective and year, to you cash environment, share. today is plan it outlined course, we've the

Steiger Alex Sachs. next with question Goldman Our from comes

Great.

competition. on one First

as share enter one continuing gain landscape outperformance. on what then we XXXX? year? this follow-up QX competitive the would market gives to how the And So characterize you you EBITDA And confidence the in

help from OpEx discipline? versus initiatives of the the automation seeing So efficiencies out laid contribution the just maybe can on various you us some understand and/or you've you're

Sumit. the Sure. is one. This first I'll take

So was intensity, of in competitive Promotional out coming and not competition point Ad QX. remains elevated high. terms it's intensity view. intensity our from of ad higher obviously of

QX, that look up you demand, at this to XX% were If have XX% in recovered of with year. met given were QX CPCs, in but roughly supplies they CPCs

we've bidding intensity were the anticipating season. So CPCs some we into coming higher of was has pared holiday kind come given into back That as higher QX.

we opinion, of Some strengths, companies naturally of with some kind X Amazon different of part least the From sort market, of portfolio -- are in competitors. like to can entire when here. the being of that of there's someone is has and my at kind but kind the that share. Walmart next X X is expecting, in is of -- span taking that we what industry, share across gamut clearly tell, able there's the Chewy believe the Chewy each -- you a look part from gaining are at

I performance our be nondiscretionary mean, performance what sales. which continues -- by supported of to I make up that XX% our categories, our So mean by is

And the where have many in that primarily so some I'm other we the are in the we environment, -- mentioning not that companies in winning. of been in that In excel XX%. winners likely discretionary pockets categories current

opportunity and the strength mix discretionary some So given other both that us you've that announced in Chewy places. seen lower that from the is shields of goods to impact it hard an

the has in like-for-like macro seen but like where were strategic in Walmart of as provide in then assortment, private do areas label, value of come current kind and unsurprisingly successes we outside have part And not been the that assortment our kind like-for-like candid out plan have to the amidst it's presentation, backdrop, strategic segment of Day including shined Investor we there.

I our to, is we provide the both think, what remains Chewy retail that generally of we comprehensive believe -- is note our parent, it, these and if of So you that ecosystem, is and health proprietary summarize the or kind ecosystem, we the and the offering business first-party across both which product industry that quasi players that from the we extends loyalties the through differentiated the pet important type to build, offerings. pet services through of subscription what strength relationships

several top it compete that, All categories, we've well categories. both which XXXX. of made are to future positions in and margin-expanding us in Alongside investments line growth

So and bullish we as we come as as well feel accelerating compete 'XX. out of about 'XX pace our into ability 'XX to 'XX through

Thank Sumit. you,

EBITDA address that Let question posed. was me the

year-over-year more expand you we first. XXXX versus bit did XX little a the margin When year XXXX, bps speak about broadly a on me basis. by roughly compare gross Let

look what margin do, investments in you long-term but portion gross good saw XXXX and when through flowed an the the saw business think to I how the line. a return the that line perspective, execute you from expansion still was where us EBITDA bottom you so execute us in saw with And at of you EBITDA us margin

margin and to as the the were we our ability EBITDA it the to quite basis. push year-over-year so pleased by then way take all And on expanded P&L through line margin gross a it

fourth on grow respect by in XX margins with have some we expenses. gross to did quarter, respect year-over-year issues basis timing fourth slightly We With quarter a bps. to did

to would the again, X.X%. primary as Care But deliver pleased a to And well investments with decrease the year, for making Chewy from basis, we those quite to I of for year did again, be throughout our on Vet to that adjusted so international that. many EBITDA support the both characterize growth. our year-over-year the as expansion were profitable reason as ability as X.X% full able

lot carved you. of here. providing started alongside a XXXX, expansion we the impact bunch a add year, year, self-fund for a sized we ability the just growth when as found the of we've through of we move And would initiatives we out -- to that increasingly sort we've that that I for continue we're the are these of we and that invest initiatives, that ending of seen the the future guidance year growth in to for initiatives bunch kind self-funding EBITDA us as strong. And provide you've

comes Parikh Rupesh Our from final question with Oppenheimer. today

So question Dave. for a

few now. So you've a there been weeks obviously

it's you So but curious if opportunities just any business. the in new see still early,

all that and all my consistency, am went my And into was in the the the is one revenue the that built the trajectory, think you I week things person. and I to of seems things Thanks of the of repeatability high line pleased expectations the the in joining was And with of fifth Autoship This with forward for diligence opportunity were. stream thesis Chewy, to question, test all business most set, kind Rupesh, my Chewy. that when meeting specifically, at items to of is I report of performance look much kind predictability, list on very what it my I as consumables. of

build-out critical us infrastructure ship have of footprint the industry. for that world-class. our to The our free going cash we increasing believe CapEx incremental that the and ability as not some The and flow. mass same only the is to in volume significant do becomes tap there volume we're but available to I infrastructure moderating through get

had about course, expand that think And care, excited I'm have services, all all well are of those you you the Did from health a vet of to have things Chewy term, as brand, some add The to built. margin business about loved as, I theses think here. little be incredibly international, business opportunities bit the direct longer the when are those as incremental Rupesh? the penetrate follow-up, finally, care meaningful. opportunities we then as we of mix up a

I question. my follow-up Yes. just And guess

be So to is sounds household formation going likely like this it year weak. pet

to if formation? net this customer is household a a that key positive return ingredient better guys missing Is about that stronger return a the macro you active need growth, essentially So to you think point? just at and

we to a mean but not clip. pick the at one is them, up that's of healthy That definitely only pretty customers continue one. I

the performing loudly. north customers million customer up resonate of within migrating I active In categories obviously that that up we're other X file that. not pharmacy, continue show is over, showing which mentioned to the All of in you

verticals, channels services, the launching of then with we're whether new such all any showed of growth the it's and that might the introduction are newer point given both at acquisition in innovations we You looking verticals. revenue at, as NSPAC all that acquisition, be marketing of amplifying and experimenting that number or customer new And these retention-type number.

yes, on there also making goes unturned per So the on that side controllable but is our what and stone se. no sure is focused macro, we're

Year you XXXX this gentlemen, and Full our We'd and Q&A Ladies concludes to Earnings today's Call. and Quarter Chewy participation. like your Fourth thank for

lines. your disconnect now may You