PLANTATION, FLA. — Online pet retail maven Chewy, Inc. is planning its international expansion in fiscal 2023, according to the company’s latest financial report for the fourth quarter and full year ended Jan. 29.
“We believe that the time is right to bring the Chewy brand and our superior value proposition to pet parents outside of the US,” said Sumit Singh, chief executive officer of Chewy, in the company’s earnings call on March 22. “We are actively building the capabilities and team to launch our first international market over the next few quarters. We expect this important development to unlock meaningful incremental TAM [total addressable market], and we are excited to introduce Chewy to a broader customer base with whom we believe our brand and mission will resonate strongly. We look forward to discussing more specific plans with you on our Q1 call.”
In the fourth quarter, the company reported net income of $6.1 million, compared to a net loss of $63.6 million in the fourth quarter of fiscal 2021. Net sales totaled $2.7 billion over the quarter, up 13.4% year-over-year. Adjusted EBITDA was $92 million.
“Nondiscretionary categories, including consumables and health care, remained pillars of strength with the offset coming from discretionary categories such as hard goods,” Singh said.
For the full fiscal year 2022, Chewy reported net income of $49.2 million, compared to a net loss of $73.8 million in fiscal 2021. Net sales topped $10.1 billion, up 13.6% from fiscal 2021. Adjusted EBITDA was $305.9 million. According to the company, net income was positive for the first time in Chewy’s history for the full fiscal year 2022.
The retailer’s growth margin was 28.1% of net sales for the fourth quarter and 28% of net sales for the full fiscal year.
According to the company, Chewy has increased revenue from $3.5 billion to more than $10 billion — or by roughly 188% — over the last four years.
“Our fourth quarter and full year fiscal 2022 results cap an incredible year,” Singh stated. “Against the backdrop of a rapidly changing operating and economic environment, Chewy produced record-high revenue, profitability and free cash flow. Chewy’s disciplined execution and dedication to serving pet parents and partners with a widening ecosystem of offerings led to another year of market share gains in the pet category, which continues to demonstrate its resilience in the present environment.”
Chewy currently has 20.4 million active customers. Net sales per active customer averages $495, up 15.1% year-over-year, according to the company. In the third quarter of fiscal 2022, Chewy reported having 20.5 million active customers, with net sales per active customer averaging $477. While the company may have lost customers between quarters, the average spend per active customer has grown enough to cover this gap.
“We believe the modest sequential decline in active customers reflects the continued softness in discretionary spending experienced across the broader economy, as well as the residual impact of attrition from our 2020 and 2021 cohorts,” Singh said. “We anticipate returning to positive active customer growth this year and expect NSPAC [net sales per active customer] will continue to strengthen.”
Autoship customer sales are also on the rise, hitting a record high of $1.98 billion in the fourth quarter. This sales category grew 17.5% from the third quarter of fiscal 2022.
“With nearly 60% of our customers having joined our platform within the last three years, we believe there remains significant runway for our customers to spend progressively more with us the longer they stay,” Singh said.
The challenging supply chain environment and cross-category inflation continue to impact brands, retailers and consumers. Chewy has been fine-tuning its supply chain operations since 2021 in an effort to improve the customer experience and increase its gross margin. These efforts include import routing, inventory planning and placement, fulfillment automation and others.
Chewy has established three automated fulfillment facilities so far. It has made the decision to close two of its oldest fulfillment centers, which are not automated, and will transfer team members and operational assets from those centers to its new automated facilities nearby. The retailer is “on track” to open its fourth automated fulfillment center in Nashville, Tenn., in the first half of 2023, according to Singh.
“…Considering the magnitude of price increases that consumers have already experienced and may yet continue to experience, we will continue to take a surgical approach to optimize pricing,” Singh said. “Additionally, with supply chains recovering, we are closely monitoring our catalog to ensure we remain competitive in light of current consumer mindset. At this point in the year, we expect the overall result of these drivers to produce a net neutral impact on gross margin in 2023.”
Closing out its earnings report, Chewy shared guidance for the first quarter of fiscal 2023 and for the full year. For the first quarter, the company is aiming for net sales between $2.72 billion and $2.74 billion, which would represent a year-over-year increase between 12% and 13%. For fiscal 2023, Chewy expects net sales between $11.1 billion and $11.3 billion, which would represent year-over-year growth between 10% and 12%.
“The pet category has a US total addressable market that is over $130 billion, which has grown consistently through the ups and downs of economic cycles,” Singh said. “We continue to see significant white space for expansion, and we remain committed towards innovating at a high pace across both new product and service offerings as well as technological and operational advancements.”
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