PLANTATION, FLA. — Online pet retailer Chewy, Inc., shared its first quarter financial results on May 31, detailing what the company described as “record profitability,” as well as the start of its international expansion.

Following the three-month period ended April 30, Sumit Singh, chief executive officer at Chewy, said the company is “off to a strong start” in 2023.

“Our first quarter results reflect accelerating double-digit topline growth and continued expansion of adjusted EBITDA margin,” Singh stated. “Net sales per active customer and autoship customer sales also both reached new record highs for the company and continued to fuel customer loyalty and spend towards our platform. The superior value proposition of the Chewy brand continues to resonate, and our team continues to demonstrate operating discipline and high-quality execution.”

The company reported net loss of $22.2 million, up 20% from $18.5 million in the first quarter of fiscal 2022. Net sales totaled $2.8 billion, up 14.7% or $356.3 million year-over-year. Adjusted EBITDA was $110.2 million, up 80% or nearly $50 million year-over-year. Gross margin grew 90 basis points to 28.4%, according to Chewy.

The company reported active customers were down nearly 1% year-over-year in the first quarter to 20.4 million customers, but up slightly from the fourth quarter of 2022, according to Mario Marte, chief financial officer at Chewy.

Net sales per active customer continue to grow. For the first quarter, Chewy reported net sales per active customer (NSPAC) of $512, up 14.8% year-over-year. The retailer is also growing its share of autoship customer sales as a percentage of net sales, which accounted for nearly 75% of total sales in the first quarter.

“Consistent NSPAC growth is driven by strong and ongoing customer engagement in programs like autoship and expansion in cross-category purchases,” Singh said in the company’s first-quarter earnings call on May 31. “…Our autoship subscription service is a powerful tool for us, driving recurring and predictable revenue and long-term customer loyalty.”

The company spent less than anticipated on promotions and found leverage with freight and packaging, allowing it to drive profitability over the quarter.

Chewy also announced it will venture north to Canada in the third quarter, marking its entrance onto the international pet retail playing field. According to the company, Canada’s substantial — and growing — pet market makes it an enticing entry point for Chewy.

“Having undergone a multiyear transition of our tech stack into the cloud, we can now leverage our platform to be reliably deployed in Canada without meaningful incremental investment,” Singh said. “As we assessed which geography would be more suitable for our expansion plans, we honed in on Canada's large and growing market where we see a path to achieving market share and profitability akin to our US business.”

The retailer shared it will focus on the Greater Toronto market first, which it noted is Canada’s largest metropolitan area, followed by a gradual expansion across the country.

Chewy noted the company will leverage its US supply chain network where possible, but will otherwise establish a local third-party logistics and fulfillment partner as it transitions to the Canadian market. This will allow the company to focus on customer experience and hold off on making sizeable investments in infrastructure until the Canadian business scales to support such an investment.

The company also announced the completion of its fourth automated fulfillment center (FC) in Nashville, Tenn., within the first quarter.

“Our growing network of automated FCs accompanied by our supply chain transformation… are improving margin efficiency and we believe will contribute to the scaling of our long-term SG&A target,” Singh noted.

The company reaffirmed its second-quarter and full-year 2023 guidance, expecting between $2.75 billion and $2.77 billion in net sales in the second quarter, which would represent 13% to 14% year-over-year revenue growth. For the full year 2023, Chewy expects net sales between $11.15 billion and $11.25 billion, which would reflect between 10% and 12% year-over-year growth.

“Our operating philosophy remains intact, and our team is highly committed to driving sustainable, profitable growth,” Marte concluded.

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