PLANTATION, FLA. — On Aug. 30, Chewy, Inc. shared its second-quarter financial results for the three-month period ended July 30. The company detailed several factors driving the business forward, including growth in the average amount its customers spend and an upcoming expansion into the Canadian market.

Net sales for the company were up 14.3% to $2.78 billion in the second quarter, with net income of $18.9 million. According to Chewy, non-discretionary categories including its Consumables and Healthcare divisions accounted for 85% of net sales in the second quarter.

The company’s gross margin was 28.3%, up 20 basis points year-over-year, and its net margin was 0.7%, down 20 basis points year-over-year. Adjusted EBITDA was up 4.6% to $86.9 million, and the pet retailer’s adjusted EBITDA margin was 3.1%, down 30 basis points year-over-year. Adjusted earnings per share remained flat at $0.15 versus year-ago.

“We delivered solid results in Q2 across both topline and profitability, with 14% growth exceeding guidance,” said Sumit Singh, chief executive officer of Chewy. “Chewy once again gained share as our customers recognize the power of our personalized autoship service, best-in-class healthcare experience, and overall value proposition as key differentiators, resulting in robust ordering behavior, which in turn is driving our strong performance.”

According to the company, it clocked 20.4 million active customers over the second quarter, which was down 0.6% year-over-year. Net sales per active customer averaged $530, up 14.7% from year-ago. Chewy noted this represents 60% from the $330 in net sales per active customer it averaged in 2019, when it went public. The company attributed this growth to price increases, growth for its Chewy Health ecosystem, increase in autoship participation and a growing customer base.

“Coming out of the summer months, we are sensing a shift in consumer mindset towards being more discernible and at the same time, with a higher willingness to consolidate their share of wallet to their trusted retailer of choice,” Singh said in the company’s second-quarter earnings call on Aug. 30. “This behavior is driven by a more fluid macro environment, including high levels of inflation, which have been passed to the industry over the past 18 months.

“…Now, while we're more insulated than some others, we are not fully exempt from the pressures currently facing the pet industry,” he added. “Pet household formation remains relatively muted. And as I mentioned above, the consumer mindset continues to be pressured. These facts taken together make the current environment a challenging period to forecast consumer behavior.”

Nearly 76% of the company’s total net sales in the second quarter were attributable to autoship customer sales. This figure was up 240 basis points year-over-year for the quarter.

The company shared its expansion into the Canadian marketplace is on track to launch in the third quarter.

“Canada represents a large and fast-growing pet category, and our teams are hard at work finalizing selection, ensuring the same convenient delivery experience and high bar service that our US customers enjoy,” Singh said.

The retailer is currently scaling automation at two of its four automated distribution facilities, and its fifth automated distribution center is expected to come online in early 2024. These investments are expected to increase efficiencies moving forward.

“Following below average CapEx intensity in the first quarter, CapEx spending increased in the second quarter,” explained Stacy Bowman, who is currently serving as interim chief financial officer of Chewy following the retirement of former CFO Mario Marte in July. “Overall, we expect 2023 capital expenditures to remain in the range of 1.5% to 2% of net sales. We finished Q2 with $905.4 million in cash and cash equivalents and marketable securities, nearly $300 million higher than the balance at this time last year, and we remain debt-free.”

The company expects net sales for the third quarter of fiscal 2023 to be between $2.74 billion and $2.76 billion, which would represent 8% to 9% growth year-over-year. For the full fiscal year 2023, Chewy reaffirmed its net sales expectations sales between $11.15 billion and $11.25 billion, which would reflect between 10% and 12% year-over-year growth.

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