PLANTATION, FLA. — Chewy, Inc. recently released its fiscal 2022 second quarter earnings for the three-month period ended July 31, showing double-digit net sales growth and an improvement in net income compared to year-ago losses.

Second-quarter net sales totaled $2.43 billion, up 12.8% from $2.16 billion in the second quarter of fiscal 2021. Adjusted EBITDA totaled $83.1 million, up $59.8 million year-over-year, and gross margin expanded 60 basis points to 28.1% year-over-year.

The company incurred a net loss of $16.7 million in the second quarter of 2021, but rebounded to a net income of $22.3 million in the second quarter of 2022. Chewy attributed this to sales momentum, gross margin improvements and optimized operating expenses.

“We are proud of our second quarter 2022 performance and ability to deliver double-digit topline growth and margin expansion in a rapidly evolving macro environment,” said Sumit Singh, chief executive officer of Chewy. “We believe our superior customer value proposition, strength in resilient demand categories such as food and healthcare, and the recurring nature of our Autoship business enabled us to continue taking market share and extend our leadership position in the recession-resistant pet category.”

Sales from the company’s Autoship segment totaled $1.78 billion, up 17.3% year-over-year, and accounted for 73.1% of total net sales over the quarter. Chewy has grown its active customer based to 20.5 million people, up 2.1% from year-ago numbers. Net sales per active customer (NSPAC) also increased to $462, up 14.4% year-over-year. Both categories — Autoship sales as a percentage of net sales and NSPAC — set new records for Chewy in the second quarter.

The impact of inflation has also affected the pet e-commerce retailer, with growing economic uncertainty “curtailing some of [consumers’] purchase activity,” Singh noted in the company’s second-quarter earnings call on Aug. 30.

“Growth in pricing during the quarter exceeded escalating cost inflation,” said Mario Marte, chief financial officer. “Our gross margin performance also continues to reflect the progress we are making in our supply chain and logistics initiatives.”

Chewy will continue to focus on its pet health and food categories as key non-discretionary growth drivers.

“Even as consumers pull back in select areas, Chewy outperformed broader industry trends on the strength of our market leadership in nondiscretionary recurring revenue categories like food and health care, the product categories that are most important to pet parents,” he added. “…We saw softer demand in the second quarter for discretionary products with longer replacement cycles, such as hard goods, which offset some of our positive momentum in food and health care.”

As supply chain issues contribute to input cost and price inflation for pet products and brands, Singh shared several initiatives to combat cost inflation for supply chain logistics impacting its own business.

“We have multiple initiatives underway to improve profitability and customer experience by improving inventory placement, reducing inbound and outbound freight costs and driving incremental fulfillment cost leverage through automation,” he said. “To this end, we successfully launched our third automated fulfillment center last month located in Reno, Nevada. The benefits from automation continue to expand across our network and our pace of realizing these benefits continue to accelerate.”

The company also onboarded its second import-routing facility, this time on the East Coast, which allows the company to optimize freight distribution to its fulfillment centers with import-routing operations now on both US coasts.

“As pet parents pull back in some areas, they refocus their spending on categories centered on the health and well-being of their pets,” Singh said. “The strength and durability of our value proposition positions Chewy well to compete and take additional market share in this environment. Looking ahead, we believe these same strengths which include market leadership across recurring demand categories such as food and health care and rapid innovation in service of customers will enable us to keep winning in pet, a category that has proven its durability throughout economic cycles.”

Chewy revised its full-year fiscal 2022 guidance, projecting net sales between $9.9 billion and $10 billion, which would represent 11% to 12% growth year-over-year. The company’s adjusted EBITDA margin is expected between 1.75% and 2% for the full fiscal year.

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