Chuy's Holdings, Inc.

Good day, everyone, and welcome to the Chewy's Holdings Fourth Quarter 2021 Earnings Conference Call. Today's call is being recorded. At this time, all participants have been placed in a listen-only mode, and the lines will be open for your questions following the presentation. On today's call, we have Steve Hislop, President and Chief Executive Officer, and John Howey, Vice President and Chief Financial Officer of Chewy's Holdings Incorporated. At this time, I'll turn the conference over to Mr. Howey. Please go ahead, sir.

Thank you, Operator, and good afternoon. By now, everyone should have access to our fourth quarter 2021 earnings release. If not, it can be found on our website at Chewy's.com in the investors section. Before we begin our review of formal remarks, I need to remind everyone that part of our discussions today will include forward-looking statements. These forward-looking statements are not a guarantee of future performance, and therefore, you should not put undue reliance on them. These statements are also subject to numerous risks and uncertainties that could cause actual results to differ materially from what we expect. We refer all of you to our recent SEC filings for a more detailed discussion of the risks that could impact our future operating results and financial condition. With that out of the way, I'd like to turn the call over to Steve.

Thank you, John. Good afternoon, everyone, and thank you for joining us on the fourth quarter earnings call today. I hope everyone is staying safe and healthy. Our solid fourth quarter results are a direct testament to the tenacity and resilience of our team members in the face of uncertain economic conditions and the COVID-19 environment. Not only did we grow our top line by over 25%, but our continued focus on cost management and operating efficiencies have allowed us to improve our profitability by 100 basis points compared to last year and 700 basis points compared to 2019. As we mentioned previously, we continue to anticipate approximately 300 to 350 basis points of margin improvement over 2019, even after factoring in the current inflationary pressure. Comparable restaurant sales increased over 20% compared to 2020, and decreased 0.7% compared to 2019. It's worth noting that our fourth quarter 2021 performance was negatively impacted by the timing of Christmas compared to fiscal 2019. Excluding this Christmas shift, our fourth quarter comparable restaurant sales would have increased approximately 0.2% compared to 2019. All in all, we are pleased with our business trajectory and how our key pillars of safety, convenience, and value continue to provide a strong foundation for our operations. Nevertheless, we will remain nimble in the current environment, and we are focusing on several key aspects of our business to help us manage the external challenges. First, let me touch on staffing, since it's a topic on everyone's mind. As I've noted before, our people are the most valuable asset, and retention is something deeply rooted in our culture. We have historically prided ourselves on having a very low turnover rate And that continues to be the case. In fact, our management and hourly turnover are some of the best in casual dining sector and were lower in 2021 than pre-pandemic 2019. If you recall, we paid out 1.6 million retention bonuses for our managers during last year's second and third quarter as a thank you for their efforts of being in the line of fire to serve our guests every single day. We believe that when you stabilize your management team, you will also stabilize your hourly team members. which generally leads to higher performing stores. We have found that to be the case in practice. To further capitalize upon our hourly retention, we continue to pay referral bonus to our team members, rewarding them for bringing new people they would enjoy working with and looking for other creative ways to increase staffing within our restaurants. As a result, we continue to believe that we are in good position with regard to our overall staffing in the current tough labor environment. Switching to menu development, our guests come to our restaurants to enjoy our made-from-scratch food and drinks at a tremendous value. To that end, starting earlier this month, we have decided to bring back eight items into our menu, primarily combination plates. In addition, we are also in the process of introducing a new happy hour menu this month, which has been proven very popular with our guests in the past. We consider these menu additions to be a good mix of items with excellent margin profile and little added complexity to our kitchen operations, which should bode well for our top line growth and profitability as our traffic returns to more normalized levels. Turning to off-premise, we are pleased with our 28% mix during the fourth quarter. While we have seen a spike into the 30 plus percent range with the spread of the Omicron variant, we continue to believe that our menus can maintain a low to mid 20% off-premise mix longer term. We also look forward to expanding our catering offerings. We ended 2021 with catering in 14 markets. While we postpone adding catering in additional markets at the onset of the pandemic, we are now planning to add catering to the remaining of our system by the end of 2022. Another important aspect we are currently focused on is our marketing effort. As you remember, our marketing spend came down during the pandemic. In conjunction with the new addition to our menu, we are slowly ramping back up in our marketing initiatives to 2019 levels. For 2022, we will heavily utilize digital media, including our recent use of TikTok to not only introduce and highlight new menu items, but also as a recruiting tool. Other digital marketing initiatives include marketing an organic influencer program on Instagram, YouTube video advertising, promotional advertising partnership with DoorDash, and a launch of our new website later this year, all of which are designed to reach a broader audience group and allow us to better connect with the new and returning guests. Lastly, let me quickly discuss our development. For 2022, we are now planning to open between five to eight new restaurants, the majority of which will be in the back half of this year due to the ongoing labor shortages and supply chain issues that have negatively impacted the construction process industry-wide. With that, I'll now turn the call over to our CFO, John Howey, to discuss the fourth quarter results in greater detail.