Chuy's Holdings, Inc.

Good day, everyone, and welcome to the Chewy's Holdings Second Quarter 2022 Earnings Conference Call. Today's call is being recorded. At this time, all participants have been placed on 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 second quarter 2022 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 discussion 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 conditions. 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 our second quarter earnings call today. Our second quarter began with a positive top-line momentum as we continued to enjoy the strong demand from our guests craving the unique Choose experience. This was demonstrated by solid comparable sales growth, particularly in April and May, as compared to both last year and 2019. With that said, we have not been immune to recent sales volatility seen across the consumer landscape, resulting in flat to slightly positive comparable sales as compared to last year for the month of June and into the third quarter to date. It's also worth noting that we have endured the hottest May, June, and July on record in Texas, which has had a negative impact on our traditionally strong patio sales and alcohol mix. Furthermore, despite the unprecedented inflationary environment, our team's ongoing focus on cost management and operating efficiencies resulted in over a 19% restaurant-level operating margin, one of the best in casual dining segment and a 190 basis point improvement over our pre-pandemic level. At Chewy's, our goal has always been to provide fresh, made-from-scratch food and drink at an incredible value. And despite the cost environment, we are continually working to maintain our strong value gap versus our peers, which we believe will benefit us in the long run. With that in mind, we are taking an approximately 3.5% price increase in the third quarter in order to maintain a balance between protecting our store-level margin and maintaining our value proposition to our guests. Importantly, even with this price increase, our value proposition remains strong relative to our peers, which we believe will continue to give us future pricing power should the need arise. With that, let me update you on certain key aspects of our business, starting with staffing. We're pleased with the improvement we've made in terms of hiring during the second quarter and are comfortable with the progress we've made in our staffing levels. We believe the key to proper staffing is in retention of our team members, both hourly and managerial. During the quarter, we continued our retention bonus program for our managers, provided referral bonuses to our team members for providing successful new applicants, and most recently rolled out a new mental health and personal counseling benefit for all of our team members. We continue to be successful with our off-premise business. Mixed is at approximately 27% during the second quarter. This is above our targeted low to mid-20 off-premise goal, and we remain pleased with our team's execution. Also, with regard to off-premise, we made progress in expanding our catering business, which is now in 16 markets. We are on track to complete the rollout system-wide by the end of the year. In terms of menu innovation, if you recall, we streamlined our menu offerings at the onset of the pandemic and have been slowly adding certain popular items back into our menu as we return to a more normal operating environment. To that end, starting in the fourth quarter, we are planning to introduce quarterly specials we call CKOs, or Chewy's Knockouts, with a combination of old favorites and exciting new items offered on a limited time basis. This includes new items such as the Macho Burrito, Pork Boom Boom Enchiladas, and Chewy's Fried Chicken Tacos, all of which will be supported by our marketing initiatives. During the quarter, we continue to utilize digital media to not only introduce and highlight new menu items, but also as a recruiting tool. This includes the use of TikTok, organic influencer programs on Instagram, YouTube video advertising, and promotional advertising partnerships with DoorDash. Combined with the launch of our new website later this year, we are excited about the potential of our marketing initiatives allowing us to reach broader audience groups and to better connect with both new and returning guests. Before I turn the call to John, let me quickly touch on a development plan. During the quarter, we successfully opened a new restaurant in Midland, Texas, and are pleased with its performance to date. As we look ahead, we have adjusted our development expectation for the year to four new restaurants as a result of external challenges related to supply chain and construction. We have pushed the rest of the openings originally scheduled for 2022 to early 2023. With that, I will now turn the call over to our CFO, John Howard, to discuss our second quarter results.