Chuy's Holdings, Inc.

Good day, everyone, and welcome to the Chewy's Holdings Third Quarter 2022 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 prepared remarks. If anyone should require operator assistance during a conference, please press star zero on your telephone keypad. 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 third quarter 2022 earnings release. If not, it can be found at our website at www.chewys.com in the Investors section. Before we begin our 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 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 our third quarter earnings call today. We are pleased with our third quarter results, which started somewhat slow in July due to record heat in Texas, but finished with strong top line momentum in August and September. This positive trend has continued thus far into the fourth quarter, and we believe that our philosophy of offering fresh, made-from-scratch food and drinks at an incredible value continues to resonate with our guests and is the driving force behind our growth. During the third quarter, we implemented a 3.5% price increase that we believe maintains the balance between protecting our store-level margins while maintaining the superior value proposition our guests have come to expect from Chewy's. Even with this price increase, we believe the value gap relative to our peers remains strong. In terms of profitability, our team continues to focus continued focus on cost management and operating efficiencies resulted in a 17.5 restaurant-level operating margin, representing a 300 basis point improvement over 2019. Moving to key aspects of our four-wall operation, we continued to make progress on hiring and staffing our restaurants during the quarter through a number of initiatives, including our newly implemented Mental Health and Personal Counseling Benefit, we've been able to continue to improve our team member retention rate with the positive benefits to our guest experience. Additionally, our team member referral bonus program has continued to improve our flow of new applicants. We sustained our positive momentum in our off-premise business during the quarter, mixing at approximately 26% and remaining above our target mix of low to mid-20s. We are pleased with our team's off-premise execution, and we remain on track to complete the rollout of our catering program system-wide by the end of the year. Turning to menu innovation, in late October, we introduced Chewy's Knockouts, or CKOs, to our guests. The CKO platform allows us to introduce quarterly specials consisting of old favorites and exciting new items that are offered on a limited time basis. We believe our CKOs create excitement and additional awareness around what differentiates Chewy's and is a testament to our commitment to menu innovation and variety. Starting in late October, we introduced items such as Macho Burrito, Pork Boom Boom Enchiladas, and our new Chewy's Fried Chicken Tacos as part of the CKO platform. We have also curated additional new items for our next CKO in the first and second quarter of next year, and we look forward to sharing our new innovations in future calls. I can assure you we're just getting started. During the quarter, we continued our marketing initiatives with a heavy emphasis on digital media, including the use of TikTok, organic influencer programs on Instagram, YouTube video advertising, and a promotional advertising partnership with DoorDash. Moreover, in conjunction with our CKO offerings, we will partner with Chase to launch a new campaign this month as part of their Chase Ultimate Rewards Program. Along with our new website, we believe our marketing efforts will allow us to reach a broader audience group and more effectively connect with both new and returning guests. Moving on to development plan, we expect to open two new restaurants in the fourth quarter for a total of three new restaurants openings of fiscal 2022. Due to supplying chain delays, our Fayetteville, Arkansas restaurant, originally expected to be a fourth quarter open, will now open in early 2023. Additionally, we are planning on closing one restaurant in the final days of 2022 at the end of the lease term, as we have already developed another restaurant in a more desirable location for the trade area. As we look forward to fiscal 2023, we're initially expecting to open between six and nine new restaurants, where they focus on markets where our concept is proven with high AUVs and brand awareness. 2022 has shown us that the development timelines are more challenging in the post-pandemic world, especially with ongoing supply chain delays that remain out of our direct control. As a result, we're tempering our forecast to account for this as we want to set a reasonable and achievable target, but one that we believe still represents the most units we've developed in the last four years. We will continue to work to secure additional openings as we progress through the year. Finally, I'm excited to announce that we accelerated our share repurchase program, which we completed in October. Additionally, as you can see in our announcement this afternoon, we are pleased to announce a new 50 million share repurchase program, which demonstrates the strength of our financial position and our commitment to long-term shareholder value. With that, I'll now turn the call over to our CFO, John Howey, to discuss Our third quarter results in greater detail.