Chuy's Holdings, Inc.

and welcome to the Chewy's Holdings fourth 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. 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, Inc. At this time, I'll turn the call over to Mr. Howey. Please go ahead, sir.

Thank you, Operator, and good afternoon. By now, everyone should have access to the fourth quarter 2022 earnings release. If not, it can be found at our website at Chewy's.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 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 Chief President and CEO, Steve Hislop.

Thank you, John. Good afternoon, everyone, and thank you for joining us on our fourth quarter earnings call today. We're proud of our strong results for the quarter, driven by organic, top-line growth and sustained operational efficiencies. Such was complemented by our continued capital return to shareholders through our share repurchases, enabled by the ongoing strength of our operating model. During the fourth quarter, we saw strong, comfortable sales growth across all periods, and importantly, our momentum has continued into January. We believe our fresh, made-from-scratch food and drinks at an incredible value continue to resonate with our guests and are the driving force behind our growth, regardless of how our guests choose to access the brand. Turning to our growth drivers, we'll start with menu innovation. As we noted last call, we launched our first-ever limited-time offer platform, Chewy's Knockouts in October. Chewy's Knockouts through quarterly specials introduced our guests to exciting new menu innovation while also reintroducing our guests to old favorites for a limited time. We plan to offer Chewy's Knockouts once per quarter for a six-week period of time. I'm thrilled to report that our first CKO drove incremental traffic and mixed at approximately 2.5% of all entrees sold during the six-week period. Importantly, We did not see consumer demand trail off in the latter weeks of the CKO period, as you do with many limited-time offers, and thus giving us increased confidence in the platform longer term. That said, while these results are encouraging, the CKO platform is still new to the brand, and we intend to continue to reiterate and experiment with their platform to determine what resonates best with our guests in the long term. Following the success of our first CKO, late January saw a return of our fan favorite, veggie enchiladas, as well as an introduction of our new wild burrito and hatched beef tacos. While we are only three weeks into the CKO period, we're excited by the results we've seen thus far. Next, we will turn to off-premise. Our momentum continued with the growth of our off-premise, which represented approximately 29% of total sales for this quarter. The delivery channel helped drive our off-premise growth as consumers embraced the opportunity to enjoy Chewy's high-quality, made-from-scratch food from the comfort of their own home. We also continue to fill out our existing catering markets and have further opportunities to expand in several other new markets in 2023 to complete the rollout of the catering program system-wide. Catering represented almost 4% of our fourth quarter sales and approximately 2.6% of our annual sales. We continue to believe that off-premise will represent a low to mid-20s of our sales over time, with catering contributing approximately four to six percent. Finally, in terms of our marketing initiatives, we continue to put 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. These initiatives initiatives have allowed us to effectively communicate our defining differences from our made from scratch food and drinks offered at an incredible value to our newly introduced CKO offerings and the unique overall experience at every Chewy's restaurant. Along with our new website, we believe these initiatives will help us to better connect with both new and returning guests. Moving to profitability, our ongoing focus on operational efficiencies and cost management resulted in a strong 17% restaurant-level operating margin, representing a 270-base point improvement over 2019. We achieved these results despite double-digit commodity inflation and high single-digit labor inflation. Looking at 2023, at the end of January, it took approximately 3.5% pricing. We believe this is an appropriate level to balance our strong value proposition to our consumers as well as solidifying our margin profile. We have not made any decisions on any additional pricing actions for the year, and we will reevaluate as necessary given the macro environment. Lastly, before I turn the call over to John, let me update you on our development plan. During the fourth quarter, we successfully opened two new restaurants in our core markets of Texas and Tennessee, bringing our total development to three restaurants during the year. We also closed one restaurant at the end of its lease term, as we have already developed another restaurant in a more desirable location for the trade area. In total, we had 98 restaurants at the end of fiscal year. As we look ahead, we are excited about the organic growth opportunities ahead for the brand through accelerated unit expansion. For 2023, we've developed a robust pipeline now consisting of six to seven new restaurants focused on markets where our concept is proven with high AUVs and brand awareness. This includes a Fayetteville, Arkansas restaurant, which is slated to open in late February, early March. With that, I will now turn the call over to our CFO, John Howey, to discuss our fourth quarter results in greater detail.