Chuy's Holdings, Inc.

Good day, everyone, and welcome to the Chewy's Holdings first quarter 2023 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 Incorporated. 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 our first quarter 2023 earnings release. If not, it can be found on 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 that 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 Chewy's President and CEO, Steve Hislop.

Thank you, John. Good afternoon, everyone, and thank you for joining us on our first quarter earnings call today. We're proud of our results for the quarter with top-line momentum from the fourth quarter continuing into the new year, resulting in comparable restaurant sales growth of 8%. In addition, we achieved store-level operating margins of 19.7%, up 70 basis points year-over-year, which continues to be among the best in casual dining industry. Combined with the extensive unit growth opportunity ahead of us, we have never been more excited about what lies ahead for Chewy's. During the first quarter, we saw positive comparable sales growth across all periods, with January and February benefiting from the Omicron variant and favorable weather comparisons. Importantly, our positive momentum has continued into April. Ultimately, we believe our fresh, made-from-scratch food and drink at an incredible value continue to resonate with our guests across the income spectrum and are the driving force behind our growth. Turning to our growth drivers, we'll start with menu innovation. January saw the return of our fan favorite veggie enchiladas, as well as the introduction of our new wild burrito and hatched beef tacos through our Chewy's Knockout platform. We continue to be excited about our CKOs as that platform drove incremental traffic and mixed at approximately 2.5% of all entrees sold during the six-week period, which is in line with our first iteration in October. In our third iteration, late April, saw the Tex-Mex Burrito Bowl, grilled grouper tacos, and creamy green chili chicken enchiladas added to the Chewy's menu for a limited time. While we are only two weeks into the current CKO period, we remain encouraged by the results we've seen thus far. Our momentum also continued with the growth of our off-premise channel, which represents 27% of total sales this quarter, While our off-premise mix is down modestly compared to last year, we are thrilled to see the off-premise dollars are up year over year with the reduced off-premise mix driven by continued improvement in our dine-in sales. Long-term, we believe the off-premise will represent mid-20% of our sales with catering contributing approximately 4% to 6%. 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 have allowed us to effectively communicate our defining differences from our incredible value for made-from-scratch food and drink to our newly introduced CK offerings and the unique overall experience at every Chewy's restaurant. Moving to profitability. Our ongoing focus on operational efficiencies and cost management resulted in a strong 19.7 restaurant-level operating margin, representing a 70 basis point improvement year over year. We believe these results showcase the strength of Chewy's brand and our ability to generate restaurant-level margin that is among the best in the industry. As a reminder, at the end of January, we took approximately 3.5% pricing. We believe this is the appropriate level to balance a strong value proposition to our consumers with solidifying our margin profile as demonstrated by the results we were able to achieve this quarter. Lastly, before I turn the call to John, let me update you on development plan. During the first quarter, we successfully opened one new restaurant in Fayetteville, Arkansas, bringing our total to 99 restaurants. Looking ahead, we remain excited about the organic growth opportunities ahead, for the brand through accelerated unit expansion. For 2023, we continue to anticipate opening six to seven new restaurants, focusing on markets where our concept is proven with high AUVs and brand awareness. With that, I'll now turn the call over to our CFO, John Howey, to discuss our first quarter results in greater detail.