Chuy's Holdings, Inc.

Good day, everyone, and welcome to the Chewy's Holdings second 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. Good afternoon. By now, everyone should have access to our second quarter 2023 earnings release. If not, it can be found on our website at chewies.com in the Investors section. Before we begin our 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. Looking ahead, We plan to release our third quarter 2023 earnings on Thursday, November 2nd, after the market closed. With that out of the way, I'd like to turn the call over to Chewy's President and CEO, Steve.

Thank you, John. Good afternoon, everybody, and thank you for joining us on our call today. Our results marked another strong quarterly performance with second quarter revenue growth of over 7%, including a 3.2% improvement in comparable restaurant sales. During the quarter, we saw solid comparable sales growth across all periods. Moreover, our strong top-line momentum has continued and we are pleased with the results we've seen thus far into the third quarter. In terms of profitability, we grew restaurant-level operating margin dollars by over 21% and generated an industry-leading restaurant-level margin as of a percent of revenue of 21.6%, which represents a 250 basis point improvement over last year. We are proud of what our team was able to accomplish during the quarter and believe that these results are a testament to the continued progress we are making on the various initiatives we've put in place to drive sustainable top-line growth and profitability. Moving on to our growth drivers, we continue to focus on menu innovations through our Chewy's Knockouts, our CKO platform. In April, we introduced our guests to several exciting menu items, including the Tex-Mex Burrito Bowl, Grilled Grouper Tacos, and Creamy Green Chili Chicken Enchiladas. The CKO perform continues to resonate with our guests as our April CKO drove incremental traffic and mix at a higher percentage of the sales than our previous CKOs. To build upon this excitement, in late July, we launched our most recent CKO with Hatch Green Chili Burger, steak burrito bowl, and chicken tenga enchiladas. Early feedback from our guests thus far has been very encouraging. Our off-premise channel also performed very well during the quarter, mixing at approximately 28% of total sales as compared to 27% a year ago. The delivery channel helped drive our off-premise growth with over a 30% increase in volume, mixing now at approximately 10.6%, of our second quarter sales, an increase of approximately 210 basis points versus last year. In addition, we saw a significant improvement in our catering channel as we continue to build out our catering markets, representing 3.5% of our second quarter sales, an increase of approximately 80 basis points versus last year. Over time, we continue to believe our off-premise business will represent at least the mid-20s of our sales, with catering contributing approximately 4% to 6% of the total sales. In terms of our marketing initiatives, our optimized digital media strategy effectively communicates our defining differences from our incredible value for our made-from-scratch food and drink to our exciting CKO offerings and overall differentiated experience at every Chewy's restaurant. This includes the use of TikTok, organic influencer programs on Instagram and Facebook, YouTube video advertising, and a promotional advertising partnership with DoorDash. Lastly, let me provide some update on our development plan. During the second quarter, we successfully opened one new restaurant in Oklahoma City, Oklahoma. Subsequent to the end of the second quarter, we opened one additional restaurant in Harker Heights, Texas. We're pleased to report that all of our recent openings have performed to our expectation. Additionally, in the second quarter, we closed one restaurant in the state of Illinois's This was a unique opportunity to exit the lease of a satellite location at no cost to the company, and we do not currently expect any additional strategic closures. As we look ahead, we remain excited about our organic growth opportunities. For 2023, due to the continued permitting and inspection delays that are outside of our control, we are now expected to open five new restaurants, three of which have already opened and the remaining units scheduled for the fourth quarter. Unit growth remains a core piece of our long-term growth model with our strategic focus on markets where our concept is proven with high AUVs and brand awareness. We continue to believe we can achieve 10% unit growth over time, and the growth we expect to achieve in 2023 and 2024 will be important steps to get there. With that, I'll now turn the call over to our CFO, John Howey, to discuss our first quarter results in greater detail.