UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM ~~10-K~~

10-K/A

Amendment No. 1

(Mark One)

☒	ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

☒~~ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934~~

For the fiscal year ended January ~~31, 2021~~29, 2023

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ____ to ____

Commission File Number:

001-38936

(Exact name of registrant as specified in its charter)

(State or other jurisdiction of

incorporation or organization)

7700 West Sunrise Boulevard, Plantation, Florida

(Address of principal executive offices)

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Name of each exchange

Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐ No ☒

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation

S-T (§

(§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a

non-accelerated

filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule

12b-2

of the Exchange Act:

DOCUMENTS INCORPORATED BY ~~REFERENCE~~REFERENCE: None

Auditor Name: Deloitte & Touche LLP

EXPLANATORY NOTE

Chewy, Inc. (“Chewy,” the ~~registrant’s Definitive Proxy Statement relating~~“Company,” “we,” “our,” or “us”) is filing this Amendment No. 1 on Form

10-K/A

(this “Amendment”) to amend the ~~Annual Meeting of Stockholders are incorporated by reference into Part III of this~~Company’s Annual Report on Form

10-K ~~where indicated. The registrant's Definitive Proxy Statement will be~~

for the fiscal year ended January 29, 2023, originally filed with the Securities and Exchange Commission (the “SEC”) on March 22, 2023 (the “2022

10-K”),

to include the information required by Items 10 through 14 of Part III of Form

10-K.

This information was previously omitted from the 2022

10-K

in reliance on General Instruction G(3) to Form

10-K,

which permits the information in the above referenced items to be incorporated in the Form

10-K

by reference from the Company’s definitive proxy statement (the “Proxy Statement”) if it is filed no later than 120 days after the Company’s fiscal

year-end.

We are filing this Amendment to provide the information required in Part III of Form

10-K

because the Proxy Statement containing such information was inadvertently not filed by the Company within 120 days after the end of the ~~registrant’s~~ fiscal year ~~ended January 31, 2021.~~covered by the 2022

10-K.

This Amendment (i) amends and restates in their entirety Items 10, 11, 12, 13 and 14 of Part III of the 2022

10-K

and (ii) deletes the reference on the cover of the 2022

10-K

to the incorporation by reference of portions of our Proxy Statement into Part III of the 2022

10-K.

Pursuant to Rule

12b-15

under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), this Amendment also contains certifications pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, which are attached hereto. Because no financial statements have been included in this Amendment and this Amendment does not contain or amend any disclosure with respect to Items 307 and 308 of Regulation

S-K,

paragraphs 3, 4, and 5 of the certifications pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 have been omitted and we are also not filing currently dated certifications pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. Terms used but not defined herein are as defined in our 2022

10-K.

Except as described above, no other changes have been made to the 2022

10-K,

and this Amendment does not modify, amend or update in any way any of the financial or other information contained in the 2022

10-K.

This Amendment does not reflect events occurring after the date of the filing of our 2022

10-K

and, except as expressly set forth herein, speaks as of the date of the filing of our 2022

10-K.

Accordingly, this Amendment should be read in conjunction with our 2022

10-K

and with our filings with the SEC subsequent to the filing of our 2022

10-K.

AMENDMENT NO. 1 TO ANNUAL REPORT ON FORM 10-K

For the Fiscal Year Ended January ~~31, 2021~~

29, 2023

TABLE OF CONTENTS

PART III

Item 10. Directors, Executive Officers and Corporate Governance

Board of Directors (“Board”)

Our Board’s responsibility is to oversee, on behalf of our stockholders, the conduct of our Company’s business, provide advice and counsel to our Chief Executive Officer and senior management, protect our Company’s best interests, and foster the creation of long-term value for our stockholders. Our Board currently consists of twelve directors, divided into three classes with staggered three-year terms. Each class consists of one-third of the total number of directors. Until such time as the Class B common stock represents less than 50% of the combined voting power of Class A and Class B common stock, any newly-created directorship on our Board that results from an increase in the number of directors and any vacancy occurring on our Board shall be filled by (i) a majority of the directors then in office, even if less than a quorum, (ii) a sole remaining director, or (iii) the stockholders. A director elected by our Board to fill a vacancy in a class, including vacancies created by an increase in the number of directors, shall serve for the remainder of the full term of that class or until the director’s successor is duly elected and qualified, or until their earlier death, resignation, retirement, disqualification, or removal.

Our Board is composed of a diverse group of individuals, with complementary skills, backgrounds, experiences, and perspectives to serve and guide our Company. Our directors are evaluated and selected based on, among other things, their integrity and character, independent judgment, track record of accomplishment in leadership roles, as well as their professional and corporate expertise, skills and experience. Our Board is composed of directors that have collective backgrounds in finance and accounting, investments and venture capital, business operations, e-commerce, corporate governance and compliance, growth and transformation, technology, retail and customer service, customer engagement and marketing, risk management, compensation and human resources, healthcare, environmental and sustainability, diversity, equity and inclusion, and other relevant areas to oversee our key strategic and operational issues. Many of our directors have experience serving on boards and board committees of other public companies and have an understanding of corporate governance practices and trends and different business processes, challenges, and strategies.

The following chart reflects our directors’ current service on board and board committees of other public companies as of May 30, 2023.


Director Name		Public Company		Public Company
Fahim Ahmed		Cyxtera Technologies, Inc.⁽²⁾⁽³⁾		Appgate, Inc.

~~Part IV.~~ James Nelson		Global Net Lease, Inc.		Xerox Holdings Corporation⁽¹⁾⁽³⁾

~~Item 15.~~ Martin H. Nesbitt	~~Exhibits and Financial Statement Schedules~~	73
~~Item 16.~~ American Airlines, Inc.⁽¹⁾			~~Form 10-K Summary~~	74 CenterPoint Energy, Inc.
	~~SIGNATURES~~		75
Lisa Sibenac		Appgate, Inc.

Sumit Singh		Booking Holdings, Inc.

James A. Star		Equity Commonwealth⁽²⁾⁽³⁾

Raymond Svider		Altice USA, Inc.⁽¹⁾⁽²⁾		GFL Environmental Inc.

⁽¹⁾	Audit Committee Member

⁽²⁾	Compensation Committee Member

⁽³⁾	Nominating and Corporate Governance Committee Member

The following table sets forth select director information as of May 30, 2023:

Name

Age

Class

Director
Since

Current
Term Expires

Position

Committee Membership

NCGC

Marco Castelli⁽¹⁾

2022

2023

Director

James Nelson⁽²⁾

2021

2023

Director

Martin H. Nesbitt⁽³⁾

2020

2023

Director

Raymond Svider⁽⁴⁾

2019

2023

Chairperson

Fahim Ahmed⁽⁵⁾

2019

2024

Director

✓

Michael Chang⁽⁶⁾

2019

2024

Director

✓

Kristine Dickson⁽⁷⁾

2021

2024

Director

✓

James A. Star⁽⁸⁾

2019

2024

Director

✓

Mathieu Bigand⁽⁹⁾

III

2022

2025

Director

David Leland⁽¹⁰⁾

III

2019

2025

Director

Lisa Sibenac⁽¹¹⁾

III

2019

2025

Director

Sumit Singh⁽¹²⁾

III

2019

2025

Director and CEO

Number of fiscal year 2022 meetings


AC: Audit Committee		¶ Committee Chairperson

CC: Compensation Committee		✓ Committee Member

NCGC: Nominating and Corporate Governance Committee

⁽¹⁾	Elected to our Board effective May 23, 2022.

⁽²⁾	Elected to our Board effective July 19, 2021, and appointed as Chairperson of our Audit Committee effective September 8, 2021.

⁽³⁾	Elected to our Board effective September 21, 2020.

⁽⁴⁾	Elected as Chairperson of our Board effective April 29, 2019, and appointed as Chairperson of both our Compensation and Nominating and Corporate Governance Committees effective June 13, 2019.

⁽⁵⁾	Elected to our Board effective April 29, 2019, and appointed as member of both our Compensation and Nominating and Corporate Governance Committees effective June 13, 2019.

⁽⁶⁾	Elected to our Board effective April 29, 2019, and appointed as member of our Nominating and Corporate Governance Committee effective June 13, 2019.

⁽⁷⁾	Elected to our Board and as a member of our Audit Committee effective July 14, 2021.

⁽⁸⁾	Elected to our Board effective June 13, 2019, and appointed as a member of our Audit Committee effective May 29, 2020.

⁽⁹⁾	Elected to our Board effective September 14, 2022.

⁽¹⁰⁾	Elected to our Board effective September 10, 2019.

⁽¹¹⁾	Elected to our Board effective April 29, 2019.

⁽¹²⁾	Elected to our Board effective April 29, 2019.

Marco Castelli. Mr. Castelli currently serves as Partner at BC Partners LLP (BC Partners LLP, together with its affiliates, “BC Partners”), which is an international investment firm that specializes in the investment of assets under management in private equity, private debt, and real estate. Before joining BC Partners in 2006, Mr. Castelli served as a management consultant at Bain & Company, a management consulting company, from January 2005 to August 2006. Mr. Castelli currently serves on the boards of Industria Macchine Automatiche S.p.A., a manufacturing company; Forno d’Asolo S.p.A., a manufacturing company; DentalPro, a dental care and services company; and Cigierre – Compagnia Generale Ristorazione S.p.A., a restaurant developer. Mr. Castelli holds a Master of Business Administration degree from the University of Chicago, Booth School of Business and a degree in Business Administration from Bocconi University in Italy. Mr. Castelli’s individual qualifications and background as a director include extensive finance, investments, and venture capital experience.

James Nelson. Mr. Nelson currently serves as Chief Executive Officer of Global Net Lease, Inc. (“GNL”), a publicly-traded real estate investment trust, a position he has held since July 2017, and he has served as a director of GNL since March 2017. Mr. Nelson previously served as a member of GNL’s audit committee from March 2017 until July 2017. Mr. Nelson was Chairman and Chief Executive Officer of Eaglescliff Corporation, a specialty investment banking, consulting, and wealth management company, from 1986 until 2009. From 1998 to 2003, he was Chairman and Chief Executive Officer of Orbit Aviation, Inc., a company engaged in the acquisition of Boeing business jets for private and corporate clients, and from 1995 to 1999, Mr. Nelson was Chief Executive Officer and Co-Chairman of Orbitex Management, Inc., a financial services company. Mr. Nelson currently serves on the board of directors of Xerox Holdings Corporation, a technology product and services company, since 2021 and as

~~CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS~~

~~This Annual Report~~

Chairman since 2022. Mr. Nelson previously served on ~~Form 10-K contains forward-looking statements about us~~the board of directors for other publicly-traded companies including Roman DBDR Tech Acquisition Corp, a special purpose acquisition company, from 2020 to 2021; Herbalife Nutrition Ltd., a nutritional products retailer, from 2014 to 2021; Caesars Entertainment, Inc., a hotel and ~~our industry that involve substantial risks~~casino entertainment company, from 2019 to 2020; Icahn Enterprises G.P. Inc., the general partner of Icahn Enterprises L.P., a diversified holding company, from 2001 to 2019; and ~~uncertainties. All statements other than statements~~New York REIT, Inc., a real estate investment trust, from 2015 to 2017. Mr. Nelson’s individual qualifications and background as a director include public company board experience and extensive accounting, compliance, environmental, finance, risk management, technology, and operational and strategic experience as chief executive officer of ~~historical facts contained in this Annual Report~~various companies.

Martin H. Nesbitt. Mr. Nesbitt currently serves as Co-Chief Executive Officer of The Vistria Group, LLC, an investment firm focused on ~~Form 10-K, including statements regarding our future results~~the education, healthcare, and financial services industries, a position he has held since 2012. From 1996 to 2012, Mr. Nesbitt was cofounder and Chief Executive Officer of ~~operations or financial condition, business strategy~~TPS Parking Management, LLC (“TPS Parking”), an owner and ~~plans and objectives~~operator of ~~management for future operations, are forward-looking statements. In some cases, you can identify forward-looking statements because they contain words such~~off-airport parking facilities. Prior to TPS Parking, Mr. Nesbitt served as “anticipate,” “believe,” “contemplate,” “continue,” “could,” “estimate,” “expect,” “intend,” “may,” “plan,” “potential,” “predict,” “project,” “should,” “target,” “will” or “would” or the negative of these words or other similar terms or expressions.

~~These forward-looking statements include, but are not limited to, statements concerning our ability to:~~

•~~successfully manage risks relating to the spread of coronavirus (also known as COVID-19), including any adverse impacts on our supply chain, workforce, facilities, customer services and operations;~~

•~~sustain our recent growth rates and manage our growth effectively;~~

•~~acquire new customers in a cost-effective manner and increase our net sales per active customer;~~

•~~accurately predict economic conditions, particularly the impact on economic conditions~~an officer of the ~~spread~~Pritzker Realty Group, L.P. and as Investment Manager at LaSalle Partners, each a commercial real estate firm. Mr. Nesbitt currently serves on the board of ~~COVID-19,~~directors of American Airlines Group Inc., a network air carrier that provides air transportation for passengers and ~~their impact on~~cargo; and CenterPoint Energy, Inc., an electric and natural gas utility. From 2011 to 2021, Mr. Nesbitt served as a director of Jones Lang LaSalle Incorporated, a commercial real estate services company; and from 2013 to 2018, he was a director of Norfolk Southern Corp., a transportation company. Mr. Nesbitt currently serves as a trustee of Chicago Museum of Contemporary Art and is the former chairman of the board of the Chicago Housing Authority and a former board member of the Chicago 2016 Olympic Committee. Mr. Nesbitt holds a Master of Business Administration degree from the University of Chicago and a Bachelor of Science degree and honorary doctorate from Albion College. Mr. Nesbitt’s individual qualifications and background as a director include public company board experience and extensive accounting, compliance, environmental, finance, risk management, and operational and strategic experience as chief executive officer and founder of various companies.

Raymond Svider. Mr. Svider currently serves as Partner and Chairman of BC Partners and as Chairman of the Executive Committee of BC Partners. Since Mr. Svider joined BC Partners in 1992, he has led investments in various sectors, including consumer ~~spending patterns, particularly in~~and retail, technology, media and telecom, healthcare, industrials, and business services. He currently holds the ~~pet products market, and accurately forecast net sales and appropriately plan our expenses in the future;~~role of Non-Executive

•~~introduce new products or offerings and improve existing products;~~

•~~successfully compete in the~~ Chairman of PetSmart, a pet products and services retailer; Chairman of the board of Valtech SE, a technology company; Chairman of the board of Keter Group Holding Sarl, a resin-based outdoor furniture manufacturing company; and Chairman of the of the board of Madison Logic, Inc., a marketing company. He serves on the boards of Altice USA, Inc., a technology company; EAB Global, Inc., an educational technology company; GardaWorld Corporation (“GardaWorld”), a security services company; GFL Environmental Inc. (“GFL Environmental”), a waste management company; NAVEX Global, Inc., a technology company (“Navex”); and the board of the holding company of Presidio Inc. (“Presidio”), an information technology services company. Mr. Svider previously served as a director of Appgate, Inc. (“Appgate”), a technology company; Intelsat S.A.; Accudyne Industries LLC; Cyxtera Technologies, Inc.; Teneo Global; Office Depot, Inc.; Multiplan, Inc.; Unity Media Group; Neuf Cegetel; Polyconcept; Neopost; Nutreco; UTL; and Chantemur. Mr. Svider holds a Master of Business Administration degree from the University of Chicago and Master of Science degrees in engineering from Ecole Polytechnique, France and Ecole Nationale Superieure des Telecommunications, France. Mr. Svider’s individual qualifications and background as a director include business acumen and leadership experience and make him particularly well-suited for the roles of Chairperson of our Board and Chairperson of our Compensation and Nominating and Corporate Governance Committees.

Fahim Ahmed. Mr. Ahmed currently serves as Partner at BC Partners, where he currently serves as the Chief Operating Officer and is a member of BC Partners’ Management Committee. Before joining BC Partners in 2006, Mr. Ahmed served as a consultant at Boston Consulting Group, a management consulting company, from 2004 to 2006 and from 2000 to 2002. Mr. Ahmed currently serves on the boards of Cyxtera Technologies, Inc., a technology company; Appgate; Presidio; and PetSmart. He previously served as a director of Suddenlink Communications, a telecommunications company. Mr. Ahmed holds a Bachelor of Arts degree from Harvard University and a Master of Philosophy degree in economics from Oxford University, where he was a Rhodes Scholar. Mr. Ahmed’s individual qualifications and background as a director include extensive accounting, compensation, and finance experience, and in-depth knowledge of the retail, ~~industry, especially~~telecommunications, and technology industries.

Michael Chang. Mr. Chang currently serves as Partner at BC Partners. Before joining BC Partners in 2009, Mr. Chang served as Principal of JLL Partners, LLC, a private equity firm, from 1999 to 2009. Mr. Chang currently serves on the boards of Zest Dental Solutions, a dental products manufacturer; Women’s Care Enterprises, LLC (“Women’s Care”), a health services company; CeramTec GmbH, a manufacturer and supplier of technical ceramics; and PetSmart. Mr. Chang holds a Master of Business Administration degree from the Harvard Business School and a Bachelor of Arts degree in economics from The Wharton School of the University of Pennsylvania. Mr. Chang’s individual qualifications and background as a director include extensive finance experience, and in-depth knowledge of the healthcare and retail industries.

Kristine Dickson. Ms. Dickson currently serves as Chief Financial Officer of Lead Bank, a commercial bank, since September 2022. Before joining Lead Bank and from 2016 to 2022, Ms. Dickson served as Chief Financial Officer of Lehman Brothers Holdings Inc. (“LBH”), a financial services company, and from 2012 to 2022, Ms. Dickson served as Chief Administrative Officer of LBH. From 2001 to 2012, Ms. Dickson served in roles of increasing responsibility at Willis Towers Watson (“WTW”), a professional consulting and services company, including as Northeast Regional Financial Officer from 2008 to 2012, Director of Financial Planning & Analysis from 2006 to 2008, and Mergers & Acquisitions from 2001 to 2006. Prior to WTW, Ms. Dickson served in the ~~e-commerce sector;~~

•~~source additional, or strengthen our existing relationships with, suppliers;~~

•~~negotiate acceptable pricing~~Mergers & Acquisitions and ~~other terms with third-party service providers, suppliers~~Telecom Investment Banking groups at Citigroup. Ms. Dickson holds a Bachelor of Science in computer systems engineering from Stanford University. Ms. Dickson’s individual qualifications and ~~outsourcing partners~~background as a director include knowledge of accounting, finance, human resources, risk management, and ~~maintain our relationships with such entities;~~

•~~optimize, operate~~transactional experience, and ~~manage the expansion~~in-depth knowledge of the ~~capacity~~financial services industry.

James A. Star. Mr. Star currently serves as Executive Chairman of ~~our fulfillment centers, including risks from the spread of COVID-19 relating to our plans to expand capacity and develop new facilities;~~

•~~provide our customers with a cost-effective platform that is able to respond and adapt to rapid changes in technology;~~

•~~maintain adequate cybersecurity with respect to our systems and ensure that our third-party service providers do the same with respect to their systems;~~

•~~successfully manufacture and sell our own proprietary brand products;~~

•~~maintain consumer confidence in the safety and quality of our vendor-supplied and proprietary brand food products and hardgood products;~~

•~~comply with existing or future laws and regulations in a cost-efficient manner;~~

•~~attract, develop, motivate and retain well-qualified employees; and~~

•~~adequately protect our intellectual property rights and successfully defend ourselves against any intellectual property infringement claims or other allegations that we may be subject to.~~

You should not rely on forward-looking statements as predictions of future events. We have based the forward-looking statements contained in this Annual Report on Form 10-K primarily on our current expectations and projections about future events and trends that we believe may affect our business, financial condition, and results of operations. The outcome of the events described in these forward-looking statements is subject to risks, uncertainties and other factors described in the section titled “Risk Factors” included under Part I, Item 1A below and elsewhere in this Annual Report on Form 10-K. Moreover, we operate in a very competitive and rapidly changing environment. New risks and uncertainties emerge from time to time, and it is not possible for us to predict all risks and uncertainties that could have an impact on the forward-looking statements contained in this Annual Report on Form 10-K. The results, events and circumstances reflected in the forward-looking statements may not be achieved or occur, and actual results, events or circumstances could differ materially from those described in the forward-looking statements.

In addition, statements that “we believe” and similar statements reflect our beliefs and opinions on the relevant subject. These statements are based on information available to us as of the date of this Annual Report on Form 10-K. While we believe that information provides a reasonable basis for these statements, that information may be limited or incomplete. Our statements should not be read to indicate that we have conducted an exhaustive inquiry into, or review of, all relevant information. These statements are inherently uncertain, and investors are cautioned not to unduly rely on these statements.

The forward-looking statements made in this Annual Report on Form 10-K relate only to events as of the date on which the statements are made. We undertake no obligation to update any forward-looking statements made in this Annual Report on Form 10-K to reflect events or circumstances after the date of this Annual Report on Form 10-K or to reflect new information or the occurrence of unanticipated events, except as required by law. We may not actually achieve the plans, intentions or expectations disclosed in our forward-looking statements, and you should not place undue reliance on our forward-looking statements. Our forward-looking statements do not reflect the potential impact of any future acquisitions, mergers, dispositions, joint ventures or investments.

Investors and others should note that we may announce material information to our investors using our investor relations website (https://investor.chewy.com/), SEC filings, press releases, public conference calls and webcasts. We use these channels, as well as social media, to communicate with our investors and the public about our company, our business and other issues. It is possible that the information that we post on social media could be deemed to be material information. We therefore encourage investors to visit these websites from time to time. The information contained on such websites and social media posts is not incorporated by reference into this filing. Further, our references to website URLs in this filing are intended to be inactive textual references only.

~~Market, Ranking and Other Industry Data~~

In this Annual Report on Form 10-K, we refer to information regarding market data obtained from internal sources, market research, publicly available information, and industry publications. Estimates are inherently uncertain, involve risks and uncertainties, and are subject to change based on various factors, including those discussed in the section titled “Risk Factors” included under Part I, Item 1A below and elsewhere in this Annual Report on Form 10-K. We believe that these sources and estimates are reliable as of the date of this report but have not independently verified them and cannot guarantee their accuracy or completeness.

~~Item 1. Business~~

~~Overview~~

~~Chewy, Inc. began operating as Chewy.com~~in 2011 and, in October 2013, Chewy.com, LLC was formed as a Delaware limited liability company. On March 16, 2016, Chewy.com, LLC converted from a Delaware limited liability company to a Delaware corporation and changed its name to Chewy, Inc. ~~On May 31, 2017, Chewy, Inc. was acquired by PetSmart, Inc. (“PetSmart”).~~ We completed the initial public offering (“IPO”) of our Class A common stock on June 18, 2019. Unless the context requires otherwise, references in this Annual Report on Form 10-K to “Chewy,” the “Company,” “we,” “our,” or “us” refer to Chewy, Inc. and its consolidated subsidiaries.

During the fiscal year ended January 31, 2021, we were controlled by PetSmart. PetSmart is wholly-owned by a consortium including private investment funds advised by BC Partners, La Caisse de dépôt et placement du Québec, affiliates of GIC Special Investments Pte Ltd, affiliates of StepStone Group LP and funds advised by Longview Asset Management LLC (“Longview”), a multi-strategy investment firm that invests on behalf of individuals, trusts, and ~~controlled by affiliates~~charitable foundations. From 2003 to 2019, he served as President and Chief Executive Officer of Longview. Mr. Star has also served as Vice President of Henry Crown and Company, a private family office affiliated with Longview, since 1994. Mr. Star currently serves as a trustee of Equity Commonwealth, a publicly-traded real estate investment trust, where he chairs the nominating and governance committee. He is a director of the Atreides Foundation Fund Ltd and V-Square Quantitative Management LLC, each an asset management firm. From 2016 to 2018, Mr. Star served as a director of Allison Transmissions Holdings Inc., a manufacturer for vehicle products, and from 2014 to 2019, he was a director of the holding company of PetSmart. He also serves, or has served, as a director or trustee of pension funds, registered mutual funds, private companies, and a private trust company. Mr. Star holds a Bachelor of Arts degree from Harvard University, a Juris Doctor degree from Yale Law School, and a Master of Management degree from Kellogg Graduate School of Management at Northwestern University. Mr. Star’s individual qualifications and background as a director include extensive accounting, compliance, corporate governance, finance, and investment experience, and in-depth knowledge of the e-commerce and retail industries.

Mathieu Bigand. Mr. Bigand currently serves as Principal at BC Partners. Before joining BC Partners in 2019, Mr. Bigand served in the Investment Banking division at Goldman Sachs Group, Inc., a financial services company, from 2014 to 2019, where he focused on the technology, media, and telecommunications spaces. Mr. Bigand also currently serves on the board of Women’s Care, and Presidio. Mr. Bigand holds a Master in Management degree from HEC Paris and Bachelor in Mathematics degree from Paris 1 Panthéon-Sorbonne University. Mr. Bigand’s individual qualifications and background as a director include extensive accounting, international, and venture capital experience, and experience with e-commerce, healthcare, and retail industries.

David Leland. Mr. Leland currently serves as Partner and Head of Capital Markets at BC Partners. Since 2019, Mr. Leland has also served as Chief Executive Officer of BC ~~Partners.~~Partners Securities LLC, a registered broker dealer in the United States. Before joining BC Partners in 2018, from 2000 to 2018, Mr. Leland served at Citigroup Inc. (“Citigroup”), a financial services company, most recently as Managing Director in the Capital Markets Originations Group, with a focus on leveraged finance. Mr. Leland also currently serves on the board of GardaWorld. Mr. Leland holds a Bachelor of Business Administration degree with a concentration in finance from The George Washington University. Mr. Leland’s individual qualifications and background as a director include extensive accounting, compliance, and finance experience.

Lisa Sibenac. Ms. Sibenac currently serves as Managing Director at BC Partners in Portfolio Operations. Before joining BC Partners in 2017, Ms. Sibenac served in management positions at Amazon, Inc. (“Amazon”), an international retailer, from 2012 to 2017, and she served in technical and commercial leadership roles at Lockheed Martin Corporation, a security and aerospace company, from 2003 to 2010. Ms. Sibenac also currently serves on the board of Appgate and previously served on the board of GFL Environmental from 2018 to 2020. Ms. Sibenac holds a Bachelor of Science degree in mechanical engineering from the University of Notre Dame and a Master of Business Administration degree from Harvard Business School. Ms. Sibenac’s individual qualifications and background as a director include knowledge of business operations, customer engagement, and technology, and in-depth knowledge of the e-commerce and retail industries.

Sumit Singh. Mr. Singh currently serves as Chief Executive Officer of Chewy since March 2018 and as director since April 2019. He also served as Chief Operating Officer of Chewy from September 2017 to March 2018. In 2020, he was inducted into the Bloomberg 50 List of Global Leaders. Prior to joining Chewy, Mr. Singh held senior leadership positions at Amazon from 2013 to 2017. Prior to Amazon, Mr. Singh served in senior management positions at Dell Technologies, Inc., a technology company. Mr. Singh has served on the board of directors of Booking Holdings Inc., a provider of online travel and related services, since April 2022. Mr. Singh holds a Bachelor of Technology degree from Punjab Technical University and a Master degree in Engineering from the University of Texas at Austin, where he was inducted into the Academy of Distinguished Alumni for outstanding achievement in 2019, and now serves on the University of Texas Engineering Advisory Board. He also holds a Master of Business Administration degree from the University of Chicago, Booth School of Business. Mr. Singh’s individual qualifications and background as a director include in-depth knowledge of our challenges and opportunities, the e-commerce and retail sectors, and extensive operational and strategic experience, all developed through leadership experience at different companies.

Board Committees

Our Board has established three standing committees—an Audit Committee, a Compensation Committee, and a Nominating and Corporate Governance Committee. Each committee has the authority to engage legal counsel or other experts or consultants as it deems appropriate to carry out its responsibilities. Our Board has adopted written charters for each committee and each charter is available on our website at https://investor.chewy.com. The composition and overview of the responsibilities of each committee are described below. Members serve on these committees as determined by our Board or until earlier resignation or death.

Audit Committee

Our Audit Committee currently consists of Mr. Nelson (Chairperson), Ms. Dickson, and Mr. Star. Our Audit Committee assists our Board with oversight of our corporate accounting and financial reporting process, our compliance with legal and regulatory requirements, and our risk assessment and risk management policies, guidelines, and processes. Our Audit Committee is responsible for, among other things:

(i)

managing the appointment, retention, compensation, oversight, and termination of our independent registered public accounting firm;

(ii)

overseeing the pre-approval process governing audit and permitted non-audit and tax services provided by our independent registered public accounting firm;

(iii)

reviewing and approving the function and scope of our internal audit department, including its purpose, authority, organization, responsibilities, budget, staffing, audit plans, and performance;

(iv)

assisting the Board with overseeing external financial reporting, including periodic reports, earnings releases, and earnings guidance;

(v)

overseeing the adequacy and effectiveness of our internal controls over financial reporting and disclosure controls and procedures;

(vi)

reviewing risks (including cybersecurity, data privacy, business continuity, and other operational risks), and the policies, guidelines, and processes used by management to assess, manage, monitor, and control such risks;

~~On February 12, 2021, PetSmart completed~~

(vii)

monitoring legal and regulatory compliance, including compliance with our Code of Conduct and Ethics;

(viii)

reviewing and approving related party transactions in accordance with our related party transactions policy;

(ix)

overseeing procedures for the receipt, retention, and treatment of complaints received by the Company regarding accounting, internal accounting controls, or auditing matters; and

(x)

reviewing our policies and processes for tax planning and compliance.

Our Board has determined that all current members of our Audit Committee satisfy the independence requirements of Rule 10A-3 of the Exchange Act and the corporate governance standards of the New York Stock Exchange (the “NYSE”), and meet the requirements for financial literacy under the applicable rules and regulations of the SEC and the NYSE. Our Board has determined that Mr. Nelson is an “audit committee financial expert,” as such term is defined in the regulations promulgated under the Exchange Act and each of Ms. Dickson, Mr. Nelson, and Mr. Star has the requisite financial sophistication, as defined under the applicable NYSE rules and regulations.

Our Audit Committee has adopted, and periodically reviews compliance with, the Company’s Guidelines for Hiring Employees or Former Employees of the Independent Auditor and the Audit Committee Pre-Approval Policy (the “Pre-Approval Policy”), each of which further ensures that the independence of the independent registered public accounting firm is not impaired.

Compensation Committee

Our Compensation Committee consists of Mr. Svider (Chairperson) and Mr. Ahmed. Our Compensation Committee assists our Board with oversight of our compensation policies, plans, and programs. Our Compensation Committee is responsible for, among other things:

(i)

reviewing and approving corporate goals and objectives applicable to our Chief Executive Officer and other executive officers, evaluating performance in light of such objectives, and approving compensation;

(ii)

reviewing director compensation and benefits for service on our Board, and making recommendations for modification;

(iii)

reviewing and approving incentive compensation and equity-based plans, and overseeing the administration of those plans on behalf of executive officers; and

(iv)

monitoring the effectiveness of non-equity-based benefit plan offerings, and approving any material new employee benefit plan or change to an existing plan that creates a material financial commitment for our Company.

Nominating and Corporate Governance Committee

Our Nominating and Corporate Governance Committee consists of Mr. Svider (Chairperson), Mr. Ahmed, and Mr. Chang. Our Nominating and Corporate Governance Committee is responsible for, among other things:

(i)

determining the qualifications, qualities, skills, and other expertise necessary to serve on our Board;

(ii)

identifying and evaluating candidates, and making recommendations to our Board for director nominees;

(iii)

assessing the size and composition of our Board and committees, and making recommendations to our Board regarding the appointment of directors to serve as members of each committee and committee chairperson annually;

(iv)

overseeing periodic evaluations of our Board’s performance, including Board committees;

(v)

reviewing, assessing the adequacy of, and proposing changes to our Board regarding our certificate of incorporation, Bylaws, Code of Conduct and Ethics, Corporate Governance Guidelines, and other corporate governance policies;

(vi)

monitoring corporate governance trends and developments, and recommending changes to our Board; and

(vii)

developing a Chief Executive Officer succession plan and evaluating potential Chief Executive Officer candidates.

Corporate Governance Guidelines and Code of Conduct and Ethics

Our Board has adopted Corporate Governance Guidelines that address items such as the qualifications and responsibilities of our directors and director candidates and corporate governance policies and standards applicable to us in general. We also have a ~~refinancing transaction,~~Code of Conduct and Ethics that applies to our directors, officers, and employees, including our Chief Executive Officer, Chief Financial Officer, and Principal Accounting Officer. Our Corporate Governance Guidelines and our Code of Conduct and Ethics are each posted on our website at https://investor.chewy.com. We will post amendments to our Code of Conduct and Ethics or any waivers thereto for directors and named executive officers (“NEOs”) on the same website or in ~~connection~~filings under the Exchange Act.

Insider Trading Policy; Hedging and Pledging Activities

Our Board has adopted an insider trading policy (the “Insider Trading Policy”) to promote compliance with ~~such transaction, all shares~~applicable securities laws that prohibit certain persons who are aware of material non-public information about a company from (i) trading in securities of that company; or (ii) providing material non-public information to other persons who may trade on the basis of that information. Under the Insider Trading Policy, our employees, including our NEOs and members of our Board, are prohibited from short-term trading, short sales, derivative transactions, hedging transactions, trading on margin account or pledging, and standing and limit orders, except for very limited duration (i.e., 2-3 days).

Delinquent Section 16(a) Reports

Section 16(a) of the Exchange Act requires that our directors, NEOs, and stockholders that own more than 10% of our common stock ~~held by PetSmart and its subsidiaries were distributed to affiliates of BC Partners. Subsequent~~report to the ~~distribution, PetSmart no longer directly or indirectly owns any shares of our common stock. As~~SEC and us certain changes in ownership and ownership information within specified periods. Based solely on a ~~result of these events, we are also no longer a restricted subsidiary under PetSmart’s credit facilities and indentures.~~

Our mission is to be the most trusted and convenient online destination for pet parents (and partners) everywhere. We believe that we are the preeminent online source for pet products, supplies and prescriptions as a result of our broad selection of high-quality products, which we offer at competitive prices and deliver with an exceptional level of care and a personal touch. We continually develop innovative ways for our customers to engage with us, and partner with approximately 2,500review of the ~~best and most trusted brands in the pet industry offering more than 70,000 products,~~reports furnished to ~~bring a high-bar, customer-centric experience to our customers.~~

~~Our Industry~~

~~We operate in a large and growing industry in the U.S., comprising of pet food and treats, pet supplies and pet medications, other pet-health products, and pet services.~~

~~“Pet humanization” and premiumization driving higher spending per pet~~

Pet parents increasingly view pets as part of the family and are willing to spend more on higher-quality goods and services for those family members. According to the American Pet Products Association (the “APPA”) 2020 Packaged Facts report (“Packaged Facts”), more than 90% of pet owners in 2020 considered their pets to be a part of their family. Furthermore, according to Packaged Facts, 73% of pet parents are willing to spend more on high quality foods that are viewed as healthier for their pets.

~~Historical and projected growth in pet spending~~

~~According to Packaged Facts, spending on the overall pet market has grown from $73 billion in 2014 to an estimated $98 billion in 2020,~~us or at a 5% compounded annual growth rate (“CAGR”) over that time. Packaged Facts projects the overall pet market to continue growing at a CAGR of over 6% through 2024, with retail pet food and treats projected to grow at a CAGR of over 5% annually over that time. Pet food and treat sales estimates from 2020 through 2024 were adjusted higher by 3% compared to pre-coronavirus (COVID-19) pandemic estimates from Packaged Facts .

~~Consistency of spending and resilience during economic downturns~~

Spending on pets is a necessity and most customers purchase frequently and at regular intervals. The pet industry is one of the most resilient categories during economic downturns because of the nature of the pet parent/pet relationship. For example, during the recession from 2008 to 2010, overall consumer spending in the U.S. declined while pet spending in the U.S. increased by 12%, according to the APPA. In 2010 alone, spending in the U.S. on entertainment decreased by 7.0%, food decreased by 3.8%, housing decreased by 2.0% and apparel and services decreased by 1.4%, according to the U.S. Bureau of Labor Statistics, while spending on pets increased by 6.2%, according to the APPA.

Similar to the resiliency shown during the 2008 to 2010 recession, the pet industry experienced a significant increase in demand as a result of the COVID-19 pandemic despite the overall economic downturn, particularly within the e-commerce channel. Pet adoptions and fostering surged with “stay-at-home” orders further increasing demand and the continued humanization of pets. According to Packaged Facts’ April/May 2020 survey, only 16% of dog and cat owners agreed that they were spending less on pet food as a result of the COVID-19 pandemic and subsequent economic downturn, with 5% strongly agreeing and over 40% agreeing that they were buying pet food online more often as a result of the COVID-19 pandemic.

~~Rapid shift to online shopping, with significant remaining opportunity~~

The pet industry, like many others in the U.S., is experiencing a continued shift from in-store to online purchases and it appears that this migration has been accelerated by the COVID-19 pandemic, with tailwinds expected to continue for several years. In 2019, e-commerce claimed the top spot of pet food sales by channel as online shopping continues to take market share from brick-and-mortar retail. Packaged Facts reports that online shopping grew from 4% of U.S. pet product sales in 2014 to an estimated 27% in 2020 with over $10 billion of pet food and treats sold online. This represents an over 40% CAGR for online pet retail over that time frame. Packaged Facts estimates the e-commerce channel to rapidly increase to over 34% of the total pet food market by 2024, up from pre-pandemic estimates of 24% while all other channels are projected to remain flat or decline.

According to Packaged Facts’ April/May 2020 Survey of Pet Owners, 64% dog and cat owners agreed that more of their everyday spending was being done online, and 73% stated they feel safer buying things online as opposed to in a store. We believe that the secular trend toward online shopping will continue for a significant period as consumers look to benefit from the convenience of home delivery and subscription-based purchasing, as well as the heightened safety of a “contactless” shopping experience.

~~Growing trend of subscription-based purchasing~~

Additional Packaged Facts research indicates 58% of dog and cat owners like the idea of home delivery for pet food and over the past 12 months, 12% of online pet food purchases and 7% of treat purchases were subscription-based. We believe that the trend of increased subscription-based purchasing behavior within the broader secular trend toward online shopping supports higher levels of customer retention and revenue visibility.

~~Our Strengths~~

•~~Chewy’s commitment to customer service is the core of our brand.~~

◦~~Customer centricity.~~ Everything about our company is organized around our commitment to provide an exceptional customer experience. We make the shopping experience easy and enjoyable, and that makes finding and buying the right product an amazing start to the customer journey. We provide competitive prices, customizable and convenient automatic reordering, fast and reliable order delivery, and innovative technology-driven services.

◦~~Customer service expertise that is knowledgeable and empowered.~~ Our customer service representatives (“CSRs”) share a common bond - they love pets. This shared passion is evident in every interaction they have with our customers, whether via phone, email, or interactive live-chat. In addition, contacting us is easy, with virtually all customer calls being answered in less than ten seconds. From the moment they join Chewy, our CSRs receive extensive training from our knowledgeable team, learning the ins and outs of the world of pets and our product offering. Thereafter, they continue learning about brands and pets of all types via recurring training. This allows them to further hone their ability to deliver highly specialized, informed, and authentic advice to our customers.

◦~~Engaging with customers on a personalized level.~~ ~~We empower our CSRs to go above and beyond for our customers, and they do so~~filed with the ~~knowledge that our commitment to our customers is our number one priority. We engage with pet parents thousands of times per day,~~SEC and we embrace the opportunity to “WOW” our customers each time, from surprising them with a hand-painted pet portrait to sending flowers to a family who has recently lost their pet. In addition, we have developed integrated technology that enables us to capture personalized profiles for each of our customers as well as their pets so that we may provide them with personalized recommendations. The expertise of our

~~CSRs, combined with the powerful tools that we provide them, allows us to deliver a high-touch and high-quality experience to our customers, which we believe results in higher retention rates.~~

•~~We offer the widest assortment of pet products available of any pet specialty retailer—and we continue to grow that assortment—which we offer at competitive prices.~~ We carry approximately 2,500 carefully selected brands, representing the best and most popular products, and we regularly add new ones as we strive to offer everything that pet parents may want for their pets. In addition, we offer a wide range of free educational media (such as blogs, videos, and tutorials on our website, Be.Chewy.com) to enhance our product offering and the buying experience, helping pet parents choose the right product for their pet or find answers to commonly asked questions specific to their type of pet. In 2020, we also launched two innovative ventures that are valuable additions to our growing healthcare business and represent our first service-based offerings for pet parents: medication compounding and a telehealth service, “Connect with a Vet,” as part of our goal to make pet healthcare more affordable and accessible to pet parents.

•~~Our highly efficient and effective distribution network provides exceptional delivery with ongoing cost advantages and superior customer service.~~ The strategic placement of our fulfillment centers across the U.S. enables us to cost-efficiently ship to over 80% of the U.S. population overnight and almost 100% in two days. The high volume of our sales, high participation rate in our Autoship subscription program, and relatively low seasonality of our business allow us to optimize asset utilization across our network and lower our fixed and variable cost per unit and our inventory levels.

•~~We deploy capital efficiently.~~ We invest cash flow generated from our existing customer base to attract new customers. Given the fast and consistent payback levels from our customers, we invest free cash flow in marketing to attract new customers. Additionally, we expect to continue to invest in technology and product innovation to continue scaling our platform, customer support, marketing efforts, and supply chain in order to drive growth.

•~~Our technology platform is scalable.~~ Our advanced technology platform was developed to enable us to grow our sales volume and increase the number of active customers while reducing marginal transaction and operational costs. Given the significant fixed-cost component of our technology platform, we expect that our cost per transaction will continue to decrease as our sales volume grows. The scalability and integrated nature of our technology platform also allow us to run our operations in a cost-efficient mannerupon information furnished by decreasing the number of operational personnel and automating many of our planning and fulfillment processes. For example, we have significantly improved our processes for picking and packing orders through better forecasting, inventory placement, and optimal labor planning, as well as investing in automated fulfillment processes. Our customer service model, while “high touch,” provides our CSRs with up-to-date customer data and cutting-edge tools to optimize their productivity. As we continue to grow, we expect that we will be able to further scale our fixed costs.

~~Our Strategy~~

•~~Continue to grow sales from our existing customer base.~~ We seek to expand our share of our customers’ wallets by broadening the selection of products and services that we offer as well as improving customer engagement. Customers have historically spent more per purchase on our website and mobile applications after their first year as they discover the wide range of our product offering and the value proposition we provide. Our exceptional customer service and “WOW” programs help us retain customers and increase their level of engagement and spending.

•~~Acquire new customers.~~ We intend to increase brand awareness and reach new customers by investing free cash flow from our existing customer base in advertising and marketing to acquire new customers from existing and new channels. Given the high levels of customer satisfaction that we see from our customers,these parties, we believe that ~~there is significant opportunity to grow our business as consumers become more aware~~during fiscal year 2022 all of our ~~brand~~directors and officers timely filed all reports they were required to file under Section 16(a) of the Exchange Act.

Item 11. Executive Compensation

Named Executive Officer Compensation

Compensation Discussion and Analysis

This Compensation Discussion and Analysis (“CD&A”) describes the material elements of our ~~strong value proposition.~~executive compensation program for fiscal year 2022 and provides an overview of our compensation philosophy and objectives for our NEOs.

•~~Leverage our technological and operational efficiencies.~~ We believe that we can further improve our margins as we grow net sales, and we remain committed to achieving this. We expect to invest in technology and product innovation to continue scaling our platform, customer support, marketing efforts and supply chain.

Our ~~management team~~executive compensation program is ~~committed to a disciplined use of capital~~ designed to ~~drive measurable improvements in unit economics and further improve our profitability.~~

•~~Continue to grow our proprietary brands.~~ In 2016, we launched our first hardgoods proprietary brand, Frisco, and in 2017, we launched two consumables proprietary brands, American Journey and Tylee’s. Millions of customers have tried and reordered at least one of our proprietary brands over the years. Our goal is to provide value to our customers by offering proprietary brandsalign total compensation with ~~compelling quality and pricing. We believe there is significant room to grow our proprietary brands through continued growth of our current brands and the launch of new ones.~~

•~~Expand further into pet healthcare.~~ Complementing our existing over-the-counter and veterinarian diet offerings, we launched Chewy Pharmacy in July 2018, thereby broadening our pet healthcare offering and providing our customers with a one-stop shop for their prescription and special diet needs. In 2020, we further advanced this goal by launching two innovative ventures that are valuable additions to our growing healthcare business and represent our first service-based offerings for pet parents. In October 2020, we launched a new telehealth service called “Connect with a Vet,” that allows pet parents and veterinarians to leverage the company’s proprietary tele-triage platform to preserve continuous veterinarian care. With this service, Chewy makes it possible for pet parents to connect directly with a licensed veterinarian to get answers to some of the most commonly asked questions, to receive advice, discuss concerns they might have regarding the health and wellness of their pet, and even get referrals to their local vets or emergency clinics. This was followed by the launch of compounding medications in November 2020, providing pet owners the ability to order customized, pharmaceutical grade, prescription medications that meet their pets’ unique needs, that cannot be fulfilled by commercially available alternatives.

These service offerings advance the company’s mission to be the most trusted resource for pet parents and veterinarians and our goal to make pet healthcare more affordable and accessible to pet parents. We believe that we share a common goal of pet health and wellness along with the veterinarian community, and we will continue to utilize our strengths to enhance partnerships with customers and veterinarians alike.

•~~Explore broader platform opportunities.~~ We believe that there are additional pet offerings that can drive future growth and that our platform extends strong complementarities to other categories such as pet services, should we choose to do so. The strengths of our platform may enable us to sell directly to businesses in addition to consumers. Finally, although we have exclusively focused on sales in the U.S. to date, we may expand our offering internationally in the future.

~~Customers and Markets~~

We serve customers through our website and mobile applications and focus on delivering the best products with the best service at competitive prices. We operate customer service centers 24/7 to serve our customers every single day of the year.

The pet products and services industry is highly competitive and can be organized into the following categories: internet (including online sales by omnichannel players); pet specialty stores; mass merchandisers/discount stores/supercenters; food stores; wholesale clubs; farm/feed stores; independent pet channel; dollar stores; drug stores; natural food; and veterinary.

Competition in the pet products and services industry is strong, particularly within the e-commerce channel as the industry continues to experience a secular shift from in-store to online shopping. We face competition from the websites of our competitors such as other online retailers, online sales for omnichannel retailers, our suppliers’ own websites, and traditional brick and mortar retailers as well as those in the veterinary channel. Some of the principal competitive factors influencing our business are price, product selection and availability, fast and reliable delivery, and customer service. We believe our ability to provide a seamless shopping experience, fast and reliable delivery options, including our convenient Autoship subscription program, and our knowledgeable customer service sets us apart from our competitors.

~~Trademarks and Intellectual Property~~

Our rights in our intellectual property, including trademarks, patents, trade secrets, copyrights and domain names, as well as contractual provisions and restrictions on use of our intellectual property, are important to our business. For example, our trademark rights assist in our marketing efforts to develop brand recognition and differentiate our brands from our competitors. We own a number of trademark registrations and applications, in the U.S. as well as in certain foreign jurisdictions. These trademarks include, among others, “American Journey,” “All Kind,” “Blue Box Event,” “Chewy,” “Chewy.com,” “Dr. Lyon’s,” “Frisco,” “Goody Box,” “Onguard,” “Tiny Tiger,” “True Acre Farms,” and “Tylee’s.” The current registrations of these trademarks are effective for varying periods of time and may be renewed periodically, provided that we, as the registered owner, or our licensees where applicable, comply with all applicable renewal requirements including, where necessary, the

continued use of the trademarks in connection with similar goods and services. We expect to pursue additional trademark registrations to the extent we believe they would be beneficial and cost-effective.

In addition to trademark protection, we own numerous domain names, including www.chewy.com. We also enter into, and rely on, confidentiality and proprietary rights agreements with our employees, consultants, contractors and business partners to protect our trade secrets, proprietary technology and other confidential information. We further control the use of our proprietary technology and intellectual property through provisions in both our customer terms of use on our website and in our vendor terms and conditions.

We believe that our intellectual property has substantial value and has significantly contributed to our success to date. We continually engage with manufacturers to develop and market better quality pet products under our brand names to better serve our customers at a lower price.

Seasonality in our business does not follow that of traditional retailers, such as typically high concentration of revenue in the holiday quarter. Our net sales tend to grow throughout the fiscal year as we continue to acquire additional new customers and they continue to purchase from us. We recognized 23%, 24%, 25%, and 28% of our annual net sales during the first, second, third, and fourth quarters of fiscal 2020, respectively.

Our employees are critical to us fulfilling our mission of being the most trusted and convenient online destination for pet parents (and partners) everywhere. We accomplish this, in part, by recruiting, hiring, training, and retaining employees who share our core values of delivering superior customer service and caring about the needs of pets and their parents. To continue our mission, and to compete and succeed in our highly competitive and rapidly evolving market, it is crucial that we continue to attract, develop, motivate, and retain well-qualified employees. As part of these efforts, we strive to offer a competitive compensation and benefits program, focus on employee safety, give employees the opportunity to have a positive impact on society by being a part of our philanthropic endeavors, and foster a workplace that is reflective of our society and where everyone feels empowered to do their best work.

We employed approximately 18,500 full-time and part-time employees as of January 31, 2021. We consider our relationship with our employees to be good. As of March 23, 2021, none of our employees were represented by a labor union or covered by a collective bargaining agreement.

Say-on-Frequency

We held an advisory vote on the frequency of future “say-on-pay” advisory votes (referred to as the “say-on-frequency” vote) at our 2020 annual meeting of stockholders, pursuant to which the majority of the advisory votes cast voted to hold our “say-on-pay” votes every year. The Board considered the outcome of this advisory vote and determined that future “say-on-pay” votes will be conducted every year. The Board will re-evaluate this determination after the next stockholder advisory “say-on-frequency” vote, which will be at the Company’s 2026 annual meeting of stockholders unless presented earlier.

Elements of NEO Compensation

Our executive compensation program is comprised of the following key components:


Component	Objective	Key Features
Base Salary	Recognizes market factors, as well as individual experience, performance, and level of responsibility.	Fixed compensation designed to attract and retain talent.

Annual Short-Term Incentive	Motivates and establishes a strong link between pay and performance.	Variable at-risk compensation directly tied to the achievement of financial and strategic annual goals. STI thresholds, targets, and maximums are set as a percentage of base salary.

Long-Term Equity Incentives	Aligns compensation with creating long-term stockholder value and retains talent through multiyear vesting.	Variable at-risk compensation in the form of restricted stock units (“RSUs”) that vest upon satisfaction of Service Conditions and Performance RSUs that vest upon satisfaction of Service Conditions and Performance Conditions.

Since a significant portion of our executive compensation is variable, at risk, and tied directly to measurable performance objectives, we believe our executive compensation program is reasonable, competitive, and appropriately balances the goals of attracting, motivating, rewarding, and retaining individuals while directly aligning their interests with those of our stockholders. The connection between pay and performance is evidenced by our strong financial performance during fiscal year 2022.

Base Salary

Base salary is a standard element of compensation designed to attract and retain talent and provide executives with cash income predictability. Our Compensation Committee reviews and determines base salary adjustments as part of its annual NEO compensation review. Factors that affect the amount of base salary include experience, market data, role and responsibilities, recruitment and retention considerations, and individual performance. None of our NEOs received an increase in base salary during fiscal year 2022. The following table sets forth NEO base salaries for fiscal year 2022:


Named Executive Officer	FY 2022 Base Salary
Sumit Singh	$	1,200,000
Mario Marte	$	595,000
Satish Mehta	$	475,000
Susan Helfrick	$	450,000

Annual Short-Term Incentive

In fiscal year 2022, we continued our annual STI plan for our NEOs that is intended to establish a strong link between pay and performance by rewarding the achievement of annual financial and strategic objectives. 100% of the STI payment was based on the achievement of pre-established Company-level performance metrics with no individual performance component. The performance metrics included goals related to net sales, adjusted EBITDA margin, and free cash flow. These performance metrics were selected because they provide a balance of both top-line and bottom-line financial goals while also incenting responsible cash utilization. Our NEOs participate in the STI plan at a target payout of 100% of annual base salary, with a threshold payout of 50% and maximum payout of 150% of target. The target payout for each NEO for fiscal year 2022 was the same as the target payout for fiscal year 2021. No STI payment is made ~~on Chewy.com.~~if achievement of all performance goals is less than the threshold. In April 2023, we increased the maximum payout of our annual STI plan for our NEOs to 200% of target to provide our NEOs with an additional incentive to met or exceed the maximum threshold and to align our practice with the prevailing market practice. We also ~~offer our corporate employees “Paw-ternity” leave, allowing them~~increased the targets for adjusted EBITDA margin. The following table shows weighting, achievement level, weighted achievement with respect to ~~work from home~~each metric, and the total weighted achievement for the fiscal year 2022 STI plan:


Metric	Weighting			Achievement (% of Target)			Weighted Achievement
Net Sales Growth		50	%		—	%		—	%
Adjusted EBITDA Margin		40	%		150	%		60	%
Free Cash Flow		10	%		150	%		15	%
Total		100	%					75	%

Based on a total weighted achievement of 75% of target, our NEOs received the following STI payments for fiscal year 2022:


NEO	Eligible Earnings⁽¹⁾			Target % of Eligible Earnings			Award at Target			Achievement			Payout
Sumit Singh		$	1,200,000		100	%		$	1,200,000		75	%		$	900,000
Mario Marte		$	595,000		100	%		$	595,000		75	%		$	446,250
Satish Mehta		$	475,000		100	%		$	475,000		75	%		$	356,250
Susan Helfrick		$	450,000		100	%		$	450,000		75	%		$	337,500

(1)	Eligible Earnings means the portion of the NEO’s base salary earned while in a STI eligible position and excludes any one-off bonus or other types of compensation. For fiscal year 2022, Eligible Earnings for each of our NEOs equaled their respective base salary.

STI payments for fiscal year 2022 were determined and paid to the NEOs during fiscal year 2023 and are included in the Non-Equity Incentive Plan Compensation column of the 2022 Summary Compensation Table.

Long-Term Equity Incentives

We view long-term incentive compensation in the form of equity awards as a critical element of our executive compensation program. As such, the majority of our NEO total compensation opportunity is stock-based compensation designed to create a strong link between pay and performance. The realized value of these equity awards over time has a direct relationship to our stock price and establishes an incentive for our NEOs to create sustainable, long-term value for our stockholders, while retaining our NEOs in a highly competitive market.

In connection with the consummation of our IPO, our NEOs received equity awards including Performance RSUs subject to the Service Condition and the Performance Condition. The Service Condition was satisfied with respect to 25% of the Performance RSUs on the first ~~two weeks after~~anniversary of our IPO and is satisfied on a ~~new dog~~continuing basis with respect to an additional 12.5% of the Performance RSUs on each six-month anniversary thereafter, subject to the NEO’s continued employment with the Company through the applicable vesting date. The Performance Condition has been satisfied in full based on the achievement of share price hurdles set at the time of grant. Upon satisfaction of the Service Condition, the portion of the NEO’s Performance RSUs that will become vested is ~~brought into~~equal to the portion of the Performance RSUs with respect to which the Service Condition is then satisfied. Upon a Change in Control, as defined in the applicable award agreement, the Service Condition will be deemed satisfied.

In April 2021, Mr. Singh, Mr. Marte and Mr. Mehta were granted 125,000, 30,000, and 20,000 RSUs, respectively, in connection with one-time performance awards to select leaders to reward their ~~home. In addition,~~impact during fiscal year 2020 ~~we offered emergency sick pay~~ and ~~additional paid time off~~to drive future retention (“Impact RSUs”). 50% of the Impact RSUs granted to our NEOs vested on March 1, 2022, and the remaining 50% vested on March 1, 2023.

We did not grant awards to our NEOs in 2022. In April 2023, Mr. Mehta was granted 223,206 RSUs and 54,109 PRSUs in connection with performance awards for ~~hourly employees for absences related~~retention purposes pursuant to ~~COVID-19.~~

~~Team Member Safety~~our 2022 Omnibus Incentive Plan (the “2022 Plan”). ~~We are committed~~With respect to 54,109 of the RSUs, 25% will vest on February 1, 2024 and 12.5% will vest on each six-month anniversary thereafter, subject to Mr. Mehta’s continued employment with the Company through the applicable vesting date. With respect to 169,097 of the RSUs, 52% will vest on February 1, 2024, 44% will vest on February 1, 2025, and 4% will vest on February 1, 2026, subject to Mr. Mehta’s continued employment with the Company through the applicable vesting date. The PRSUs granted in April 2023 vest on February 1, 2026, subject to the ~~health~~satisfaction of certain Company performance conditions and ~~safety~~Mr. Mehta’s continued employment through the vesting date. Mr. Mehta will be eligible to receive between zero percent (0%) and two hundred percent (200%) of the target PRSUs, depending on the extent to which certain Company performance-based vesting conditions are met during fiscal year 2023.

Our NEOs are eligible to receive additional equity awards at the discretion of our ~~employees. During fiscal~~Compensation Committee, but may or may not receive equity awards on an annual basis and, consequently, their compensation, as reported in the 2022 Summary Compensation Table below, may fluctuate materially from year ~~2020, as~~to year depending on whether a ~~result~~grant was made in a particular year. Equity awards are subject to the provisions of any claw-back policy implemented by the ~~COVID-19 pandemic, we implemented additional safety protocols to protect~~Company and/or in the applicable equity award agreement.

Additional NEO Compensation

401(k) Plan

We have a 401(k) retirement savings plan for our employees, including ~~protocols regarding social distancing and face coverings, temperature checks, and enhanced cleanings. In addition, a vast majority~~our NEOs, who satisfy certain eligibility requirements. Under the 401(k) plan, eligible employees may defer receipt of ~~our corporate employees continue to work remotely. We also provide several channels for all employees to speak up, ask for guidance, and report concerns related to ethics or safety violations.~~

~~Community Involvement. Our Chewy Gives Back team works tirelessly at continuing our philanthropic mission~~portions of ~~supporting animal shelters and rescues everywhere. During the fiscal year ended January 31, 2021, we donated approximately $35 million in products and supplies to animal shelters and rescues.~~

~~Diversity, Equity, and Inclusion. At Chewy, we recognize the significance of a diverse and inclusive workforce and fostering safe working environments in which our employees can be~~ their authentic and best selves. Chewy’s diversity, equity, and inclusion mission is to hire, retain, and promote exceptional talent that values and is inclusive of all backgrounds and perspectives to deliver excellence. We are focused on this mission and on building an inclusive culture through a variety of diversity, equity, and inclusion initiatives, including assessments of current Chewy processes and policies.

~~Available Information~~

Our website address is www.chewy.com, and our investor relations website is investor.chewy.com. We promptly make available on our investor relations website, free of charge, the reports that we file or furnish with the Securities and Exchange Commission (“SEC”), corporate governance information (including our Code of Business Conduct and Ethics) and select press releases. We file annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, proxy and information statements and amendments to reports filed or furnished pursuant to Sections 13(a), 14, and 15(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). The SEC maintains a website at www.sec.gov that contains reports, proxy and information statements and other information regarding Chewy and other issuers that file electronically with the SEC.

~~Item 1A. Risk Factors~~

The following are important factors that could affect our financial performance and could cause actual results for future periods to differ materially from our anticipated results or other expectations, including those expressed in any forward-looking statements made in this Annual Report on Form 10-K or our other filings with the SEC or in oral presentations such as telephone conferences and webcasts open to the public. You should carefully consider the following factors and consider these in conjunction with “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Item 7 and our consolidated financial statements and related notes in Item 8. The risks and uncertainties described below are not the only ones we face.~~Additional risks and uncertainties that we are unaware of, or that we currently believe are not material, may also become important factors that adversely affect our business.If any of the following risks actually occur, our business, financial condition, results of operations and future prospects could be materially and adversely affected.~~

~~Summary Risk Factors~~

Our business faces significant risks. The risk factors described below are only a summary of the principal risk factors associated with an investment in us. These risks are more fully described in this “Risk Factors” section, including the following:

~~Risks Related to Our Business and Operations~~

•~~Our recent growth rates may not be sustainable or indicative of our future growth and we may not be able to successfully manage the challenges to our future growth.~~

•The recent outbreak of the COVID-19 global pandemic and related government, private sector and individual consumer responsive actions may adversely affect our business operations, employee availability, financial performance, liquidity and cash flow for an unknown period of time.

•~~If we fail to acquire and retain new customers, or fail to do so in a cost-effective manner, we may be unable to increase net sales, improve margins and achieve profitability.~~

•The growth of our business depends on our ability to accurately predict consumer trends, successfully introduce new products and services, improve existing products and services, and expand into new offerings.

•~~We may be unable to accurately forecast net sales and appropriately plan our expenses in the future.~~

•~~Our estimate of the size of our addressable market may prove to be inaccurate.~~

•~~If we are not able to source additional, or strengthen our existing relationships with, suppliers, or if we lose any of our key suppliers, our business could be negatively impacted.~~

•~~Any changes in, or disruptions to, our shipping arrangements could adversely affect our business, financial condition, and results of operations.~~

•~~If we do not successfully optimize, operate and manage the expansion of the capacity of our fulfillment centers, our business, financial condition, and results of operations could be harmed.~~

•~~Our business may be adversely affected if we are unable to provide our customers with a cost-effective platform that is able to respond and adapt to rapid changes in technology.~~

•~~We are subject to risks related to online payment methods.~~

•Any significant interruptions or delays in service on our website or mobile applications or any undetected errors or design faults could result in limited capacity, reduced demand, processing delays, and loss of customers or suppliers.

•Our failure or the failure of third-party service providers to protect our website, networks, and systems against cybersecurity incidents, or otherwise to protect our confidential information, could damage our reputation and brand and substantially harm our business, financial condition, and results of operations.

•~~Safety, quality, and health concerns could affect our business.~~

•Risks associated with our suppliers and our outsourcing partners, many of which are located outside of the United States (“U.S.”), could materially and adversely affect our business, financial condition, and results of operations.

•We are subject to extensive governmental regulation and we may incur material liabilities under, or costs in order to comply with, existing or future laws and regulation, and our failure to comply may result in enforcements, recalls, and other adverse actions.

•Resistance from veterinarians to authorize prescriptions, or attempts/efforts on their part to discourage pet owners from purchasing from us could cause our sales to decrease and could adversely affect our financial condition and results of operations.

•~~Our ability to utilize net operating loss carryforwards may be~~eligible salaries, subject to certain ~~limitations.~~

•~~We may be unable~~limitations imposed by the Code, by making contributions to ~~adequately protect~~the 401(k) plan. This plan provides for matching contributions made by us equal to 50% of the first 6% of an employee’s covered compensation. The employee becomes vested in our ~~intellectual property rights. Additionally, we may be~~matching contribution ratably over a four-year period.

Employee Benefits and Perquisites

Our NEOs are eligible to receive the same employee benefits that are generally available to all of our full-time employees, subject to ~~intellectual property infringement claims or other allegations, which could result in substantial damages~~the satisfaction of certain eligibility requirements. This includes medical, dental, and ~~diversion of management’s efforts~~vision benefits, flexible spending accounts, short-term and ~~attention.~~

•~~If we~~long-term disability insurance, life insurance, and accidental death and dismemberment insurance. Our employee benefits programs are ~~unable~~designed to ~~attract, develop, motivate~~be affordable and ~~retain well-qualified employees, our business could be harmed.~~

•~~Uncertainties in economic conditions and their impact on consumer spending patterns, particularly~~competitive in the ~~pet products~~ market ~~could adversely impact our results of operations.~~

•~~Significant merchandise returns or refunds could harm our business.~~

•Severe weather, including hurricanes, earthquakes and natural disasters could disrupt normal business operations, which could result in increased costs and materially and adversely affect our business, financial condition, and results of operations.

•~~Our failure to manage new acquisitions, investments or alliances, or to integrate them with our existing business, could have a material adverse effect on us.~~

•~~If we cannot successfully manage the unique challenges presented by international markets, we may not be successful in expanding our operations outside the U.S.~~

~~Risks Related to Our Industry~~

•~~Competition in the pet products and services retail industry, especially Internet-based competition, is strong and presents an ongoing threat to the success of our business.~~

•Government regulation of the Internet and e-commerce is evolving, and unfavorable changes or failure by us to comply with these regulations could substantially harm our business, financial condition, and results of operations.

~~Risks Related to Our Indebtedness~~

•~~Restrictions in our revolving credit facility could adversely affect our operating flexibility.~~

~~Risks Related to Ownership of Our Class A Common Stock~~

•~~Our stock price has been, and may continue to be, volatile and may decline regardless of our operating performance.~~

•~~The dual class structure of our common stock may adversely affect the trading market for our Class A common stock.~~

•We are a “controlled company” within the meaning of the rules of NYSE and, as a result, we rely on exemptions from certain corporate governance requirements and the concentrated ownership of our common stock will prevent other stockholders from influencing significant decisions.

~~General Risk Factors~~

•~~Future litigation could have a material adverse effect on our business and results of operations.~~

•If our internal control over financial reporting or our disclosure controls and procedures are not effective, we may be unable to accurately report our financial results, prevent fraud or file our periodic reports in a timely manner, which may cause investors to lose confidence in our reported financial information and may lead to a decline in our stock price.

~~Risks Related to Our Business and Operations~~

~~Our recent growth rates may not be sustainable or indicative of our future growth.~~

We have experienced significant growth in recent periods. This rate of growth may not be sustainable or indicative of our future rate of growth. We believe that our continued growth in net sales will depend upon, among other factors, our ability to:

•~~acquire new customers who purchase products from us at the same rate and of the same type as our existing customer base;~~

•~~retain our customers and have them continue to purchase products from us at rates and in a manner consistent with their prior purchasing behavior;~~

•~~encourage customers to expand the categories of products they purchase from us, leading to increased net sales per active customer;~~

•~~increase the number of customers that use our Autoship subscription program;~~

•~~attract new vendors to supply quality products that we can offer to our customers at attractive prices;~~

•~~retain our existing vendors and have them supply additional quality products that we can offer to our customers at attractive prices;~~

•~~expand our proprietary brand product offering, including the launch of new brands and expansion into new offerings;~~

•~~increase the awareness of our brand;~~

•~~provide our customers and vendors with a superior experience;~~

•~~develop new features to enhance the consumer experience on our website and our mobile and tablet applications;~~

•~~respond to changes in consumer access to and use of the Internet and mobile devices;~~

•~~react to challenges from existing and new competitors;~~

•develop a scalable, high-performance technology and fulfillment infrastructure that can efficiently and reliably handle increased demand, as well as the deployment of new features and the sale of new products and services;

•~~fulfill and deliver orders in a timely way and in accordance with customer expectations, which may change over time;~~

•~~respond to macroeconomic trends and their impact on consumer spending patterns;~~

•~~hire, integrate and retain talented personnel;~~

•~~leverage our technological and operational efficiencies;~~

•~~invest in the infrastructure underlying our website and other operational systems, including with respect to data protection and cybersecurity; and~~

•~~expand into new offerings or new lines of business~~ in which we ~~do not have prior, or sufficient, operating experience, including sustaining continued expansion of Chewy Pharmacy or our pet healthcare category more generally.~~

Our ability to improve margins and achieve profitability will also depend on the factors described above. We cannot provide assurance that we will be able to successfully manage any of the foregoing challenges to our future growth. Any of these factors could cause our net sales growth to decline and may adversely affect our margins and profitability. We have also benefited from increasing pet ownership and discretionary spending on pets. To the extent these trends slow or reverse, our net sales, margins and profitability could be adversely affected. In particular, COVID-19 has driven an increase in pet ownership and consumer demandcompete for our products that may not be sustained or may reverse. Failure to continue our net sales growth or improve margins could have a material adverse effect on our business, financial condition, and results of operations. You should not rely on our historical rate of net sales growth as an indication of our future performance.

The recent outbreak of the COVID-19 global pandemic and related government, private sector and individual consumer responsive actions may adversely affect our business operations, employee availability, financial performance, liquidity and cash flow for an unknown period of time.

The outbreak of COVID-19 has been declared a pandemic by the World Health Organization and continues to spread in the U.S., Canada, and in many other countries globally. Related government and private sector responsive actions have adversely affected, and may continue to adversely affect, our business operations. It is impossible to predict the effect and ultimate impact of the COVID-19 pandemic, as the situation continues to evolve and variant strains of the virus have led to increased uncertainty. The COVID-19 pandemic has disrupted the global supply chain and may cause disruptions to our operations if a significant number of employees are quarantined or if they are otherwise limited in their ability to work at our locations or travel. Any worsening of the COVID-19 pandemic, including the unknown potential impact of variant strains, and any future

actions in response to the COVID-19 pandemic by federal, state or local authorities, including those that order the shutdown of non-essential businesses or limit the ability of our employees to travel to work, could impact our ability to take or fulfill our customers’ orders and operate our business. If surges related to the COVID-19 pandemic or any future pandemics outpace our capacity or occur at unexpected times, we may be unable to fully meet our customers’ demands for our products.

As a result of the COVID-19 pandemic, many of our personnel are working remotely and it is possible that this could have a negative impact on the execution of our business plans and operations. If a natural disaster, power outage, connectivity issue, or other event occurred that impacted our employees’ ability to work remotely, it may be difficult or, in certain cases, impossible, for us to continue our business for a substantial period of time. The increase in remote working may also result in consumer privacy, IT security and fraud concerns, increase our exposure to potential wage and hour issues, and decrease the cohesiveness of our teams and our ability to maintain our corporate culture. As we prepare to return our workforce back to the office in 2021, we may experience increased costs as we prepare our facilities for a safe return to work environment and experiment with hybrid work models.

Our plans to open new fulfillment centers or to expand the capacity of our existing fulfillment centers over the next few years may also be delayed or made more costly by the continuing spread of COVID-19 and variant strains. Disruptions to the operations of our fulfillment centers and delays or increased costs in the expansion of our fulfillment center capacity may negatively impact our financial performance and slow our future growth.

The uncertainty around the duration of business disruptions and the extent of the spread of the virus in the U.S. and to other areas of the world will likely continue to adversely impact the national or global economy and negatively impact consumer spending. Any of these outcomes could have a material adverse impact on our business, financial condition, operating results and ability to execute and capitalize on our strategies. The full extent of the COVID-19 pandemic’s impact on our operations and financial performance depends on future developments that are uncertain and unpredictable, including the duration and spread of the pandemic, its impact on capital and financial markets and any new information that may emerge concerning the severity of the virus, its spread to other regions as well as the actions taken to contain it, among others. The COVID-19 pandemic could adversely affect our business operations, costs of doing business, availability of labor, access to inventory, supply chain operations and financial results for a period of time that is currently unknown.

~~If we fail to acquire and retain new customers, or fail to do so in a cost-effective manner, we may be unable to increase net sales, improve margins and achieve profitability.~~

Our success depends on our ability to acquire and retain new customers and to do so in a cost-effective manner. In order to expand our customer base, we must appeal to, and acquire, customers who have historically purchased their pet food and other pet products from other retailers such as traditional brick and mortar retailers, the websites of our competitors, or our suppliers’ own websites. We have made significant investments related to customer acquisition and expect to continue to spend significant amounts to acquire additional customers. We cannot assure you that the net sales from the new customers we acquire will ultimately exceed the cost of acquiring those customers. If we fail to deliver a quality shopping experience, or if consumers do not perceive the products we offer to be of high value and quality, we may be unable to acquire or retain customers. If we are unable to acquire or retain customers who purchase products in volumes sufficient to grow our business, we may be unable to generate the scale necessary to achieve operational efficiency and drive beneficial network effects with our suppliers. Consequently, our prices may increase, or may not decrease to levels sufficient to generate customer interest, our net sales may decrease and our margins and profitability may decline or not improve. As a result, our business, financial condition, and results of operations may be materially and adversely affected.

We believe that many of our new customers originate from word-of-mouth and other non-paid referrals from our customers. Therefore, we must ensure that our customers remain loyal to us in order to continue receiving those referrals. If our efforts to satisfy our customers are not successful, we may be unable to acquire new customers in sufficient numbers to continue to grow our business, and we may be required to incur significantly higher marketing expenses in order to acquire new customers.

We also use paid and non-paid advertising. Our paid advertising includes search engine marketing, direct mail, display, television, radio and magazine advertising, paid social media and product placement. Our non-paid advertising efforts include search engine optimization, non-paid social media and e-mail marketing. We drive a significant amount of traffic to our website via search engines and, therefore, rely on search engines. Search engines frequently update and change the logic that determines the placement and display of results of a user’s search, such that the purchased or algorithmic placement of links to our website can be negatively affected. Moreover, a search engine could, for competitive or other purposes, alter its search algorithms or results, causing our website to place lower in search query results.

We also drive a significant amount of traffic to our website via social networking or other e-commerce channels used by our current and prospective customers. As social networking and e-commerce channels continue to rapidly evolve, we may be unable to develop or maintain a presence within these channels. If we are unable to cost-effectively drive traffic to our website, our ability to acquire new customers and our financial condition would be materially and adversely affected. Additionally, if we fail to increase our net sales per active customer, generate repeat purchases or maintain high levels of customer engagement, our business, financial condition, and results of operations could be materially and adversely affected.

~~If we fail to manage our growth effectively, our business, financial condition, and results of operations could be materially and adversely affected.~~

To manage our growth effectively, we must continue to implement our operational plans and strategies, improve and expand our infrastructure of people and information systems and expand, train and manage our employee base. We have rapidly increased employee headcount since our inception to support the growth in our business. To support our continued growth, we must effectively integrate, develop and motivate a large number of new employees. We face significant competition for personnel in the areas where our corporate offices are located, and certain other areas in which we have operations. Failure to manage our hiring needs effectively or successfully integrate our new hires may have a material adverse effect on our business, financial condition, and results of operations.

Additionally, the growth of our business places significant demands on our management and other employees. We are required to manage relationships with a growing number of suppliers, customers and other third parties. Our information technology systems and our internal controls and procedures may not be adequate to support future growth of our customer or supplier base. If we are unable to manage the growth of our organization effectively, our business, financial condition, and results of operations may be materially and adversely affected.

The growth of our business depends on our ability to accurately predict consumer trends, successfully introduce new products and services, improve existing products and services, and expand into new offerings.

Our growth depends, in part, on our ability to successfully introduce new products and services, including our proprietary brand products, and improve and reposition our existing products and services to meet the requirements of our customers and the needs of their pets. It also depends on our ability to expand our offering. This, in turn, depends on our ability to predict and respond to evolving consumer trends, demands and preferences. The development and introduction of innovative new products and services and expansion into new offerings involves considerable costs. In addition, it may be difficult to establish new supplier or partner relationships and determine appropriate product selection when developing a new product, service or offering. Any new product, service or offering may not generate sufficient customer interest and sales to become profitable or to cover the costs of its development and promotionand, as a result, may reduce our operating income. In addition, any such unsuccessful effort may adversely affect our brand and reputation. If we are unable to anticipate, identify, develop or market products, services or any new offering, that respond to changes in consumer requirements and preferences, or if our new product or service introductions, repositioned products or services, or new offerings fail to gain consumer acceptance, we may be unable to grow our business as anticipated, our sales may decline and our margins and profitability may decline or not improve. As a result, our business, financial condition, and results of operations may be materially and adversely affected.

In addition, while we plan to continue to invest in the development of our business, including in the expansion of our offering of proprietary brand products, we may be unable to maintain or expand sales of our proprietary brand products for a number of reasons, including the loss of key suppliers and product recalls. Maintaining consistent product quality, competitive pricing, and availability of our proprietary brand products for our customers is essential to developing and maintaining customer loyalty and brand awareness. Our proprietary brand products on average provide us with higher gross margins than the comparable third-party brand products that we sell. Accordingly, our inability to sustain the growth and sales of our proprietary brand offerings may materially and adversely affect our projected growth rates, business, financial condition, and results of operations.

~~Our continued success is largely dependent on positive perceptions of our company.~~

We believe that one of the reasons our customers prefer to shop at Chewy is the reputation we have built for providing an exceptional customer experience. To be successful in the future, we must continue to preserve, grow, and leverage the value of our reputation and our brand. Reputational value is based in large part on perceptions of subjective qualities, and even isolated incidents may erode trust and confidence and have adverse effects on our business and financial results, particularly if they result in adverse publicity or widespread reaction on social media, governmental investigations, or litigation.

~~We have a history of losses and may generate operating losses as we continue to expand our business.~~

We have a history of losses and may continue to generate operating losses in the near-term as we increase investment in our business. Furthermore, it is difficult for us to predict our future results of operations. We expect our operating expenses to increase over the next several years as we increase our advertising, launch new fulfillment centers, expand our offerings, hire additional personnel and continue to develop features on our website and mobile applications. In particular, we intend to continue to invest substantial resources in marketing to acquire new customers. Our operating expenses may also be adversely impacted by increased costs and delays in launching new fulfillment centers and expanding fulfillment center capacity as a result of the COVID-19 pandemic, as well as increased costs associated with returning to our corporate offices in a safe manner. If our future growth and operating performance fail to meet investor or analyst expectations, or if we have future negative cash flow or losses resulting from our investment in acquiring new customers, our financial condition and stock price could be materially and adversely affected.

~~We may be unable to accurately forecast net sales and appropriately plan our expenses in the future.~~

Net sales and results of operations are difficult to forecast because they generally depend on the volume, timing and type of orders we receive, all of which are uncertain. We base our expense levels and investment plans on our estimates of net sales and gross margins. We cannot be sure the same growth rates, trends, and other key performance metrics are meaningful predictors of future growth. If our assumptions prove to be wrong, we may spend more than we anticipate acquiring and retaining customers or may generate lower net sales per active customer than anticipated, either of which could have a negative impact on our business, financial condition, and results of operations.

~~Our estimate of the size of our addressable market may prove to be inaccurate.~~

Data for retail sales of pet products is collected for most, but not all channels, and as a result, it is difficult to estimate the size of the market and predict the rate at which the market for our products will grow, if at all. While our market size estimate was made in good faith and is based on assumptions and estimates we believe to be reasonable, this estimate may not be accurate. If our estimates of the size of our addressable market are not accurate, our potential for future growth may be less than we currently anticipate, which could have a material adverse effect on our business, financial condition, and results of operations.

~~We may be unable to source additional, or strengthen our existing relationships with, suppliers. In addition, the loss of any of our key suppliers would negatively impact our business.~~

~~In order to attract quality suppliers, we must:~~

•~~demonstrate our ability to help our suppliers increase their sales;~~

•~~offer suppliers a high quality, cost-effective fulfillment process; and~~

•~~continue to provide suppliers a dynamic and real-time view of our demand and inventory needs.~~

If we are unable to provide our suppliers with a compelling return on investment and an ability to increase their sales, we may be unable to maintain and/or expand our supplier network, which would negatively impact our business.

We purchase significant amounts of products from a number of suppliers with limited supply capabilities. There can be no assurance that our current suppliers will be able to accommodate our anticipated growth or continue to supply current quantities at preferential prices. An inability of our existing suppliers to provide products in a timely or cost-effective manner could impair our growth and materially and adversely affect our business, financial condition, and results of operations. For instance, as a result of the disruptions resulting from the COVID-19 pandemic, some of our existing suppliers were not able to supply us with products in a timely or cost-effective manner. While we believe these disruptions to be temporary, their duration is uncertain and a continued inability of our existing suppliers to provide products or other product supply disruptions that may occur in the future could impair our business, financial condition, and results of operations.

We generally do not maintain long-term supply contracts with any of our pet product suppliers and any of our pet product suppliers could discontinue selling to us at any time. The loss of any of our significant suppliers or the discontinuance of any preferential pricing or exclusive incentives they currently offer to us would have a negative impact on our business, financial condition, and results of operations. In addition, in our experience, it is challenging to persuade pet food buyers to switch to a different product, which could make it difficult to retain certain customers if we lose a pet food supplier, thereby exacerbating the negative impact of such loss on our business, financial condition, and results of operations.

We continually seek to expand our base of suppliers and to identify new pet products. If we are unable to identify or enter into distribution relationships with new suppliers or to replace the loss of any of our existing suppliers, we may experience a competitive disadvantage, our business may be disrupted and our business, financial condition, and results of operations may be adversely affected.

Most of the premium pet food brands that we purchase are not widely carried in supermarkets, warehouse clubs or mass merchants. If any premium pet food manufacturers were to make premium pet food products widely available in supermarkets or through mass merchants, or if the premium brands currently available to supermarkets and mass merchants were to increase their market share at the expense of the premium brands sold only through specialty pet food and supplies retailers, our ability to attract and retain customers and our competitive position may suffer. Furthermore, if supermarkets, warehouse clubs or mass merchants begin offering any of these premium pet food brands at lower prices, our sales and gross margin could be adversely affected.

In addition, several of the pet food brands we currently purchase and offer for sale to our customers are not offered by our closest specialty pet retailer competitors. However, we have not entered into formal exclusivity agreements with the suppliers for such brands. In the event these suppliers choose to enter into distribution arrangements with other specialty pet retailers or other competitors our sales could suffer and our business could be adversely affected.

Our principal suppliers currently provide us with certain incentives such as volume purchasing, trade discounts, cooperative advertising and market development funds. A reduction or discontinuance of these incentives would increase our costs and could reduce our profitability. Similarly, if one or more of our suppliers were to offer these incentives, including preferential pricing, to our competitors, our competitive advantage would be reduced, which could materially and adversely affect our business, financial condition, and results of operations.

~~Shipping is a critical part of our business and any changes in, or disruptions to, our shipping arrangements could adversely affect our business, financial condition, and results of operations.~~

We currently rely on third-party national, regional and local logistics providers to deliver the products we offer on our website and mobile applications. If we are not able to negotiate acceptable pricing and other terms with these providers, or if these providers experience performance problems or other difficulties in processing our orders or delivering our products to customers, it could negatively impact our results of operations and our customers’ experience. For example, changes to the terms of our shipping arrangements may adversely impact our margins and profitability. In addition, our ability to receive inbound inventory efficiently and ship merchandise to customers may be negatively affected by factors beyond our and these providers’ control, including inclement weather, fire, flood, power loss, earthquakes, acts of war or terrorism or other events specifically impacting our or other shipping partners, such as labor disputes, financial difficulties, system failures and other disruptions to the operations of the shipping companies on which we rely. We are also subject to risks of damage or loss during delivery by our shipping vendors. If the products ordered by our customers are not delivered in a timely fashion or are damaged or lost during the delivery process, our customers could become dissatisfied and cease buying products through our website and mobile applications, which would adversely affect our business, financial condition, and results of operations. Further, due to the continuing spread of COVID-19 and its variant strains and related governmental work and travel restrictions, there may be disruptions and delays in national, regional and local shipping, which may negatively impact our customers’ experience and our results or operations. The spread of COVID-19, and any future pandemic, epidemic or similar outbreak, may disrupt our suppliers and logistics providers, such as FedEx, UPS, DHL, the U.S. Postal Service and other third- party delivery agents, as their workers may be prohibited or otherwise unable to report to work and transporting products within regions or countries may be limited due to extended holidays, factory closures, port closures and increased border controls and closures, among other things. We may also incur higher shipping costs due to various surcharges by third- party delivery agents on retailers related to the increased shipping demand resulting from the COVID-19 outbreak and any future pandemic, epidemic or similar outbreak.

~~If we do not successfully optimize, operate and manage the expansion of the capacity of our fulfillment centers, our business, financial condition, and results of operations could be harmed.~~

If we do not optimize and operate our fulfillment centers successfully and efficiently, it could result in excess or insufficient fulfillment capacity, an increase in costs or impairment charges or harm our business in other ways. In addition, if we do not have sufficient fulfillment capacity or experience a problem fulfilling orders in a timely manner, our customers may experience delays in receiving their purchases, which could harm our reputation and our relationship with our customers. As a result of the COVID-19 pandemic, we may experience disruptions to the operations of our fulfillment centers, which may negatively impact

~~our ability to fulfill orders in a timely manner, which could harm our reputation, relationship with customers and results of operations.~~

We have designed and built our own fulfillment center infrastructure, including customizing third-party inventory and package handling software systems, which is tailored to meet the specific needs of our business. If we continue to add fulfillment and warehouse capabilities, add new businesses or categories with different fulfillment requirements or change the mix in products that we sell, our fulfillment network will become increasingly complex and operating it will become more challenging. Failure to successfully address such challenges in a cost-effective and timely manner could impair our ability to timely deliver our customers’ purchases and could harm our reputation and ultimately, our business, financial condition, and results of operations.

We anticipate the need to add additional fulfillment center capacity as our business continues to grow. We cannot assure you that we will be able to locate suitable facilities on commercially acceptable terms in accordance with our expansion plans, nor can we assure you that we will be able to recruit qualified managerial and operational personnel to support our expansion plans. If we are unable to secure new facilities for the expansion of our fulfillment operations, recruit qualified personnel to support any such facilities, or effectively control expansion-related expenses, our business, financial condition, and results of operations could be materially and adversely affected. If we grow faster than we anticipate, we may exceed our fulfillment center capacity sooner than we anticipate, we may experience problems fulfilling orders in a timely manner or our customers may experience delays in receiving their purchases, which could harm our reputation and our relationship with our customers, and we would need to increase our capital expenditures more than anticipated and in a shorter time frame than we currently anticipate. Our ability to expand our fulfillment center capacity, including our ability to secure suitable facilities and recruit qualified employees, may be substantially affected by the spread of COVID-19 and its variant strains and related governmental orders and there may be delays or increased costs associated with such expansion as a result of the spread and impact of the COVID-19 pandemic. Many of the expenses and investments with respect to our fulfillment centers are fixed, and any expansion of such fulfillment centers will require additional investment of capital. We expect to incur higher capital expenditures in the future for our fulfillment center operations as our business continues to grow. We would incur such expenses and make such investments in advance of expected sales, and such expected sales may not occur. Any of these factors could materially and adversely affect our business, financial condition, and results of operations.

~~Our business may be adversely affected if we are unable to provide our customers with a cost-effective platform that is able to respond and adapt to rapid changes in technology.~~

The number of people who access the Internet through devices other than personal computers, including mobile phones, handheld computers such as notebooks and tablets, video game consoles and television set-top devices, has increased dramatically in recent years. The versions of our website and mobile applications developed for these devices may not be compelling to consumers. Our website and platform are also currently not compatible with voice-enabled products. Adapting our services and/or infrastructure to these devices as well as other new Internet, networking or telecommunications technologies could be time-consuming and could require us to incur substantial expenditures, which could adversely affect our business, financial condition, and results of operations.

Additionally, as new mobile devices and platforms are released, it is difficult to predict the problems we may encounter in developing applications for alternative devices and platforms and we may need to devote significant resources to the creation, support and maintenance of such applications. If we are unable to attract consumers to our website or mobile applications through these devices or are slow to develop a version of our website or mobile applications that is more compatible with alternative devices, we may fail to capture a significant share of consumers in the pet food and accessory market and could also lose customers, which could materially and adversely affect our business, financial condition, and results of operations.

Further, we continually upgrade existing technologies and business applications and we may be required to implement new technologies or business applications in the future. The implementation of upgrades and changes requires significant investments. Our results of operations may be affected by the timing, effectiveness and costs associated with the successful implementation of any upgrades or changes to our systems and infrastructure. In the event that it is more difficult for our customers to buy products from us on their mobile devices, or if our customers choose not to buy products from us on their mobile devices or to use mobile products that do not offer access to our website, we could lose customers and fail to attract new customers. As a result, our customer growth could be harmed and our business, financial condition, and results of operations may be materially and adversely affected.

~~We are subject to risks related to online payment methods.~~

We currently accept payments using a variety of methods, including credit card, debit card, Paypal and gift cards. As we offer new payment options to consumers, we may be subject to additional regulations, compliance requirements, fraud and other risks. For certain payment methods, we pay interchange and other fees, which may increase over time and raise our operating costs and lower profitability. We are also subject to payment card association operating rules and certification requirements, including the Payment Card Industry Data Security Standard (“PCI DSS”) and rules governing electronic funds transfers, which could change or be reinterpreted to make it difficult or impossible for us to comply. Failure to comply with PCI DSS or to meet other payment card standards may result in the imposition of financial penalties or the allocation by the card brands of the costs of fraudulent charges to us.

Furthermore, as our business changes, we may be subject to different rules under existing standards, which may require new assessments that involve costs above what we currently pay for compliance. In the future, as we offer new payment options to consumers, including by way of integrating emerging mobile and other payment methods, we may be subject to additional regulations, compliance requirements and fraud. If we fail to comply with the rules or requirements of any provider of a payment method we accept, if the volume of fraud in our transactions limits or terminates our rights to use payment methods we currently accept, or if a data breach occurs relating to our payment systems, we may, among other things, be subject to fines or higher transaction fees and may lose, or face restrictions placed upon, our ability to accept credit card payments from consumers or facilitate other types of online payments. If any of these events were to occur, our business, financial condition, and results of operations could be materially and adversely affected.

We also occasionally receive orders placed with fraudulent data. If we are unable to detect or control fraud, our liability for these transactions could harm our business, financial condition, and results of operations.

~~Our business depends on network and mobile infrastructure, our third-party data center hosting facilities, including cloud- service providers,~~other third-party providers, and our ability to maintain and scale our technology. Any significant interruptions or delays in service on our website or mobile applications or any undetected errors or design faults could result in limited capacity, reduced demand, processing delays, and loss of customers or suppliers.

A key element of our strategy is to generate a high volume of traffic on, and use of, our website and mobile applications. Our reputation and ability to acquire, retain and serve our customers are dependent upon the reliable performance of our website and mobile applications and the underlying network infrastructure. As our customer base and the amount of information shared on our website and mobile applications continue to grow, we will need an increasing amount of network capacity and computing power. We have spent and expect to continue to spend substantial amounts on data centers, including cloud providers, and equipment and related network infrastructure to handle the traffic on our website and mobile applications. The operation of these systems is complex and could result in operational failures. In some cases, third-party cloud providers run their own platforms that we access, and we are, therefore, vulnerable to their service interruptions. In the event that the volume of traffic of our customers exceeds the capacity of our current network infrastructure or in the event that our customer base or the amount of traffic on our website and mobile applications grows more quickly than anticipated, we may be required to incur significant additional costs to enhance the underlying network infrastructure. Interruptions or delays in these systems, whether due to system failures, computer viruses, physical or electronic break-ins, undetected errors, design faults or other unexpected events or causes, could affect the security or availability of our website and mobile applications and prevent our customers from accessing our website and mobile applications. If sustained or repeated, these performance issues could reduce the attractiveness of our products and services. In addition, the costs and complexities involved in expanding and upgrading our systems may prevent us from doing so in a timely manner and may prevent us from adequately meeting the demand placed on our systems. Any web or mobile platform interruption or inadequacy that causes performance issues or interruptions in the availability of our website or mobile applications could reduce consumer satisfaction and result in a reduction in the number of consumers using our products and services.

We depend on the development and maintenance of the Internet and mobile infrastructure. This includes maintenance of reliable Internet and mobile infrastructure with the necessary speed, data capacity and security, as well as timely development of complementary products, for providing reliable Internet and mobile access. We also use and rely on services from other third parties, such as our telecommunications services and credit card processors, and those services may be subject to outages and interruptions that are not within our control. Failures by our telecommunications providers may interrupt our ability to provide phone support to our customers and Distributed denial-of-service (“DDoS”) attacks directed at our telecommunication service providers could prevent customers from accessing our website. talent.

In addition, we have provided certain perquisites and other personal benefits in limited circumstances where we believe it is appropriate to assist a NEO in the ~~past~~performance of their duties, to make our NEOs more efficient and ~~may in the future experience down periods where our third-party credit card processors are unable to process the online payments~~effective, for security purposes, and for recruitment, motivation, and retention purposes. During fiscal year 2022, none of our ~~customers, disrupting our ability~~NEOs received material perquisites or other personal benefits that are not generally made available to ~~receive customer orders. Our business, financial condition, and results of operations could~~

~~be materially and adversely affected if for any reason the reliability of our Internet, telecommunications, payment systems and mobile infrastructure is compromised.~~

~~We currently rely upon third-party data storage providers, including cloud storage solution providers, including Amazon Web Services (“AWS”). Nearly~~ all of our ~~data storage~~employees, with the exception of security services, two automobiles, home services, and ~~analytics~~a security employee, periodically provided to our Chief Executive Officer, which we have deemed to be necessary and appropriate, and a legacy long-term disability benefit that is provided to our Chief Financial Officer.

Non-qualified Deferred Compensation

We introduced a non-qualified deferred compensation plan (the “NQDCP”) in fiscal year 2022 and provide eligible employees the opportunity to defer compensation into the NQDCP. There are conducted on, and the data and content we create associated with sales on our website and mobile applications are processed through, servers hosted by these providers. We also rely on e-mail service providers, bandwidth providers, Internet service providers and mobile networks to deliver e-mail and “push” communications to customers and to allow customers to access our website.

~~Any damage to, or failure of, our systems or the systems of our third-party data centers, including cloud storage solution providers, or our other third-party providers could result in interruptions~~no employer contributions to the ~~availability or functionality~~NQDCP. The NQDCP permits eligible employees to defer up to 50% of ~~our website~~base salary and ~~mobile applications. As~~up to 80% of STI on a result, we could lose customer data and miss order fulfillment deadlines, which could result in decreased sales, increased overhead costs, excess inventory and product shortages. If for any reason our arrangements with our data centers, cloud storage solution providers or other third-party providers are terminated or interrupted, such termination or interruption could adversely affect our business, financial condition, and results of operations. We exercise little control over these providers, which increases our vulnerability to problems with the services they provide. We have designed certain of our software and computer systems so as to also utilize data processing, storage capabilities and other services providedtax-advantaged basis. Amounts contributed by AWS. Given this, along with the fact that we cannot rapidly switch our AWS operations to another cloud provider, any disruption of or interference with our use of AWS would impact our operations and our business would be adversely impacted. We could experience additional expense in arranging for new facilities, technology, services and support. In addition, the failure of our third-party data centers, including cloud storage solution providers, or any other third-party providers to meet our capacity requirements could result in interruption in the availability or functionality of our website and mobile applications.

The satisfactory performance, reliability and availability of our website, mobile applications, transaction processing systems and technology infrastructure are critical to our reputation and our ability to acquire and retain customers, as well as to maintain adequate customer service levels. Our net sales depend on the number of visitors who shop on our website and mobile applications and the volume of orders that we can handle. Unavailability of our website or of our mobile applications or reduced order fulfillment performance would reduce the volume of goods sold and could also materially and adversely affect consumer perception of our brand. Any slowdown or failure of our website, mobile applications or the underlying technology infrastructure could harm our business, reputation and our ability to acquire, retain and serve our customers.

The occurrence of a natural disaster, power loss, telecommunications failure, data loss, computer virus, an act of terrorism, cyberattack, vandalism or sabotage, act of war or any similar event, or a decision to close our third-party data centers on which we normally operate or the facilities of any other third-party provider without adequate notice or other unanticipated problems at these facilities could result in lengthy interruptions in the availability of our website and mobile applications. Cloud computing, in particular, is dependent upon having access to an Internet connection in order to retrieve data. If a natural disaster, pandemic (such as the COVID-19 pandemic), blackout or other unforeseen event were to occur that disrupted the ability to obtain an Internet connection, we may experience a slowdown or delay in our operations. While we have some limited disaster recovery arrangements in place, our preparations may not be adequate to account for disasters or similar events that may occur in the future and may not effectively permit us to continue operating in the event of any problems with respect to our systems or those of our third-party data centers or any other third-party facilities. Our disaster recovery and data redundancy plans may be inadequate, and our business interruption insurance may not be sufficient to compensate us for the losses that could occur. If any such event were to occur to our business, our operations could be impaired and our business, financial condition, and results of operations may be materially and adversely affected.

~~Our reliance on software-as-a-service (“SaaS”) technologies from third parties may adversely affect our business and results of operations.~~

We rely on SaaS technologies from third parties in order to operate critical functions of our business, including financial management services, customer relationship management services, supply chain services and data storage services. If these services become unavailable due to extended outages or interruptions or because they are no longer available on commercially reasonable terms or prices, or for any other reason, our expenses could increase, our ability to manage our finances could be interrupted, our processes for managing sales of our offerings and supporting our customers could be impaired, our ability to communicate with our suppliers could be weakened and our ability to access or save data storedeligible employees to the ~~cloud may be impaired until equivalent services, if available,~~NQDCP are ~~identified, obtained and implemented, all of which could harm our business, financial condition, and results of operations.~~

Our failure or the failure of third-party service providers to protect our website, networks, and systems against cybersecurity incidents, or otherwise to protect our confidential information, could damage our reputation and brand and substantially harm our business, financial condition, and results of operations.

As a result of our services being web based, we collect, process, transmit and store large amounts of data about our customers, employees, suppliers and others, including credit card information and personally identifiable information, as well as other confidential and proprietary information. We also employ third-party service providers for a variety of reasons, including storing, processing and transmitting proprietary, personal and confidential information on our behalf. While we rely on tokenization solutions licensed from third parties in an effort to securely transmit confidential and sensitive information, including credit card numbers, advances in computer capabilities, new technological discoveries or other developments may result in the whole or partial failure of this technology to protect this data from being breached or compromised. Similarly, our security measures, and those of our third-party service providers, may not detect or prevent all attempts to hack our systems or those of our third-party service providers. DDoS attacks, viruses, malicious software, break-ins, phishing attacks, social engineering, security breaches or other cybersecurity incidents and similar disruptions that may jeopardize the security of information stored in or transmitted by our website, networks and systems or that we or our third-party service providers otherwise maintain, including payment card systems, may subject us to fines or higher transaction fees or limit or terminate our access to certain payment methods. We and our service providers may not anticipate or prevent all types of attacks until after they have already been launched, and techniques used to obtain unauthorized access to or sabotage systems change frequently and may not be known until launched against us or our third-party service providers. In addition, cybersecurity incidents can also occur as a result of non-technical issues, including intentional or inadvertent breaches by our employees or by persons with whom we have commercial relationships.

Breaches of our security measures or those of our third-party service providers or any cybersecurity incident could result in unauthorized access to our website, networks and systems; unauthorized access to and misappropriation of consumer and/oremployee information, including personally identifiable information, or other confidential or proprietary information of ourselves or third parties; viruses, worms, spyware or other malware being served from our website, networks or systems; deletion or modification of content or the display of unauthorized content on our website; interruption, disruption or malfunction of operations; costs relating to cybersecurity incident remediation, deployment of additional personnel andprotection technologies, response to governmental investigations and media inquiries and coverage; engagement of third party experts and consultants; litigation, regulatory action and other potential liabilities. If any of these cybersecurity incidents occur, or there is a public perception that we, or our third-party service providers, have suffered such a breach, our reputation and brand could also be damaged and we could be required to expend significant capital and other resources to alleviate problems caused by such cybersecurity incidents. As a consequence, our business could be materially and adversely affected and we could also be exposed to litigation and regulatory action and possible liability. In addition, any party who is able to illicitly obtain a customer’s password could access the customer’s transaction data or personal information. Any compromise or breach of our security measures, or those of our third-party service providers, could violate applicable privacy, data security and other laws, and cause significant legal and financial exposure, adverse publicity and a loss of confidence in our security measures, which could have an material adverse effect on our business, financial condition, and results of operations. This is more so since governmental authorities throughout the U.S. and around the world are devoting more attention to data privacy and security issues.

While we maintain privacy, data breach and network security liability insurance, we cannot be certain that our coverage will be adequate for liabilities actually incurred or that insurance will continue to be available to us on economically reasonable terms, or at all. Additionally, even though we continue to devote significant resources to monitor and update our systems and implement information security measures to protect our systems, there can be no assurance that any controls and procedures we have in place will be sufficient to protect us from future cybersecurity incidents. Failure by us or our vendors to comply with data security requirements, including the CCPA’s new “reasonable security” requirement in light of the private right of action, or rectify a security issue may result in class action litigation, fines and the imposition of restrictions on our ability to accept payment cards, which could adversely affect our operations. As cyber threats are continually evolving, our controls and procedures may become inadequate and we may be required to devote additional resources to modify or enhance our systems in the future. As a result, we may face interruptions to our systems, reputational damage, claims under privacy and data protection laws and regulations, customer dissatisfaction, legal liability, enforcement actions or additional costs, any and all of which could adversely affect our business, financial condition, and results of operations.

~~Safety, quality, and health concerns could affect our business.~~

We could be adversely affected if consumers lose confidence in the safety and quality of our vendor supplied and proprietary brand food and hardgood products. All of our suppliers are required to comply with applicable product safety laws and we are dependent upon them to ensure such compliance. One or more of our suppliers, including manufacturers of our proprietary brand products, might not adhere to product safety requirements or our quality control standards. Any issues of product safety or allegations that our products are in violation of governmental regulations, including, but not limited to, issues involving products manufactured in foreign countries, could cause those products to be recalled. Adverse publicity about these types of concerns, whether valid or not, may discourage consumers from buying the products we offer, or cause supplier production and delivery disruptions. The real or perceived sale of contaminated food products by us could result in product liability claims against our suppliers or us, expose us or our suppliers to governmental enforcement action or private litigation, or lead to costly recalls and a loss of consumer confidence, any of which could have an adverse effect on our business, financial condition, and results of operations. In addition, our products may be exposed to product recalls, and we may be subject to litigation, if they are alleged to cause or pose a risk of injury or illness or if they are alleged to have been mislabeled, misbranded or adulterated or to otherwise be in violation of governmental regulations. We may also voluntarily recall or withdraw products that we consider do not meet our standards, whether for palatability, appearance or otherwise, in order to protect our brand and reputation. While we carry product liability insurance, our insurance may not be adequate to cover all liabilities we may incur in connection with product liability claims. For example, punitive damages are generally not covered by insurance. In addition, we may be unable to continue to maintain our existing insurance, obtain comparable insurance at a reasonable cost, if at all, or secure additional coverage, which may result in future product liability claims being uninsured. Any of these factors could negatively impact our business and adversely affect our results of operations.

Risks associated with our suppliers and our outsourcing partners, many of which are located outside of the U.S., could materially and adversely affect our business, financial condition, and results of operations.

We depend on a number of suppliers and outsourcing partners, a significant portion of which are located in Asia, to provide our customers with a wide range of products in a timely and efficient manner. If we are unable to maintain our relationships with our existing outsourcing partners or cannot identify or enter into relationships with new outsourcing partners to meet the manufacturing and assembly needs of our proprietary brand business, our proprietary brand business may be disrupted and our business, financial condition, and results of operations may be materially and adversely affected. In addition, political and economic instability, the financial stability of our suppliers and outsourcing partners, their ability to meet our standards, labor problems, the availability and prices of raw materials, merchandise quality issues, currency exchange rates, transport availability and cost, transport security, inflation, natural disasters and epidemics, among other factors, are beyond our control and may materially and adversely affect our suppliers and outsourcing partners and, in turn, our business, financial condition, and results of operations. For example, governments, public institutions and other organizations in countries and regions where cases of COVID-19 have been detected are taking certain emergency measures to combat its spread and impact, including implementation of travel bans and closures of factories, schools, public buildings, businesses and other institutions. While the full impact of this outbreak is not yet known, our business has been affected by, and may continue to be affected by, disruptions or restrictions on our employees’ and other service providers’ ability to travel, temporary closures of our facilities, including one or more of our fulfillment centers or customer service centers, or the facilities of our suppliers and other vendors in our supply chain. We have suppliers around the world, including in China, the U.S. and other countries where cases of COVID-19 have been reported and may be spreading rapidly in the community. If COVID-19 or any of its variant strains were to continue to spread widely in the U.S. or in any other country or region where we have a significant employee presence, facilities or critical operations, it could impair our ability to manage day-to-day operations and service our customers, increase our costs of operations and also result in, among other things, losses of revenue. In addition to the potential direct effects on us of COVID-19 or any similar epidemic or pandemic, we could be materially adversely impacted, including from any disruption to critical vendor services or losses of business, if any of our suppliers face significant business disruptions as a result of COVID-19 or any similar outbreak.

Moreover, there is uncertainty regarding the future of international trade agreements and the U.S.’ position on international trade. For example, the U.S. government has previously threatened to undertake a number of actions relating to trade with Mexico, including the imposition of escalating tariffs on goods imported into the U.S. from Mexico. In addition, the U.S. government has previously raised tariffs, and imposed new tariffs, on a wide range of imports of Chinese products. The U.S. federal government may also withdraw from or materially modify international trade agreements. Additional trade restrictions, including tariffs, quotas, embargoes, safeguards and customs restrictions, could increase the cost or reduce the supply of products available to us and to our suppliers based in the U.S. and may require us to modify our supply chain organization or other current business practices, any of which could harm our business, financial condition, and results of operations.

We are subject to extensive governmental regulation and we may incur material liabilities under, or costs in order to comply with, existing or future laws and regulation, and our failure to comply may result in enforcements, recalls, and other adverse actions.

We are subject to a broad range of federal, state, local, and foreign laws and regulations intended to protect public and worker health and safety, natural resources and the environment. Our operations, including our outsourced proprietary brand manufacturing partners, are subject to regulation by the Occupational Safety and Health Administration (“OSHA”), the Food and Drug Administration (the “FDA”), the Department of Agriculture (the “USDA”) and by various other federal, state, local and foreign authorities regarding the processing, packaging, storage, distribution, advertising, labeling and export of our products, including food safety standards. In addition, we and our outsourced proprietary brand manufacturing partners are subject to additional regulatory requirements, including environmental, health and safety laws and regulations administered by the U.S. Environmental Protection Agency, state, local and foreign environmental, health and safety legislative and regulatory authorities and the National Labor Relations Board, covering such areas as discharges and emissions to air and water, the use, management, disposal and remediation of, and human exposure to, hazardous materials and wastes, and public and worker health and safety. These laws and regulations also govern our relationships with employees, including minimum wage requirements, overtime, terms and conditions of employment, working conditions and citizenship requirements. Violations of or liability under any of these laws and regulations may result in administrative, civil or criminal fines, penalties or sanctions against us, revocation or modification of applicable permits, licenses or authorizations, environmental, health and safety investigations or remedial activities, voluntary or involuntary product recalls, warning or untitled letters or cease and desist orders against operations that are not in compliance, among other things. Such laws and regulations generally have become more stringent over time and may become more so in the future, and we may incur (directly, or indirectly through our outsourced proprietary brand manufacturing partners) material costs to comply with current or future laws and regulations or in any required product recalls. Liabilities under, and/or costs of compliance, and the impacts on us of any non-compliance, with any such laws and regulations could materially and adversely affect our business, financial condition, and results of operations. In addition, changes in the laws and regulations to which we are subject could impose significant limitations and require changes to our business, which may increase our compliance expenses, make our business more costly and less efficient to conduct, and compromise our growth strategy.

Among other regulatory requirements, the FDA reviews the inclusion of specific claims in pet food labeling. For example, pet food products that are labeled or marketed with claims that may suggest that they are intended to treat or prevent disease in pets would potentially meet the statutory definitions of both a food and a drug. The FDA has issued guidance containing a list of specific factors it will consider in determining whether to initiate enforcement action against such products if they do not comply with the regulatory requirements applicable to drugs. These factors include, among other things, whether the product is only made available through or under the direction of a veterinarian and does not present a known safety risk when used as labeled. While we believe that we market our products in compliance with the policy articulated in FDA’s guidance and in other claim-specific guidance, the FDA may disagree or may classify some of our products differently than we do, and may impose more stringent regulations which could lead to alleged regulatory violations, enforcement actions and product recalls. In addition, we may produce new products in the future that may be subject to FDA pre-market review before we can market and sell such products.

Currently, many states in the U.S. have adopted the Association of American Feed Control Officials definition of the term “natural” with respect to the pet food industry, which means no synthetic additives or synthetic processing except vitamins, minerals or certain trace nutrients, and only ingredients that are derived solely from plant, animal or mined sources. Certain of our pet food products use the term “natural” in their labelling or marketing materials. As a result, we may incur material costs to comply with any new labeling requirements relating to the term “natural” and could be subject to liabilities if we fail to timely comply with such requirements, which could have a material adverse effect on our business, financial condition, and results of operations.

In addition to enforcement actions initiated by government agencies, there has been an increasing tendency in the U.S. among pharmaceutical companies to resort to the courts and industry and self-regulatory bodies to challenge comparative prescription drug advertising on the grounds that the advertising is false and deceptive. Through the years, there has been a continuing expansion of specific rules, prohibitions, media restrictions, labeling disclosures, and warning requirements with respect to the advertising for certain products.

~~These developments, depending on the outcome, could have a material adverse effect on our reputation, business, financial condition, and results of operations.~~

~~We may inadvertently fail to comply with various state or federal regulations covering our pet health business, includingthe dispensing of prescription pet medications and provision of telehealth services,which may subject us to reprimands, sanctions, probations, fines, suspensions, or the loss of one or more of our pharmacy licenses.~~

The sale and delivery of prescription pet medications and the provision of telehealth services are generally governed by state laws and regulations and, with respect to controlled substances, also by federal law, and are subject to extensive regulation and oversight by state and federal governmental authorities. The laws and regulations governing our operations and interpretations of those laws and regulations are increasing in number and complexity, change frequently, and can be inconsistent or conflicting. In addition, the governmental authorities that regulate our business have broad latitude to make, interpret, and enforce the laws and regulations that govern us and continue to interpret and enforce those laws and regulations more strictly and more aggressively each year. We are party to a number of routine administrative complaints incidental to our pharmacy business. We cannot assure you that we will not be subject to reprimands, sanctions, probations or fines, or that one or more of our pharmacy licenses will not be suspended or revoked, or our ability to offer telehealth services will not be challenged, in connection with these complaints or otherwise. We may also be the subject of administrative complaints in the future.

Our pharmacy business also involves the provision of professional services, including by pharmacists, that could expose us to professional liability claims. Our pharmacy business is subject to risks inherent in the dispensing, packaging and distribution of drugs and other health care products and services, including claims related to purported dispensing and other operational errors (any failure to adhere to the laws and regulations applicable to the dispensing of drugs could subject our businesses to civil and criminal penalties).

If we are unable to maintain the licenses granted by relevant state authorities in connection with our pharmacy business, or if we become subject to actions by the FDA or other regulators, our dispensing of prescription medications to pet parents could cease and we may be subject to reprimands, sanctions, probations or fines, which could have a material adverse effect on our business, financial condition, and results of operations.

Resistance from veterinarians to authorize prescriptions, or attempts/efforts on their part to discourage pet owners from purchasing from us could cause our sales to decrease and could adversely affect our financial condition and results of operations.

The laws and regulations relating to the sale and delivery of prescription pet medications vary from state to state, but generally require that prescription pet medications be dispensed with authorization from a prescribing veterinarian. Some veterinarians resist providing our customers with a copy of their pet’s prescription or resist authorizing the prescription to our pharmacy staff, thereby effectively preventing us from filling such prescriptions under applicable law. Certain veterinarians have also tried to discourage pet owners from purchasing from Internet mail order pharmacies. If the number of veterinarians who refuse to authorize prescriptions to our pharmacy staff increases, or if veterinarians are successful in discouraging pet owners from purchasing from us, our sales could decrease and our financial condition and results of operations may be materially adversely affected.

~~We face significant competition from veterinarians and other retailers and may not be able to compete profitably with them.~~

We compete directly and indirectly with veterinarians for the sale of pet medications and other health products. Veterinarians hold a competitive advantage because many pet owners may find it more convenient or preferable to purchase prescription medications directly from their veterinariansfully vested at the time of ~~an office visit. We also compete directly and indirectly with both online and traditional retailers. Both online and traditional retailers may hold~~contribution. As part of the NQDCP deferral election, the participant decides whether to receive distributions at a ~~competitive advantage because~~set date or upon the earliest of ~~longer operating histories, established brand names, greater resources, and/~~the participant’s death, disability, retirement, or separation from service or a ~~more established customer base.~~

~~Failure~~change in control. Distributions from the participant’s account may generally be made either in a lump sum or consecutive annual installments over a period that may be between two years and ten years (or up to ~~comply with federal~~fifteen years for retirement-related distributions). The NQDCP is administered by our 401(k) Plan Administrative Committee. Although not legally required, we have chosen to fund the NQDCP liability by means of a rabbi trust. Mr. Mehta participated in the NQDCP in fiscal year 2022.

Pension Benefits

Our NEOs did not participate in, or earn any benefits under, any defined benefit pension or retirement plan sponsored by us during fiscal year 2022 (other than the 401(k) plan as described above and ~~state laws~~in the 2022 Summary Compensation Table below).

Severance Benefits

Mr. Singh’s, Mr. Marte’s, and ~~regulations~~Ms. Helfrick’s respective employment agreements provide for certain severance benefits upon qualifying terminations. As of the end of fiscal year 2022, Mr. Mehta did not have an employment agreement. The compensation that our NEOs could receive upon a qualifying termination or a change of control is described and quantified in the Employment Agreements and Potential Payments Upon Termination or Change in Control section below. Other than as described above and in the Employment Agreements and Potential Payments Upon Termination or Change in Control section, our NEOs are not entitled to severance payments or benefits upon a termination of employment.

Other Compensation Policies and Practices

Clawback

The Compensation Committee is reviewing the final rule issued by the SEC implementing the provisions of the Dodd-Frank Wall Street Reform and Consumer Protection Act relating to ~~privacy, data protection, advertising~~recoupment of incentive-based compensation and ~~consumer protection, or~~will adopt a compliant policy when the ~~expansion of current or~~NYSE adopts listing standards in accordance with the ~~enactment of new laws or regulations relating to privacy, data protection, advertising and consumer protection, could adversely affect our business, financial condition, and results of operations.~~

final rules.

Stock Ownership Guidelines

We rely on a variety of marketing techniques, including email and social media marketing and postal mailings, and we are subject to various laws and regulations that govern such marketing and advertising practices. A variety of federal and state laws and regulations govern the collection, use, retention, sharing and security of consumer data, particularly in the context of online advertising which we rely upon to attract new customers. In addition, we also collect, store, and transmit employees’ health information in order to administer employee benefits; accommodate disabilities and injuries; comply with public health requirements; and mitigate the spread of COVID-19 in the workplace.

Laws and regulations relating to privacy, data protection, marketing and advertising, and consumer protection are evolving and subject to potentially differing interpretations. These requirements may be interpreted and applied in a manner that is inconsistent from one jurisdiction to another or may conflict with other rules or our practices. As a result, our practices may not have complied or may not comply in the future with all such laws, regulations, requirements and obligations. Any failure, or perceived failure, by us to comply with our posted privacy policies or with any federal or state privacy or consumer protection-related laws, regulations, industry self-regulatory principles, industry standards or codes of conduct, regulatory guidance, orders to which we may be subject or other legal obligations relating to privacy or consumer protection could adversely affect our reputation, brand and business, and may result in claims, liabilities, proceedings or actions against us by governmental entities, customers, suppliers or others, or may require us to change our operations and/or cease using certain data sets. Any such claims, proceedings or actions could hurt our reputation, brand and business, force us to incur significant expenses in defense of such proceedings or actions, distract our management, increase our costs of doing business, result in a loss of customers and suppliers and result in the imposition of monetary penalties. We may also be contractually required to indemnify and hold harmless third parties from the costs or consequences of non-compliance with any laws, regulations or other legal obligations relating to privacy or consumer protection or any inadvertent or unauthorized use or disclosure of data that we store or handle as part of operating our business.

Federal and state governmental authorities continue to evaluate the privacy implications inherent in the use of third-party “cookies” and other methods of online tracking for behavioral advertising and other purposes. The U.S. government has enacted, has considered or is considering legislation or regulations that could significantly restrict the ability of companies and individuals to engage in these activities, such as by regulating the level of consumer notice and consent required before a company can employ cookies or other electronic tracking tools or the use of data gathered with such tools. Additionally, some providers of consumer devices and web browsers have implemented, or announced plans to implement, means to make it easier for Internet users to prevent the placement of cookies or to block other tracking technologies, which could if widely adopted result in the use of third-party cookies and other methods of online tracking becoming significantly less effective. The regulation of the use of these cookies and other current online tracking and advertising practices or a loss in our ability to make effective use of services that employ such technologies could increase our costs of operations and limit our ability to acquire new customers on cost-effective terms and consequently, materially and adversely affect our business, financial condition, and results of operations.

In addition, various federal and state legislative and regulatory bodies, or self-regulatory organizations, may expand current laws or regulations, enact new laws or regulations or issue revised rules or guidance regarding privacy, data protection, consumer protection, and advertising. For example, in June, 2018 the State of California enacted the California Consumer Privacy Act of 2018 (the “CCPA”), which became effective on January 1, 2020. The CCPA requires companies that process information on California residents to make new disclosures to consumers about their data collection, use and sharing practices, and allows consumers to opt out of certain data sharing with third parties and provides a new cause of action for data breaches. Further, on November 3, 2020, the California Privacy Rights Act (the “CPRA”) was voted into law by California residents. The CPRA significantly amends the CCPA, and imposes additional data protection obligations on companies doing business in California, including additional consumer rights processes and opt outs for certain uses of sensitive data. It also creates a new California data protection agency specifically tasked to enforce the law, which could result in increased regulatory scrutiny of California businesses in the areas of data protection and security. The substantive requirements for businesses subject to the CPRA will go into effect on January 1, 2023, and become enforceable on July 1, 2023. Similar laws have been proposed in other states and at the federal level, and if passed, such laws may have potentially conflicting requirements that would make compliance challenging. Additionally, the Federal Trade Commission (the “FTC”) and many state attorneys general are interpreting federal and state consumer protection laws to impose standards for the online collection, use, dissemination and security of data. Consumer protection laws require us to publish statements that describe how we handle personal data and choices individuals may have about the way we handle their personal data. If such information that we publish is considered untrue, we may be subject to government claims of unfair or deceptive trade practices, which could lead to significant liabilities and consequences. Further, according to the FTC, violating consumers’ privacy rights or failing to take appropriate steps to keep consumers’ personal data secure may constitute unfair acts or practices in or affecting commerce in violation of Section 5(a) of the Federal Trade Commission Act. Each of these privacy, security, and data protection laws and regulations, and any other such changes or new laws or regulations, could impose significant limitations, require changes to our business, impose fines and other penalties or restrict our use or storage of personal information, which may increase our compliance expenses and make our business more costly or less efficient to conduct. Any such changes could compromise our ability to develop an adequate marketing strategy and pursue our growth strategy effectively, which, in turn, could adversely affect our business, financial condition, and results of operations.

Our ~~ability to utilize net operating loss carryforwards may be subject to certain limitations.~~

Our ability to use our federal and state net operating losses to offset potential future taxable income and related income taxes that would otherwise be due is dependent upon our generation of future taxable income, and we cannot predict with certainty when, or whether, we will generate sufficient taxable income to use all of our net operating losses. In addition, Section 382 of the Internal Revenue Code of 1986, as amended (the “Code”), contains rules that impose an annual limitation on the ability of a company with net operating loss carryforwards that undergoes an ownership change, which is generally any change in ownership of more than 50% of its stock (by value) over a three-year period, to utilize its net operating loss carryforwards in years after the ownership change. These rules generally operate by focusing on ownership changes among holders owning directly or indirectly 5% or more of the shares of stock of a company or any change in ownership arising from a new issuance of shares of stock by such company. If a company’s income in any year is less than the annual limitation prescribed by Section 382 of the Code, the unused portion of such limitation amount may be carried forward to increase the limitation (and net operating loss carryforward utilization) in subsequent tax years.

We experienced an ownership change related to PetSmart’s acquisition of us that will result in an annual limitation under Section 382 of the Code, but we do not expect such limitation to have a material adverse effect on our ability to utilize net operating losses. In addition, if we were to undergo a further ownership change as a result of future transactions involving our common stock, including a follow-on offering of our common stock or purchases or sales of common stock between 5% holders, our ability to use our net operating loss carryforwards may be subject to additional limitation under Section 382 of the Code. As a result, a portion of our net operating loss carryforwards may expire before we are able to use them. If we are unable to utilize our net operating loss carryforwards, there may be a negative impact on our financial position and results of operations.

In addition to the aforementioned federal income tax implications pursuant to Section 382 of the Code, most states follow the general provisions of Section 382 of the Code, either explicitly or implicitly resulting in separate state net operating loss limitations.

We may be unable to adequately protect our intellectual property rights. Additionally, we may be subject to intellectual property infringement claims or other allegations, which could result in substantial damages and diversion of management’s efforts and attention.

We regard our brand, customer lists, trademarks, trade dress, domain names, trade secrets, proprietary technology and similar intellectual property as critical to our success. We rely on trademark, copyright and patent law, trade secret protection, agreements and other methods with our employees and others to protect our proprietary rights. Effective intellectual property protection may not be available in every country in which our products are, or may be made, available. The protection of our intellectual property rights mayStock Ownership Guidelines require the expenditure of significant financial, managerial and operational resources. Moreover, the steps we take to protect our intellectual property may not adequately protect our rights or prevent third parties from infringing or misappropriating our proprietary rights, and we may be unable to broadly enforce all of our intellectual property rights. Any of our intellectual property rights may be challenged by others or invalidated through administrative process or litigation. Our patent and trademark applications may never be granted. Additionally, the process of obtaining patent protection is expensive and time-consuming, and we may be unable to prosecute all necessary or desirable patent applications at a reasonable cost or in a timely manner. Even if issued, there can be no assurance that these patents will adequately protect our intellectual property, as the legal standards relating to the validity, enforceability and scope of protection of patent and other intellectual property rights are uncertain. We also cannot be certain that others will not independently develop or otherwise acquire equivalent or superior technology or intellectual property rights. Furthermore, our confidentiality agreements may not effectively prevent disclosure of our proprietary information, technologies and processes and may not provide an adequate remedy in the event of unauthorized disclosure of such information.

We might be required to spend significant resources to monitor and protect our intellectual property rights. For example, we may initiate claims or litigation against others for infringement, misappropriation or violation of our intellectual property rights or other proprietary rights or to establish the validity of such rights. However, we may be unable to discover or determine the extent of any infringement, misappropriation or other violation of our intellectual property rights and other proprietary rights. Despite our efforts, we may be unable to prevent third parties from infringing upon, misappropriating or otherwise violating our intellectual property rights and other proprietary rights. Any litigation, whether or not it is resolved in our favor, could result in significant expense to us and divert the efforts of our technical and management personnel, which may materially and adversely affect our business, financial condition, and results of operations.

In addition, our technology platform may use open source software. The use of such open source software may subject us to certain conditions, including the obligation to offer, distribute, or disclose our technology platform for no or reduced cost, make the proprietary source code subject to open source software licenses available to the public, license our software and systems that use open source software for the purpose of making derivative works, or allow reverse assembly, disassembly, or reverse engineering. We monitor our use of open source software to avoid subjecting our technology platform to conditions we do not intend. However, if our technology platform becomes subject to such unintended conditions, it could have an adverse effect on our business, financial condition, and results of operations.

Third parties have from time to time claimed, and may claim in the future, that we have infringed their intellectual property rights. These claims, whether meritorious or not, could be time-consuming, result in considerable litigation costs, result in injunctions against us or the payment of damages by us, require significant amounts of management time or result in the diversion of significant operational resources and expensive changes to our business model, result in the payment of substantial damages or injunctions against us, or require us to enter into costly royalty or licensing agreements, if available. In addition, we may be unable to obtain or utilize on terms that are favorable to us, or at all, licenses or other rights with respect to intellectual property we do not own. These risks have been amplified by the increase in third parties whose sole or primary business is to assert such claims. Any payments we are required to make and any injunctions we are required to comply with as a result of these claims could materially and adversely affect our business, financial condition, and results of operations.

~~We rely on the performance of members of management and highly skilled personnel, and if we are unable to attract, develop, motivate and retain well-qualified employees, our business could be harmed.~~

Our ability to maintain our competitive position is largely dependent on the services of our senior management and other key personnel. In addition, our future success depends on our continuing ability to attract, develop, motivate and retain highly qualified and skilled employees. The market for such positions is competitive. Qualified individuals are in high demand and we may incur significant costs to attract them. In addition, the loss of any of our senior management or other key employees or our inability to recruit and develop mid-level managers could materially and adversely affect our ability to execute our business plan and we may be unable to find adequate replacements. Other than our CEO, CFO and certain other senior executives, all of our employees are at-will employees, meaning that they may terminate their employment relationship with us at any time, and their knowledge of our business and industry would be extremely difficult to replace. If we fail to retain talented senior management and other key personnel, or if we do not succeed in attracting well-qualified employees or retaining and motivating existing employees, our business, financial condition, and results of operations may be materially and adversely affected.

~~Uncertainties in economic conditions and their impact on consumer spending patterns, particularly in the pet products market, could adversely impact our results of operations.~~

Our results of operations are sensitive to changes in certain macro-economic conditions that impact consumer spending on pet products and services. Some of the factors adversely affecting consumer spending on pet products and services include consumer confidence, levels of unemployment and general uncertainty regarding the overall future economic environment. We may experience declines in sales or changes in the types of products sold during economic downturns. Any material decline in the amount of consumer spending or other adverse economic changes could reduce our sales, and a decrease in the sales of higher-margin products could reduce profitability and, in each case, harm our business, financial condition, and results of operations.

~~Significant merchandise returns or refunds could harm our business.~~

We allow our customers to return products or offer refunds, subject to our return and refunds policy. If merchandise returns or refunds are significant or higher than anticipated and forecasted, our business, financial condition, and results of operations could be adversely affected. Further, we modify our policies relating to returns or refunds from time to time, and may do so in the future, which may result in customer dissatisfaction and harm to our reputation or brand, or an increase in the number of product returns or the amount of refunds we make.

Severe weather, including hurricanes, earthquakes and natural disasters could disrupt normal business operations, which could result in increased costs and materially and adversely affect our business, financial condition, and results of operations.

Several of our fulfillment centers, customer service centers, and corporate offices are located in Florida, Texas, and other areas that are susceptible to hurricanes, sea-level rise, earthquakes, and other natural disasters. Recent intense weather conditions may cause property insurance premiums to significantly increase in the future. We recognize that the frequency and intensity of

extreme weather events, sea-level rise, and other climatic changes may continue to increase, and as a result, our exposure to these events may increase. Therefore, as a result of the geographic location of our properties, we face risks, including higher costs, such as uninsured property losses and higher insurance premiums, as well as unexpected disruptions to our business and operations, which could materially and adversely affect our business, financial condition and results of operations.

We may seek to grow our business through acquisitions of, or investments in, new or complementary businesses, facilities, technologies or products, or through strategic alliances, and the failure to manage these acquisitions, investments or alliances, or to integrate them with our existing business, could have a material adverse effect on us.

From time to time we may consider opportunities to acquire or make investments in new or complementary businesses, facilities, technologies, offerings, or products, or enter into strategic alliances, that may enhance our capabilities, expand our outsourcing and supplier network, complement our current products or expand the breadth of our markets. Acquisitions, investments and other strategic alliances involve numerous risks, including:

•~~problems integrating the acquired business, facilities, technologies or products, including issues maintaining uniform standards, procedures, controls and policies;~~

•~~unanticipated costs associated with acquisitions, investments or strategic alliances;~~

•~~diversion of management’s attention from our existing business;~~

•~~adverse effects on existing business relationships with suppliers, outsourced proprietary brand manufacturing partners, retail partners and distribution customers;~~

•~~risks associated with entering new markets in which we may have limited or no experience;~~

•~~potential loss of key employees of acquired businesses; and~~

•~~increased legal and accounting compliance costs.~~

Our ability to successfully grow through strategic transactions depends upon our ability to identify, negotiate, complete and integrate suitable target businesses, facilities, technologies and products and to obtain any necessary financing. These efforts could be expensive and time-consuming and may disrupt our ongoing business and prevent management from focusing on our operations. If we are unable to identify suitable acquisitions or strategic relationships, or if we are unable to integrate any acquired businesses, facilities, technologies and products effectively, our business, financial condition, and results of operations could be materially and adversely affected. Also, while we employ several different methodologies to assess potential business opportunities, the new businesses may not meet or exceed our expectations.

~~If we cannot successfully manage the unique challenges presented by international markets, we may not be successful in expanding our operations outside the U.S.~~

~~Our strategy may include the expansion of our operations to international markets. Although some of~~ our executive officers have experience in international business from prior positions, we have little experience with operations outside the U.S. Our ability to successfully execute this strategy is affected by many of the same operational risks we face in expanding(including our U.S. operations. In addition, our international expansion may be adversely affected by our ability to identify and gain access to local suppliers, obtain and protect relevant trademarks, domain names, and other intellectual property, as well as by local laws and customs, legal and regulatory constraints, political and economic conditions and currency regulations of the countries or regions in which we may intend to operate in the future. Risks inherent in expanding our operations internationally also include, among others, the costs and difficulties of managing international operations, adverse tax consequences, domestic and international tariffs and other barriers to trade.

~~Risks Related to Our Industry~~

~~Competition in the pet products and services retail industry, especially Internet-based competition, is strong and presents an ongoing threat to the success of our business.~~

The pet products and services retail industry is very competitive. We compete with pet product retail stores, supermarkets, warehouse clubs and other mass and general retail and online merchandisers, including e-tailers, many of which are larger than us and have significantly greater capital resources than we do. We also compete with a number of specialty pet supply storesNEOs) and independent ~~pet stores, catalog retailers and other specialty e-tailers.~~

~~Many~~directors to hold an aggregate value of our current competitors have, and potential competitors may have, longer operating histories, greater brand recognition, larger fulfillment infrastructures, greater technical capabilities, significantly greater financial, marketing and other resources and larger customer bases than we do. These factors may allow our competitors to derive greater net sales and profits from their existing customer base, acquire customers at lower costs or respond more quickly than we can to new or emerging technologies and changes in consumer preferences or habits. These competitors may engage in more extensive research and development efforts, undertake more far-reaching marketing campaigns and adopt more aggressive pricing policies (including but not limited to predatory pricing policies and the provision of substantial discounts), which may allow them to build larger customer bases or generate net sales from their customer bases more effectively than we do.

We have been able to compete successfully by differentiating ourselves from our competitors by providing a large selection of high-quality pet food, treats and supplies, competitive pricing, convenience and exceptional customer service. If changes in consumer preferences decrease the competitive advantage attributable to these factors, or if we fail to otherwise positively differentiate our product offering or customer experience from our competitors, our business, financial condition, and results of operations could be materially and adversely affected. In particular, a key component of our business strategy is to rely on our reputationqualifying Company equity for exceptional customer service. This is done, in part, by recruiting, hiring, training, and retaining employees who share our core values of delivering superior service to our customers and caring about pet parents and their needs. If our reputation is negatively affected by the actions of our employees, by our inability to conduct our operations in a manner that is appealing to current or prospective customers, or otherwise, our business, financial condition, and results of operations may be materially and adversely affected. In addition, if we are unable to maintain our current levels of customer service and our reputation for customer service as we grow or otherwise, our net sales may not continue to grow or may decline, and our business, financial condition, and results of operations may be materially and adversely affected.

We compete directly and indirectly with veterinarians for the sale of pet medications and other pet health products. Veterinarians hold a competitive advantage over us because many pet parents may find it more convenient or preferable to purchase these products directly from their veterinarians at the time of an office visit. We also compete directly and indirectly with both online and traditional pet pharmacies. Both online and traditional pet pharmacies may hold a competitive advantage over us because of longer operating histories, established brand names, greater resources, and/or an established customer base. Online pet pharmacies may have a competitive advantage over us because of established affiliate relationships that drive traffic to their website. Traditional pet pharmacies may hold a competitive advantage over us because pet parents may prefer to purchase these products from a store instead of online. In addition, we face growing competition from online and multichannel pet pharmacies, some of whom may have a lower cost structure than ours, as customers now routinely use computers, tablets, smartphones, and other mobile devices and mobile applications to shop online and compare prices and products in real time. In order to effectively compete in the future, we may be required to offer promotions and other incentives, which may result in lower operating margins and in turn adversely affect our results of operations. We also face a significant challenge from our competitors forming alliances with each other, such as those between online and traditional pet pharmacies. These relationships may enable both their retail and online stores to negotiate better pricing and better terms from suppliers by aggregating the demand for products and negotiating volume discounts, which could be a competitive disadvantage to us.

We expect competition in the pet products and services retail industry, in particular Internet-based competition, generally to continue to increase. If we fail to compete successfully, our business, financial condition, and results of operations could be materially and adversely affected.

Government regulation of the Internet and e-commerce is evolving, and unfavorable changes or failure by us to comply with these regulations could substantially harm our business, financial condition, and results of operations.

We are subject to general business regulations and laws as well as regulations and laws specifically governing the Internet and e-commerce. Existing and future regulations and laws could impede the growth of the Internet, e-commerce or mobile commerce, which could in turn adversely affect our growth. These regulations and laws may involve taxes, tariffs, privacy and data security, anti-spam, content protection, electronic contracts and communications, consumer protection and Internet neutrality. It is not clear how existing laws governing issues such as property ownership, sales and other taxes and consumer privacy apply to the Internetso long as the ~~vast majority~~individual serves as an executive officer or independent director and for ninety (90) days following termination of these laws were adopted prior to the advent of the Internet and do not contemplate or address the unique issues raised by the Internet or e-commerce. It is possible that general business regulations and laws, or those specifically governing the Internet or e-commerce, may be interpreted and applied in a manner that is inconsistent from one jurisdiction to another and may conflict with other rules or our practices. We cannot be sure that our practices have complied, comply or will comply fully with all such laws and regulations. Any failure, or perceived failure, by us to comply with any of these laws or regulations could result in damage to our reputation, a loss in business and proceedings or actions against us by governmental entities, customers, suppliers or others. Any such proceeding or action could hurt our reputation, force us to spend significant amounts in defense of these proceedings, distract our management, increase our costs

of doing business, decrease the use of our website and mobile applications by consumers and suppliers and may result in the imposition of monetary liabilities. We may also be contractually liable to indemnify and hold harmless third parties from the costs or consequences of non-compliance with any such laws or regulations. As a result, adverse developments with respect to these laws and regulations could substantially harm our business, financial condition, and results of operations.

~~Changes in tax treatment of companies engaged in e-commerce may adversely affect the commercial use of our website and mobile applications and our financial results.~~

On June 21, 2018, the Supreme Court of the United States overturned a prior decision under which e-tailers had not been required to collect sales tax unless they had a physical presence in the buyer’s state. As a result, a state may now enforce or adopt laws requiring e-tailers to collect and remit sales tax even if the e-tailer has no physical presence within the taxing state. In response, an increasing number of states have adopted or are considering adopting laws or administrative practices, with or without notice, that impose sales or similar value added or consumption taxes on e-commerce activity, as well as taxes on all or a portion of gross revenue or other similar amounts earned by an e-tailer from sales to customers in the state. Since October 28, 2018, we have withheld sales tax to the extent required in all states to which we ship. If any state were to assert that we have any liability for sales tax for prior periods and seek to collect such tax in arrears and/or impose penalties for past non-payment of taxes, it could have an adverse effect on us. New legislation or regulations, the application of laws and regulations from jurisdictions, including other countries whose laws do not currently apply to our business, or the application of existing laws and regulations to the Internet and commercial online services could similarly result in significant additional taxes on our business. These taxes or tax collection obligations could have an adverse effect on us, including by way of creating additional administrative burdens on us. For instance, the Supreme Court’s recent decision and the enactment and enforcement of laws resulting therefrom could also impact where we are required to file state income taxes. As a result, our effective income tax rate as well as the cost and growth of our business could be materially and adversely affected, which could in turn have a material adverse effect on our financial condition and results of operations. Furthermore, there is a possibility that we may be subject to significant fines or other payments for any past failures to comply with these requirements.

We are also subject to U.S. federal and state laws, regulations, and administrative practices that require us to collect information from our customers, vendors, merchants, and other third parties for tax reporting purposes and report such information to various government agencies. The scope of such requirements continues to expand, requiring us to develop and implement new compliance systems. Failure to comply with such laws and regulations could result in significant penalties. We cannot predict the effect of current attempts to impose sales, income or other taxes on e-commerce. New or revised taxes would likely increase the cost of doing business online and decrease the attractiveness of selling products over the Internet. New taxes could also create significant increases in internal costs necessary to capture data and collect and remit taxes. Any of these events could have a material adverse effect on our business, financial condition, and results of operations.

~~Risks Related to Our Indebtedness~~

~~Restrictions in our revolving credit facility could adversely affect our operating flexibility.~~

~~Our revolving credit facility limits our ability to, among other things:~~

•~~incur or guarantee additional debt;~~

•~~make certain investments and acquisitions;~~

•~~incur certain liens or permit them to exist;~~

•~~enter into certain types of transactions with affiliates;~~

•~~merge or consolidate with another company; and~~

•~~transfer, sell or otherwise dispose of assets.~~

Our revolving credit facility also contains covenants requiring us to maintain certain financial ratios. The provisions of our revolving credit facility may affect our ability to obtain future financing and to pursue attractive business opportunities and our flexibility in planning for, and reacting to, changes in business conditions. As a result, restrictions in our revolving credit facility could adversely affect our business, financial condition, and results of operations. In addition, a failure to comply with the provisions of our revolving credit facility could result in a default or an event of default that could enable our lenders to declare the outstanding principal of that debt, together with accrued and unpaid interest, to be immediately due and payable. If the payment of outstanding amounts under our revolving credit facility is accelerated, our assets may be insufficient to repay such amounts in full, and our stockholders could experience a partial or total loss of their investment. Please see “Management’s Discussion and Analysis of Financial Condition and Results of Operations–Liquidity and Capital Resources.”

~~We do not intend to pay dividends for the foreseeable future and the terms of our revolving credit facility may also restrict our ability to pay dividends.~~

We currently intend to retain any future earnings to finance the operation and expansion of our business and we do not expect to declare or pay any dividends in the foreseeable future. Moreover, the terms of our revolving credit facility may restrict our ability to pay dividends, and any additional debt we may incur in the future may include similar restrictions. As a result, stockholders must rely on sales of their Class A common stock after price appreciation as the only way to realize any future gains on their investment.

~~Risks Related to Our Relationship with and Separation from PetSmart~~

Since we are no longer controlled by or affiliated with PetSmart, we may be unable to continue to benefit from that relationship, which may adversely affect our operations and have a material adverse effect on us.

As of February 12, 2021, we were no longer controlled by PetSmart, although our company and PetSmart remain controlled by affiliates of BC Partners. Our relationship with PetSmart provided us with increased scale and reach. Since we are no longer controlled by PetSmart, we may incur increased costs and higher prices to our customers, which may adversely affect our business, financial condition, and results of operations.

~~If affiliates of BC Partners sell a controlling interest in our company to a third party in a private transaction, you may not realize any change-of-control premium on shares of~~service. Qualifying Company equity includes our Class A common stock, deferred stock units, unvested restricted stock or RSUs, vested shares in our 401(k) plan, and ~~we may become~~common stock beneficially owned in a family trust or by a spouse or minor children. Our stock ownership requirements are:

CEO – six (6) times annual base salary

CFO – three (3) times annual base salary

•

Other C-suite Level Executives – three (3) times annual base salary

Independent Director – five (5) times annual equity retainer

Our executive officers (including our NEOs) and independent directors are required to achieve the stock ownership requirements within five (5) years after becoming subject to the ~~control~~Stock Ownership Guidelines. If an executive officer or independent director becomes subject to a greater stock ownership requirement, such as due to a promotion or an increase in base salary or annual retainer, the executive officer or independent director is expected to meet the higher stock ownership requirement within three (3) years. Until the stock ownership requirement is satisfied, an executive officer or director is required to retain a minimum of fifty percent (50%) of the net shares received as the result of exercise, vesting, or payment of any equity awards granted by the Company. All NEOs and independent directors have been subject to the Stock Ownership Guidelines for less than five (5) years and are in the transition period for compliance with the Stock Ownership Guidelines.

Tax Implications of Executive Compensation

Section 162(m) of the Code places a limit of $1 million on the amount of compensation per year that a public company may deduct for federal income tax purposes with respect to certain executive officers. Our pay-for-performance philosophy remains central to our compensation program, even though some compensation could be non-deductible compensation expenses.

Accounting for Stock-Based Compensation

We follow ASC 718 for our stock-based compensation awards. ASC 718 requires us to measure the compensation expense for all share-based payment awards made to our employees and independent members of our Board, including RSU awards, based on the grant date fair value. This calculation is performed for accounting purposes and reported in the executive compensation tables required by federal securities laws, even though the recipient of the awards may never realize any value from their awards.

Compensation Related Risks

Our Compensation Committee has reviewed our compensation policies and practices to assess whether they encourage our NEOs to take inappropriate risk. Our Compensation Committee believes that the mix and design of the elements of executive compensation, individually or in their entirety, do not encourage NEOs to take inappropriate risks. The mix of fixed and variable compensation prevents undue focus on short-term results and is intended to align the long-term interests of our NEOs with those of our stockholders.

Compensation Committee Report

Our Compensation Committee has reviewed and discussed with management this Compensation Discussion and Analysis. Based on that review and discussion, we recommended to our Board that the Compensation Discussion and Analysis be included in the Proxy Statement and the 2022 10-K.

THE COMPENSATION COMMITTEE

Raymond Svider, Chair

Fahim Ahmed

Compensation Committee Interlocks and Insider Participation

During fiscal year 2022, Mr. Ahmed and Mr. Svider served as members of our Compensation Committee. None of these individuals currently are, or have been, an officer or employee of Chewy. None of our NEOs currently serve, or in the past year have served, as a member of the board of directors or compensation committee (or other board committee performing equivalent functions) of any entity that has one or more of its NEOs serving on our Board or Compensation Committee.

Compensation Tables

2022 Summary Compensation Table

The following table provides information with respect to the compensation of our NEOs for the fiscal years indicated:


Name and Principal Position	Year	Salary ($)⁽¹⁾	Stock Awards ($)⁽²⁾	Non-Equity Incentive Plan Compensation ($)⁽³⁾	All Other Compensation ($)⁽⁴⁾	Total ($)
Sumit Singh Chief Executive Officer	FY22	1,200,000	—	900,000	381,735	2,481,735
	FY21	1,200,000	10,106,250	900,000	244,088	12,450,338
	FY20	1,200,000	—	1,800,000	27,525	3,027,525
Mario Marte Chief Financial Officer	FY22	595,000	—	446,250	11,850	1,053,100
	FY21	595,000	2,425,500	446,250	7,461	3,474,211
	FY20	595,000	—	892,500	7,462	1,494,962
Satish Mehta Chief Technology Officer	FY22	475,000	—	356,250	9,150	840,400
	FY21	475,000	1,617,000	356,250	8,700	2,456,950
	FY20	475,000	—	712,500	8,550	1,196,050
Susan Helfrick General Counsel & Secretary	FY22	450,000	—	337,500	9,150	796,650
	FY21	450,000	—	337,500	8,585	796,085
	FY20	450,000	—	675,000	6,635	1,131,635

(1)	These amounts reflect the actual salary earned by each NEO during fiscal years 2020, 2021, and 2022.

(2)

These amounts reflect the aggregate grant date fair value of the RSUs, as computed in accordance with ASC 718. For a discussion of the assumptions used in the calculation of the grant date fair value, refer to Part II, Item 8 “Financial Statements and Supplementary Data–Note 11 – Share-Based Compensation” of our 2022 10-K.

(3)	For fiscal year 2022, these amounts reflect payouts for performance under our 2022 STI plan. For additional information regarding these amounts refer to Annual Short-Term Incentive in the Elements of NEO Compensation section above.

(4)

For Mr. Mehta and Ms. Helfrick, the amounts disclosed in the “All Other Compensation Column” for fiscal year 2022 reflect Company matching contributions made to their accounts under the Company’s 401(k) retirement savings plan (the “401(k) Plan”). For Mr. Singh, the amounts disclosed for fiscal year 2022 reflect $4,575 of Company matching contributions made to his account under the 401(k) Plan, $352,837 for the value of security services, which included home security and two security employees (including meals and incidentals for the security employees), $22,803 for two automobiles, and approximately $1,520 for Company-provided home services. For Mr. Marte, the amounts disclosed for fiscal year 2022 reflect $9,150 of Company matching contributions made to his account under the 401(k) Plan and $2,700 for the value of a legacy long-term disability benefit.

2022 Grants of Plan-Based Awards

The following table provides certain information with respect to grants of plan-based awards to our NEOs during fiscal year 2022.


Name	Estimated Future Payouts Under Non-Equity Incentive Plan Awards⁽¹⁾
	Threshold ($)		Target ($)		Maximum ($)
Sumit Singh		600,000		1,200,000		1,800,000
		—		—		—
Mario Marte		297,500		595,000		892,500
		—		—		—
Satish Mehta		237,500		475,000		712,500
		—		—		—
Susan Helfrick		225,000		450,000		675,000

(1)

These amounts reflect the threshold, target, and maximum payouts under our 2022 STI plan. For amounts actually earned by each NEO pursuant to our STI plan for fiscal year 2022, refer to the Non-Equity Incentive Plan Compensation column in the Summary Compensation Table above. For additional information regarding these amounts, refer to Annual Short-Term Incentive in the Elements of NEO Compensation section above.

Outstanding Equity Awards at 2022 Fiscal Year-End

The following table provides certain information with respect to outstanding equity awards as of January 29, 2023:


Name	Stock Awards
Name	Number of Shares or Units of Stock That Have Not Vested (#)⁽¹⁾		Market Value of Shares of Units of Stock That Have Not Vested ($)⁽²⁾⁽³⁾		Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested (#)⁽³⁾		Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested ($)⁽²⁾
Sumit Singh		373,417		17,143,574		62,500		2,869,375
Mario Marte		179,240		8,228,908		15,000		688,650
Satish Mehta		134,430		6,171,681		10,000		459,100
Susan Helfrick		89,620		4,114,454		0		0

⁽¹⁾

These amounts reflect Performance RSUs that have met the Performance Condition and are subject to the Service Condition as described in the Long-Term Equity Incentives in the Elements of NEO Compensation section above. The vesting date for these awards are as follows: (i) for Mr. Singh, 373,417 Performance RSUs will vest on June 13, 2023; (ii) for Mr. Marte, 179,240 Performance RSUs will vest on June 13, 2023; (iii) for Mr. Mehta, 134,430 Performance RSUs will vest on June 13, 2023; and (iv) for Ms. Helfrick, 89,620 Performance RSUs will vest on June 13, 2023.

⁽²⁾	These amounts reflect the closing price of our Class A common stock on the NYSE on January 27, 2023 (the last trading day of fiscal year 2022), which was $45.91.

⁽³⁾

These amounts reflect Impact RSUs as described in the Long-Term Equity Incentives in the Elements of NEO Compensation section above. The vesting dates for these awards were as follows: (i) for Mr. Singh, 62,500 Impact RSUs vested on March 1, 2023; (ii) for Mr. Marte, 15,000 Impact RSUs vested on March 1, 2023; and (iii) for Mr. Mehta, 10,000 Impact RSUs vested on March 1, 2023.

2022 Option Exercises and Stock Vested

The following table provides certain information with respect to shares acquired by our NEOs upon the vesting of stock awards in fiscal year 2022:


Stock Awards
Name	Number of Shares Acquired on Vesting (#)⁽¹⁾		Value Realized on Vesting ($)⁽²⁾
Sumit Singh		809,334		29,683,469
Mario Marte		373,480		13,544,404
Satish Mehta		278,860		10,099,665
Susan Helfrick		179,240		6,420,377

⁽¹⁾	These amounts reflect Performance RSUs as described in the Long-Term Equity Incentives in the Elements of NEO Compensation section above.

⁽²⁾

The value realized upon vesting has been calculated by multiplying the gross number of shares acquired on vesting by the closing price of our Class A common stock on the NYSE on the vesting date. Therefore, the amounts shown in this column do not represent the actual amounts paid to or realized by the NEO during fiscal year 2022.

2022 Non-Qualified Deferred Compensation

The following table provides certain information with respect to contributions and earnings credited to the accounts of our NEOs under the NQDCP in fiscal year 2022:


Name	Executive Contributions in Last FY ($)⁽¹⁾		Aggregate Earnings in Last FY ($)⁽²⁾		Aggregate Balance at Last FYE ($)⁽³⁾
Sumit Singh		0		0		0
Mario Marte		0		0		0
Satish Mehta		9,135		69		9,204
Susan Helfrick		0		0		0

⁽¹⁾	These amounts are included in the fiscal year 2022 compensation in the “Salary” column of the Summary Compensation Table.

⁽²⁾	None of these amounts are included in the Summary Compensation Table because earnings were not above-market or preferential, as credited earnings on NQDCP contributions are tied to changes in the value of publicly traded investment funds.

⁽³⁾	The NQDCP was introduced in fiscal year 2022, therefore no amounts were reported from this column as compensation to the NEOs in our Summary Compensation Table in previous years.

Employment Agreements and Potential Payments Upon Termination or Change in Control

Mr. Singh, Mr. Marte, and Ms. Helfrick are each eligible for severance payments and benefits described in this section pursuant to their respective employment agreements. Mr. Singh entered into his employment agreement in May 2018, which was amended and restated in June 2019. Mr. Marte and Ms. Helfrick entered into their respective employment agreements in June 2019. As of the end of fiscal year 2022, Mr. Mehta did not have an employment agreement. All severance payments are contingent upon the executive’s timely execution and non-revocation of a ~~presently unknown third party. Substantial future sales~~general release of claims.

Involuntary Termination of Employment Not Involving a Change in Control

In the event the executive’s employment is terminated by us without “Cause” (as defined in the respective employment agreement) or, in the case of Mr. Singh, by him for “Good Reason” (as defined in his employment agreement) (each, a “qualifying termination”) not within three (3) months before or twelve (12) months following a “Change in Control” (as defined in the respective employment agreement), the executive is entitled to the following:

all accrued but unpaid base salary through the date of termination, including any unpaid or unreimbursed expenses, accrued vacation that the executive has not taken, and any benefits provided under the Company’s employee benefit plans upon a termination of employment;

Twelve (12) months of base salary payable in equal monthly installments over the twelve (12) month period following termination;

an annual bonus earned for any fiscal year completed prior to the date of termination that remains unpaid as of the date of termination, payable at the same time annual bonuses are paid to executives generally for the relevant year;

•

a pro-rated annual bonus for the year of termination based on actual performance, payable at the same time annual bonuses are paid to executives generally for the relevant year;

an amount equal to eighteen (18) months of premiums for continuation coverage under our group health plans payable in a lump sum payment within thirty (30) days of termination;

in the case of Mr. Singh, 100% of the Target Bonus (as defined in Mr. Singh’s employment agreement), payable in equal monthly installments over the twelve (12) month period following termination; and

in the case of Mr. Singh, nine (9) months of service credit with respect to any time- or service-based equity incentive awards (or if greater, service credit for 40% of the awards).

Involuntary Termination of Employment Involving a Change in Control

In the event Mr. Singh experiences a qualifying termination within three (3) months before or twelve (12) months following a Change in Control, Mr. Singh is entitled to the following:

twenty-four (24) months of base salary and 200% of the Target Bonus (as defined in Mr. Singh’s employment agreement), both generally payable in a lump sum within thirty (30) days following termination;

•

a pro-rated annual bonus for the year of termination based on actual performance, payable at the same time annual bonuses are paid to executives generally for the relevant year;

an amount equal to twenty-four (24) months of premiums for continuation coverage under our group health plans payable in a lump sum within thirty (30) days of termination; and

nine (9) months of service credit with respect to any time- or service-based equity incentive awards (or if greater, service credit for 40% of the awards).

In the event Mr. Marte or Ms. Helfrick experiences a qualifying termination within three (3) months before or twelve (12) months following a Change in Control, the executive is entitled to the following:

eighteen (18) months of base salary and 100% of the Target Bonus (as defined in their respective employment agreements), both generally payable in a lump sum within thirty (30) days following termination;

an amount equal to eighteen (18) months of premiums for continuation coverage under our group health plans payable in a lump sum payment within thirty (30) days of termination; and

any earned, but unpaid, annual bonus for the year preceding termination.

Death or Disability and Restrictive Covenants

In the event Mr. Singh’s employment is terminated due to his death or “Disability” (as defined in his employment agreement), Mr. Singh is entitled to twelve (12) months of service credit with respect to any time- or service-based equity incentive awards (or if greater, service credit for 40% of the awards), in addition to all accrued but unpaid base salary through the date of termination, including any unpaid or unreimbursed expenses, accrued vacation that he has not taken, and any benefits provided under the Company’s employee benefit plans upon a termination of employment.

Mr. Singh’s, Mr. Marte’s, and Ms. Helfrick’s employment agreements also subject each of them to the following restrictive covenants: (i) during the “Restricted Period” (as defined in the respective employment agreement), a non-competition covenant, customer non-solicitation covenant, and an employee non-solicitation covenant and (ii) perpetual confidentiality and mutual non-disparagement covenants.

Each employment agreement includes a Code Section 280G “best-net cutback” provision that provides in the event any payment or benefit provided under the employment agreement or any other arrangement with our Company or its affiliates constitutes “parachute payments” within the meaning of ~~BC Partners~~ Section 280G of the Code, then such payments and/or ~~others~~benefits will either be (i) provided to the executive in full or (ii) be reduced to the extent necessary to avoid the excise tax imposed by Section 4999 of the Code, whichever results in the executive receiving a greater amount on an after-tax basis.

Potential Payments Upon Termination or Change in Control Table

The following table discloses estimates of the potential payments and benefits, other than those available generally on a nondiscriminatory basis to all salaried employees, provided upon a Change in Control or termination of employment for each of the NEOs, calculated as if the Change in Control and/or termination of employment occurred on January 29, 2023.


Name	Involuntary Termination (not for Cause; Good Reason for Mr. Singh) w/ no Change in Control ($)⁽¹⁾		Change in Control no Termination ($)⁽²⁾		Involuntary Termination (not for Cause) in Connection with a Change in Control ($)⁽³⁾		Death or Disability ($)⁽⁴⁾
Sumit Singh
Cash Payments		2,410,208		—		4,813,611		—
Accelerated Equity Vesting		20,012,949		20,012,949		20,012,949		20,012,949
Total		22,423,157		20,012,949		24,826,560		20,012,949
Mario Marte
Cash Payments		624,346		—		1,516,846		—
Accelerated Equity Vesting		—		8,917,558		8,917,558		—
Total		624,346		8,917,558		10,434,404		—
Satish Mehta
Cash Payments		—		—		—		—
Accelerated Equity Vesting		—		6,630,781		6,630,781		—
Total		—		6,630,781		6,630,781		—
Susan Helfrick
Cash Payments		458,385		—		1,133,385		—
Accelerated Equity Vesting		—		4,114,454		4,114,454		—
Total		458,385		4,114,454		5,247,839		—

All equity amounts in the above table reflect full Performance Condition vesting and a closing stock price of $45.91 as of January 29, 2023 (the last trading day of fiscal year 2022).

⁽¹⁾

For Mr. Singh, this amount includes (i) cash payments and (ii) partial accelerated vesting of the Service Condition for Performance RSUs, both as outlined in Involuntary Termination of Employment Not Involving a Change in Control in the Employment Agreements and Potential Payments Upon Termination or Change in Control section above. For Mr. Marte and Ms. Helfrick, these amounts include cash payments as outlined in Involuntary Termination of Employment Not Involving a Change in Control in the Employment Agreements and Potential Payments Upon Termination or Change in Control section above.

⁽²⁾

These amounts reflect accelerated vesting of the Service Condition upon a Change in Control for Mr. Singh, Mr. Marte, Mr. Mehta, and Ms. Helfrick’s respective Performance RSUs as described in Long-Term Equity Incentives in the Elements of NEO Compensation section above. These amounts are single-trigger.

⁽³⁾

For Mr. Singh, this amount includes (i) double-trigger cash payments for termination of employment without cause or for good reason within three (3) months before or twelve (12) months following a Change in Control (as defined in his employment agreement), and (ii) single-trigger accelerated vesting of the Service Condition upon a Change in Control for Performance RSUs as described in Long-Term Equity Incentives in the Elements of NEO Compensation section above. For Mr. Marte and Ms. Helfrick, these amounts include (i) double-trigger cash payments for termination of employment without cause within three (3) months before or twelve (12) months following a Change in Control (as defined in their respective employment agreements), and (ii) single-trigger accelerated vesting of the Service Condition upon a Change in Control for Performance RSUs as described in Long-Term Equity Incentives in the Elements of NEO Compensation section above. For Mr. Mehta, this amount includes single-trigger accelerated vesting of the Service Condition upon a Change in Control for Performance RSUs as described in Long-Term Equity Incentives in the Elements of NEO Compensation section above.

⁽⁴⁾	These amounts reflect partial accelerated vesting of the Service Condition for Mr. Singh’s Performance RSUs as described in Death or Disability and Restrictive Covenants in the Employment Agreements and Potential Payments Upon Termination or Change in Control section above.

CEO Pay Ratio

The Company is providing the information below to comply with Item 402(u) of Regulation S-K.

Ratio

For fiscal year 2022, the annual total compensation of the employee identified as the median Chewy employee (excluding the CEO) (the “Median Employee”) was $40,803, and the annual total compensation of the CEO was $2,481,735. Based on this information, for fiscal year 2022 the ratio of the annual total compensation of the CEO to the Median Employee was 61:1.

Methodology

The following information was used to identify the Median Employee:

As of December 31, 2022, there were 19,360 Chewy employees.

•

To determine the Median Employee, Chewy used W-2 earnings (base pay, cash bonuses, overtime, etc., as applicable) reflected in payroll records of all employees in the United States for the calendar year ended December 31, 2022, as its measure of compensation. In making this determination, Chewy annualized the base pay or monthly wages and annual bonus amounts paid in respect of calendar year 2022 for those full-time and part-time employees who did not work for the entire calendar year.

•

The Median Employee’s annual total compensation was calculated based on the rules for determining the annual total compensation of our NEOs, which includes base salary, bonus, non-equity incentive plan compensation, and other elements of pay, such as 401(k) employer match, stock awards, or overtime, as applicable. The pay ratio disclosed is a reasonable estimate calculated in a manner consistent with Item 402(u) of Regulation S-K.

The Median Employee is a customer service employee.

Evaluating the CEO Pay Ratio Disclosure

Similar to other organizations with sizable distribution and customer service workforces, as well as the flexibility allowed by the SEC in calculating this ratio, Chewy’s ratio may not be comparable to ratios of other companies.

Director Compensation

In July 2022, following a review conducted by management, we increased the amount of annual compensation for Board and committee service for our independent directors pursuant to our Director Compensation and Educational Expense Reimbursement Policy as follows:

$250,000 for service as a Board member payable 25% in cash and 75% in time-based restricted stock units (“Director RSUs”);

$20,000 for service as a committee chairperson, payable in cash; and

$10,000 for service as a committee member, payable in cash.

Each independent director who serves as the chairperson of a committee receives an annual service fee as a committee member and as the chairperson. Fees paid in cash are generally paid in arrears. Director RSUs are granted to each independent director after our Company’s annual stockholder meeting and vest the earlier of (i) the date of our next annual stockholder meeting or (ii) one year from the date of grant, each subject to the independent director’s continued service as a director on our Board through the vesting date. Directors that join our Board on a date other than our annual stockholder meeting receive a pro-rated amount of the annual cash compensation and Director RSUs.

The Board occasionally establishes committees of limited duration for special purposes. When a special committee is established, the Board will determine whether to provide non-employee directors with additional compensation for service on such committee based on the expected duties of the committee, the anticipated number and length of any committee meetings, and other factors the Board may deem relevant.

We reimburse our directors for reasonable travel expenses relating to Board meetings and up to $7,000 for director educational expenses for each twelve-month period between annual stockholder meetings. We also extend our employee discount to our directors, allowing them to receive a twenty percent (20%) discount on most Chewy orders. Our Director Compensation and Educational Expense Reimbursement Policy was designed to attract and retain high quality independent directors and is periodically reviewed by our Compensation Committee and Nominating and Corporate Governance Committee.

Our independent directors are subject to stock ownership requirements as set forth below under the heading Stock Ownership Guidelines.

2022 Director Compensation

The following table provides information regarding compensation of our independent directors for their service as a director for fiscal year 2022. Non-independent directors received no compensation for their service as a director. Mr. Singh serves as a director and as Chief Executive Officer of the Company. His compensation is shown in the table entitled “Summary Compensation Table” and the related tables under the section entitled “Compensation Tables”.


Name	Fees Earned or Paid in Cash ($)		Stock Awards ($)⁽¹⁾⁽²⁾		Total ($)
Kristine Dickson⁽³⁾		60,625		232,451		293,076
James Nelson⁽⁴⁾		78,038		232,451		310,489
Martin H. Nesbitt⁽⁵⁾		53,125		232,451		285,576
James A. Star⁽⁶⁾		60,625		232,451		293,076

(1)

The amounts reflected in this column represent the grant date fair value of the awards made in fiscal year 2022, as computed in accordance with ASC 718. For a discussion of the assumptions used in the calculation of the grant date fair value, refer to Part II, Item 8 “Financial Statements and Supplementary Data–Note 11 – Share-Based Compensation” of our 2022 10-K.

(2)

Amounts shown do not reflect compensation actually received by the director, and there can be no assurance that these amounts will ever be realized by the director. Each independent director received a grant of Director RSUs in an amount equal to 75% of their annual retainer divided by the 20-day average closing price of the Company’s Class A common stock for the 20 trading days immediately preceding the grant date, rounded to the nearest whole share.

(3)

Ms. Dickson was granted 5,145 Director RSUs in fiscal year 2022, settlement of which will be deferred until the first to occur of (i) her termination of service, (ii) her death or disability, or (iii) a Change in Control, as defined in our 2022 Plan. The Director RSUs vest on the date of the 2023 Annual Meeting, subject to her continued service with the Company.

(4)	Mr. Nelson was granted 5,145 Director RSUs in fiscal year 2022. The Director RSUs vest on the date of the 2023 Annual Meeting, subject to his continued service with the Company.

(5)	Mr. Nesbitt was granted 5,145 Director RSUs in fiscal year 2022, settlement of which will be deferred until the first to occur of (i) his termination of service, (ii) his death or disability, or (iii) a Change in Control, as defined in our 2022 Plan.

(6)	Mr. Star was granted 5,145 Director RSUs in fiscal year 2022. The Director RSUs vest on the date of the 2023 Annual Meeting, subject to his continued service with the Company.

Deferral of Director RSUs

Independent directors may generally elect to defer receipt of their Director RSUs by making such election prior to the end of the calendar year preceding the year in which such Director RSUs are granted. Directors who make a deferral election will have no rights as a stockholder of the Company with respect to Director RSUs until such Director RSUs are settled. Settlement of any deferred Director RSUs in shares of fully vested Company common stock will occur at the time specified in the director’s deferral election, but no later than as soon as practicable following the first to occur of the director’s termination of Board service, the director’s death or disability, or a Change in Control (as defined in our 2022 Plan).

Indemnification

We have entered into indemnification agreements with each of our directors and anticipate that we will enter into similar agreements with any future directors. Generally, the indemnification agreements are designed to provide the maximum protection permitted by Delaware law with respect to indemnification of a director. The indemnification agreements provide that we will pay certain amounts incurred by a director in connection with any civil or criminal action or proceeding, specifically including actions by or in our name (i.e., derivative suits) where the individual’s involvement is by reason of the fact that the director is or was a director or officer. Such amounts include, to the maximum extent permitted by law, attorney’s fees, judgments, civil or criminal fines, settlement amounts, and other expenses reasonably incurred in connection with legal proceedings. Under the indemnification agreements, a director will receive indemnification unless they are adjudged not to have acted in good faith and in a manner reasonably believed to be in, or not opposed to, the best interest of our Company and, in the case of a criminal proceeding, had no reasonable cause to believe that the conduct was unlawful.

Materials Not Incorporated by Reference

The Compensation Committee Report included herein shall not be deemed soliciting material or filed with the SEC and shall not be deemed incorporated by reference into any prior or future filings made by us under the Securities Act of 1933, as amended, or the ~~perception that~~Exchange Act, except to the extent we specifically incorporate such ~~sales may occur, could also depress the price~~information by reference. In addition, this Amendment includes website addresses, which are intended to provide inactive, textual references only. The information on these websites does not form part of ~~our Class A common stock.~~

~~Affiliates~~this Amendment.

Item 12. Security Ownership of ~~BC Partners that control our company have the ability, should they choose~~Certain Beneficial Owners and Management and Related Stockholder Matters

Equity Compensation Plan Information

The following table provides information as of January 29, 2023, with respect to ~~do so, to sell some or all of their shares of our common stock in a privately negotiated transaction or otherwise, which, if sufficient in size, could result in a change of control of our company.The ability of affiliates of BC Partners to sell their shares of our common stock, with no requirement for a concurrent offer to be made to acquire all of~~ the shares of our Class A common stock that will be publicly traded hereafter, could prevent you from realizing any change-of-control premium on your shares of our Class A common stock that may otherwise accrue to affiliates of BC Partners on their sale of our common stock. Additionally, if affiliates of BC Partners sell their significant equity interest in our company, or if secured parties foreclose on any or all of the shares of Class B common stock beneficially owned by affiliates of BC Partners pursuant to the pledges that secure certain debt, including certain of PetSmart’s credit facilities and indentures, we may become subject to the control of a presently unknown third party. Such third party may have conflicts of interest with those of other stockholders. In addition, if affiliates of BC Partners sell a controlling interest in our company to a third party, any outstanding indebtedness may be ~~subject to acceleration and~~issued under our commercial agreements and relationships could be impacted, all of which may adversely affect our ability to run our business as described herein and may have a material adverse effect on our results of operations and financial condition.

We have also granted certain registration rights to certain holders of our Class B common stock, including certain affiliates of BC Partners, pursuant to which they have the right to demand that we register Class A common stock beneficially owned by them under the Securities Act as well as the right to demand that we include any such shares in any registration statement that we file with the SEC, subject to certain exceptions.

We are unable to predict with certainty whether or when such holders of our Class B common stock will exercise its registration rights and/or sell a substantial number of shares of our common stock. The sale by affiliates of BC Partners of a substantial number of shares, or a perception that such sales could occur, could also significantly reduce the market price of our Class A common stock.

~~Conflicts of interest may arise because some of our directors own stock or other equity interests in PetSmart and hold management or board positions with PetSmart.~~

~~Some of our directors directly or indirectly own equity interests in PetSmart. In addition, some of our directors are also directors or officers of PetSmart or its parent companies.~~2022 Plan:

Plan Category

Number of Securities to be
Issued Upon Exercise of
Outstanding Options, Warrants,
and Rights

Weighted-Average Exercise
Price of Outstanding Options,
Warrants, and Rights

Number of Securities Remaining
Available for Future Issuance
Under Equity Compensation
Plans (excluding securities
reflected in column (a))

(a)

(b)

(c)

Equity Compensation Plans Approved by Security Holders⁽¹⁾

3,101,608

⁽²⁾

N/A

⁽³⁾

37,850,136

Equity Compensation Plans Not Approved by Security Holders

N/A

Total

3,101,608

N/A

37,850,136

⁽¹⁾	Includes issuances under the 2019 Omnibus Incentive Plan (through the adoption of the 2022 Plan) and the 2022 Plan.

⁽²⁾	This amount reflects PRSUs and RSUs issued under the 2022 Plan.

⁽³⁾	As of fiscal year ended January 29, 2023, no options or other exercisable awards were outstanding under the 2022 Plan.

Security Ownership of ~~such equity interests by our directors~~Certain Beneficial Owners and Management

The following table sets forth the presence of directors or officers of PetSmart or its parent companies on our board of directors could create, or appear to create, conflicts of interest with respect to matters involving both us and any one of them, or involving us and PetSmart, that could have different implications for any of these investors than they do for us. Pursuant to our amended and restated certificate of incorporation, none of our non-employee directors have a duty, to the fullest extent permitted by law, to refrain from engaging in the same or similar business activities or lines of business in which we are now engaged in or from otherwise competing with

us. In addition, pursuant to our amended and restated certificate of incorporation, we may be unable to take advantage of corporate opportunities presented to individuals who are directors of both us and our affiliates, including PetSmart. As a result, we may be precluded from pursuing certain advantageous transactions or growth initiatives.

Our inability to resolve in a manner favorable to us any potential conflicts or disputes that arise between us and PetSmart or its subsidiaries with respect to our past and ongoing relationships may adversely affect our business and prospects.

~~Potential conflicts or disputes may arise between PetSmart or its subsidiaries and us in a number of areas relating to our past or ongoing relationships, including:~~

•~~tax, employee benefit, indemnification and other matters arising from our relationship with PetSmart or its subsidiaries;~~

•~~business combinations involving us;~~

•~~the nature, quality and pricing of services PetSmart or its subsidiaries have agreed to provide us;~~

•~~business opportunities that may be attractive to us and PetSmart or its subsidiaries;~~

•~~intellectual property or other proprietary rights; and~~

•~~joint sales and marketing activities with PetSmart or its subsidiaries.~~

~~The resolution of any potential conflicts or disputes between us and PetSmart or its subsidiaries over these or other matters may be unfavorable for us.~~

~~Risks Related to Ownership of Our Class A Common Stock~~

~~Our stock price has been, and may continue to be, volatile and may decline regardless of our operating performance.~~

Prior to our initial public offering in June 2019, there had been no public market for our Class A common stock. The market price of our Class A common stock has fluctuated significantly in response to numerous factors and may continue to fluctuate for these and other reasons, many of which are beyond our control, including:

•~~actual or anticipated fluctuations in our revenue and results of operations;~~

•~~the financial projections we may provide to the public, any changes in these projections or our failure to meet these projections;~~

•failure of securities analysts to maintain coverage of our company, changes in financial estimates or ratings by any securities analysts who follow our company or our failure to meet these estimates or the expectations of investors;

•~~announcements by us or our competitors of significant technical innovations, acquisitions, strategic partnerships, joint ventures, results of operations or capital commitments;~~

•~~changes in operating performance and stock market valuations of other retail or technology companies generally, or those in our industry in particular;~~

•~~price and volume fluctuations in the overall stock market, including as a result of trends in the economy as a whole;~~

•~~trading volume of our Class A common stock;~~

•~~the inclusion, exclusion or removal of our Class A common stock from any indices;~~

•~~changes in our board of directors or management;~~

•~~transactions in our Class A common stock by directors, officers, affiliates and other major investors;~~

•~~lawsuits threatened or filed against us;~~

•~~changes in laws or regulations applicable to our business;~~

•~~changes in our capital structure, such as future issuances of debt or equity securities;~~

•~~short sales, hedging and other derivative transactions involving our capital stock;~~

•~~general economic conditions in the U.S.;~~

•~~other events or factors, including those resulting from war, incidents of terrorism or responses to these events; and~~

•~~the other factors described in the sections of this report titled “Risk Factors” and “Cautionary Note Regarding Forward-Looking Statements.”~~

The stock market has recently experienced extreme price and volume fluctuations. The market prices of securities of companies have experienced fluctuations that often have been unrelated or disproportionate to their operating results. In the past, stockholders have sometimes instituted securities class action litigation against companies following periods of volatility in the market price of their securities. Any similar litigation against us could result in substantial costs, divert management’s attention and resources, and harm our business, financial condition, and results of operations.

~~The dual class structure of our common stock may adversely affect the trading market for our Class A common stock.~~

In July 2017, S&P Dow Jones and FTSE Russell announced changes to their eligibility criteria for the inclusion of shares of public companies on certain indices, including the Russell 2000, the S&P 500, the S&P MidCap 400 and the S&P SmallCap 600, to exclude companies with multiple classes of shares of common stock from being added to these indices. As a result, our dual class capital structure would make us ineligible for inclusion in any of these indices, and mutual funds, exchange-traded funds and other investment vehicles that attempt to passively track these indices will not be investing in our stock. Furthermore, we cannot assure you that other stock indices will not take a similar approach to S&P Dow Jones or FTSE Russell in the future. Exclusion from indices could make our Class A common stock less attractive to investors and, as a result, the market price of our Class A common stock could be adversely affected.

Anti-takeover provisions in our charter documents and under Delaware law could make an acquisition of our company more difficult, limit attempts by our stockholders to replace or remove our current management and limit the market price of our Class A common stock.

Provisions in our amended and restated certificate of incorporation and amended and restated bylaws may have the effect of delaying or preventing a change of control or changes in our management. Our amended and restated certificate of incorporation and amended and restated bylaws include provisions that:

•~~permit the board of directors to establish the number of directors and fill any vacancies and newly created directorships;~~

•provide that a director may be removed only for cause and only by the affirmative vote of the holders of at least 66 2/3% of the votes that all of our stockholders would be entitled to cast in an annual election of directors;

•require at least 75% of the votes that all of our stockholders would be entitled to cast in an annual election of directors in order to amend our amended and restated certificate of incorporation and amended and restated bylaws after the date on which the outstanding shares of Class B common stock represent less than 50% of the combined voting powerbeneficial ownership of our Class A common stock and Class B common ~~stock;~~

•~~eliminate the ability~~stock as of May 17, 2023 by (i) each director, director nominee, and named executive officer, (ii) all current executive officers and directors of Chewy as a group, and (iii) all those known by Chewy to beneficially own more than 5% of our Class A common stock or Class B common stock.

This table is based upon information supplied by our executive officers, directors, director nominees, and principal stockholders, and Schedules 13D, 13F, and 13G filed with the SEC. Under SEC rules, a person is deemed to ~~call special meetings~~be a “beneficial owner” of a security if that person has or shares voting power or investment power, which includes the power to dispose of or to direct the disposition of such security.

Unless otherwise indicated in the footnotes to this table and subject to community property laws where applicable, we believe each of the stockholders ~~after~~named in this table has sole voting and investment power with respect to the ~~date~~shares indicated as beneficially owned. Applicable percentages are based on ~~which the outstanding~~116,239,189 shares of Class A common stock and 311,188,356 shares of Class B common stock ~~represent less than 50% of the combined voting power~~outstanding on May 17, 2023. We have deemed shares of our ~~Class A~~ common stock issuable pursuant to RSUs, which are subject to vesting and ~~Class B common stock;~~

•~~prohibit stockholder action by written consent, instead requiring stockholder actions~~settlement conditions expected to occur within 60 days of May 17, 2023, to be ~~taken at a meeting~~outstanding and beneficially owned by the person holding the RSUs for the purpose of computing the percentage ownership of that person. Such RSUs are not deemed outstanding for the purposes of computing the percentage ownership of any other person, except with respect to the percentage ownership of all of our ~~stockholders, when~~current NEOs and directors as a group.

Unless otherwise indicated, the ~~outstanding~~address for each beneficial owner listed below is c/o Chewy, Inc., 7700 West Sunrise Boulevard, Plantation, FL 33322.


Name of Beneficial Owner	Voting Shares Beneficially Owned								% Total Voting Power⁽¹⁾
	Class A Common Stock				Class B Common Stock
	Shares		%		Shares		%
Current Named Executive Officers and Directors
Sumit Singh⁽²⁾		1,240,859		*		—		—		*
Mario Marte⁽³⁾		369,264		*		—		—		*
Satish Mehta⁽⁴⁾		546,915		*		—		—		*
Susan Helfrick⁽⁵⁾		89,620		*		—		—		*
Raymond Svider⁽⁶⁾		60,000		*		—		—		*
Fahim Ahmed⁽⁷⁾		10,000		*		—		—		*
Mathieu Bigand		—		—		—		—		—
Marco Castelli		—		—		—		—		—
Michael Chang⁽⁸⁾		10,000		*		—		—		*
Kristine Dickson⁽⁹⁾		6,769		*		—		—		*
David Leland		—		—		—		—		—
James Nelson⁽¹⁰⁾		6,752		*		—		—		*
Martin H. Nesbitt⁽¹¹⁾		8,586		*		—		—		*
Lisa Sibenac⁽¹²⁾		1,000		*		—		—		*
James A. Star⁽¹³⁾		117,718		*		—		—		*
All directors and executive officers as a group⁽¹⁴⁾		2,467,483		2.1		—		—		*
More Than 5% Security Holders
BC Partners Holdings Limited/Argos Holdings GP LLC⁽¹⁵⁾		—		—		311,188,356		100.0		96.4
Morgan Stanley and Morgan Stanley Investment Management Inc.⁽¹⁶⁾		19,796,350		17.0		—		—		*
Baillie Gifford & Co⁽¹⁷⁾		17,080,994		14.7		—		—		*
The Vanguard Group⁽¹⁸⁾		7,619,549		6.6		—		—		*

*	Represents less than one percent (1%).

(1)

Percentage total voting power represents voting power with respect to all shares of our Class A common stock and Class B common stock, voting together as a single class. Each holder of Class B common stock is entitled to ten (10) votes per share of Class B common stock, and each holder of Class A common stock is entitled to one (1) vote per share of Class A common stock on all matters submitted to our stockholders for a vote. The Class A common stock and Class B common stock vote together as a single class on all matters submitted to a vote of our stockholders, except as may otherwise be required by law. The Class B common stock is convertible at any time by the holder into shares of Class A common stock on a share-for-share basis upon written notice to the transfer agent.

(2)

Consists of (i) 759,876 shares of Class A common stock held by Mr. Singh, (ii) 373,417 shares of Class A common stock issuable to Mr. Singh upon the vesting of RSUs within 60 days of May 17, 2023, (iii) 71,718 shares of Class A common stock held by Mr. Singh’s spouse and (iv) 35,848 shares of Class A common stock issuable to Mr. Singh’s spouse upon the vesting of RSUs within 60 days of May 17, 2023. This does not include (i) 43,255 shares of Class A common stock issuable to Mr. Singh’s spouse upon the vesting of RSUs, which are not expected to vest within 60 days of May 17, 2023, (ii) 6,960 shares of Class A common stock (which represents the maximum number of shares that may be issued upon the vesting of PRSUs if maximum performance goals are achieved) issuable to Mr. Singh’s spouse upon the vesting of PRSUs, which are not expected to vest within 60 days of May 17, 2023, (iii) 2,121 shares of Class A common stock underlying PRSUs that were granted on April 7, 2022 to Mr. Singh’s spouse, which are not expected to vest within 60 days of May 17, 2023, or (iv) 679 shares of Class A common stock underlying PRSUs that were granted on April 5, 2021 to Mr. Singh’s spouse, which are not expected to vest within 60 days of May 17, 2023.

(3)

Consists of (i) 190,024 shares of Class A common stock held by Mr. Marte and (ii) 179,240 shares of Class A common stock issuable upon the vesting of RSUs within 60 days of May 17, 2023. This does not include 179,240 shares of Class A common stock issuable to Mr. Marte upon the vesting of RSUs, which are not expected to vest within 60 days of May 17, 2023.

(4)

Consists of (i) 412,485 shares of Class A common stock held by Mr. Mehta and (ii) 134,430 shares of Class A common stock issuable upon the vesting of RSUs within 60 days of May 17, 2023. This does not include (i) 223,206 shares of Class A common stock issuable to Mr. Mehta upon the vesting of RSUs, which are not expected to vest within 60 days of May 17, 2023, or (ii) 108,218 shares of Class A common stock (which represents the maximum number of shares that may be issued upon the vesting of PRSUs if maximum performance goals are achieved) issuable to Mr. Mehta upon the vesting of PRSUs, which are not expected to vest within 60 days of May 17, 2023.

(5)	Consists of (i) 0 shares of Class A common stock held by Ms. Helfrick and (ii) 89,620 shares of Class A common stock issuable upon the vesting of RSUs within 60 days of May 17, 2023.

(6)	Consists of 60,000 shares of Class A common stock held by Mr. Svider.

(7)	Consists of 10,000 shares of Class A common stock held by Mr. Ahmed.

(8)	Consists of 10,000 shares of Class A common stock held by Mr. Chang.

(9)

Consists of (i) 5,145 shares of Class A common stock issuable upon the vesting of RSUs, which will vest on the date of the 2023 Annual Meeting, subject to Ms. Dickson’s continued service as a director on the Board through the vesting date, and (ii) 1,624 shares of Class A common stock underlying RSUs that vested on July 14, 2022 and will be settled upon the earlier of (x) the date of Ms. Dickson leaving the Board or (y) a Change in Control of the Company, as defined in our 2022 Plan.

(10)	Consists of (i) 1,607 shares of Class A common stock held by Mr. Nelson, and (ii) 5,145 shares of Class A common stock held by Mr. Nelson, which will vest on the date of the 2023 Annual Meeting, subject to Mr. Nelson’s continued service as a director on the Board through the vesting date.

(11)

Consists of (i) 5,145 shares of Class A common stock issuable upon the vesting of RSUs, which will vest on the date of the 2023 Annual Meeting, subject to Mr. Nesbitt’s continued service as a director on the Board through the vesting date, and (ii) 3,441 shares of Class A common stock underlying RSUs that vested on July 14, 2021 and will be settled upon the earlier of (x) the date of Mr. Nesbitt leaving the Board or (y) a Change in Control of the Company, as defined in our 2022 Plan.

(12)	Consists of 1,000 shares of Class A common stock held by Ms. Sibenac.

(13)

Consists of (i) 109,050 shares of Class A common stock held by Mr. Star, (ii) 5,145 shares of Class A common stock issuable upon the vesting of RSUs, which will vest on the date of the 2023 Annual Meeting, subject to Mr. Star’s continued service as a director on the Board through the vesting date, and (iii) 804 and 2,719 shares of Class A common stock underlying RSUs that vested on July 14, 2020 and July 14, 2021, respectively, and will be settled upon the earlier of (x) the date of Mr. Star leaving the Board or (y) a Change in Control of the Company, as defined in our 2022 Plan.

(14)

Consists of (i) 1,625,760 shares of Class A common stock held by our executive officers and directors, (ii) 833,135 shares of Class A common stock issuable upon the vesting of RSUs within 60 days of May 17, 2023, and (iii) 8,588 shares of Class A common stock underlying RSUs that have vested for which settlement has been deferred.

(15)

The number of shares listed as beneficially owned consists of (i) 106,903,343 shares of Class B common stock held by Argos Intermediate Holdco I Inc. (“Argos I”), (ii) 165,000,000 shares of Class B common stock held by Buddy Holdings II LLC (“Buddy II”), and (iii) 39,285,013 shares of Class B common stock held by Buddy Holdings III LLC (“Buddy III”). Each of Argos I, Buddy II, and Buddy III are

direct or indirect wholly-owned subsidiaries of Argos Holdings L.P. (“Argos Holdings”). The general partner of Argos Holdings is Argos Holdings GP LLC (“Argos GP”). Argos GP is controlled by affiliates of BC Partners. The business address of each of Argos I, Argos Holdings, Argos GP, and BC Partners is 650 Madison Avenue, New York, NY 10022. The business address of each of Buddy II and Buddy III is 19601 N. 27th Avenue, Phoenix, AZ 85027.

(16)

Based solely on a Schedule 13G/A filed on February 8, 2023. Morgan Stanley exercises shared voting power with respect to 16,845,211 shares of Class A common stock and shared dispositive power with respect to 19,796,350 shares of Class A common stock. Morgan Stanley Investment Management Inc. exercises shared voting power with respect to 16,712,322 shares of Class A common stock and shared dispositive power with respect to 19,650,871 shares of Class A common stock. The business address of Morgan Stanley is 1585 Broadway, New York, NY 10036. The business address of Morgan Stanley Investment Management Inc. is 522 5th Avenue 6th Floor New York, NY 10036.

(17)

Based solely on a Schedule 13G/A filed on January 18, 2023. Baillie Gifford & Co. exercises sole voting power with respect to 15,115,833 shares of Class A common stock and sole dispositive power with respect to 17,080,994 shares of Class A common stock. The business address of Baillie Gifford & Co. is Calton Square, 1 Greenside Row, Edinburgh EH1 3AN, Scotland, United Kingdom.

(18)

Based solely on a Schedule 13G/A filed on February 9, 2023. The Vanguard Group exercises shared voting power with respect to 38,639 shares of Class A common stock, sole dispositive power with respect to 7,525,285 shares of Class A common stock and shared dispositive power with respect to 94,264 shares of Class A common stock. The business address of The Vanguard Group is 100 Vanguard Blvd., Malvern, PA 19355.

Pledge of Common Stock by Affiliates of BC Partners

Certain affiliates of BC Partners have granted a security interest in certain shares of our Class B ~~common stock represent less than 50% of the combined voting power of our Class A common stock and Class B common stock;~~

•permit our board of directors, without further action by our stockholders, to fix the rights, preferences, privileges and restrictions of preferred stock, the rights of which may be greater than the rights of our Class A common stock;

•~~restrict the forum for certain litigation against us to Delaware;~~

•~~establish advance notice requirements for nominations for election to our board of directors or for proposing matters that can be acted upon by stockholders at annual stockholder meetings; and~~

•~~provide for a staggered board.~~

These provisions may frustrate or prevent any attempts by our stockholders to replace or remove our current management by making it more difficult for stockholders to replace members of our board of directors, which is responsible for appointing the members of our management. As a result, these provisions may adversely affect the market price and market for our Class A common stock if they are viewed as limiting the liquidity of our stock or as discouraging takeover attempts in the future.

Our amended and restated certificate of incorporation provides that the Court of Chancery of the State of Delaware is the exclusive forum for substantially all disputes between us and our stockholders, which could limit our stockholders’ ability to obtain a favorable judicial forum for disputes with us or our directors, officers or employees.

Our amended and restated certificate of incorporation provides that the Court of Chancery of the State of Delaware is the exclusive forum for any derivative action or proceeding brought on our behalf; any action asserting a breach of fiduciary duty; any action asserting a claim against us arising pursuant to the Delaware General Corporation Law (the “DGCL”), our amended and restated certificate of incorporation or our amended and restated bylaws; or any action asserting a claim against us that is governed by the internal affairs doctrine. The choice of forum provision may limit a stockholder’s ability to bring a claim in a judicial forum that it finds favorable for disputes with us or our directors, officers or other employees, which may discourage such lawsuits against us and our directors, officers and other employees. Alternatively, if a court were to find the choice of forum provision contained in our amended and restated certificate of incorporation to be inapplicable or unenforceable in an action, we may incur additional costs associated with resolving such action in other jurisdictions, which could materially and adversely affect our business, financial condition, and results of operations.

~~Affiliates of BC Partners control the direction of our business and the concentrated ownership of our common stock will prevent other stockholders from influencing significant decisions.~~

As of March 23, 2021, affiliates of BC Partners beneficially owned more than 50% of our outstanding shares of common stock and, together with its affiliates, exercised control over more than 95% of the voting power of our outstanding common stock. So long as BC Partners and/or its affiliates remain our controlling stockholder they will be able to control, directly or indirectly, and subject to applicable law, all matters affecting us, including:

•~~any determination with respect to our business direction and policies, including the appointment and removal of officers and directors;~~

•~~any determinations with respect to mergers, business combinations or disposition of assets;~~

•~~compensation and benefit programs and other human resources policy decisions;~~

•~~the payment of dividends on our common stock; and~~

•~~determinations with respect to tax matters.~~

Because BC Partners and its affiliates’ interests may differ from ours or from those of our other stockholders, actions that BC Partners or its affiliates take with respect to us, as our controlling stockholder, may not be favorable to us or our other stockholders, including holders of our Class A common stock. In addition, even if BC Partners and/or its affiliates were to control less than a majority of the voting power of our outstanding common stock, it may be able to influence the outcome of such matters so long as it owns a significant portion of our common stock.

~~In addition, certain of our stockholders which are affiliated with BC Partners have granted, and in the future may grant, a security interest in shares of our~~ common stock beneficially owned by them to secure certain ~~debt,~~indebtedness, including ~~debt~~indebtedness of PetSmart, ~~each of~~ which includes customary default provisions. In the event of a default under any such credit facility or the ~~agreements governing such debt,~~applicable indenture, the secured parties may foreclose upon any and all shares of ~~our~~Class B common stock pledged to ~~them. Future transfers by BC Partners~~them and ~~their affiliates of Class B common stock, which entitles each holder thereof to ten votes per share (including transfers by secured parties that foreclose on Class B common stock), will generally~~may seek recourse against the obligors under the relevant credit facilities and indentures. Any such action could result in ~~those shares converting on~~ a ~~one-to-one basis to Class A common stock, which entitles each holder thereof to one vote per share. As a result, such transfers will have the effect, over time,~~change of ~~increasing the relative voting power~~control of ~~holders of Class B common stock who retain their shares in the long-term, which may include our directors~~Chewy.

Item 13. Certain Relationships and ~~their affiliates.~~

Related Transactions, and Director Independence

Director Independence

We are ~~a “controlled company” within the meaning of the rules of NYSE and, as a result, qualify for, and rely on, exemptions from certain corporate governance requirements.~~

~~As of March 23, 2021, affiliates of BC Partners control a majority of the voting power of our outstanding common stock. As a result, we are considered as~~ a “controlled company” within the meaning of the corporate governance standards of the NYSE. Under these rules, a listed company offor which more than 50% of the voting power is held by an individual, group, or another company is a “controlled ~~company” and may elect not to comply with~~company.” As a result, we qualify for exemption from certain ~~corporate governance~~independence requirements, ~~including:~~

•including the requirement that within one year of completion of our IPO at least a majority of ~~the board of directors consist~~our Board is composed of independent ~~directors;~~

•~~the requirement that~~directors, and our ~~nominating~~Compensation and ~~corporate governance committee be~~Nominating and Corporate Governance Committees are each composed entirely of independent ~~directors with~~directors. Even though we are a ~~written charter addressing the committee’s purpose and responsibilities;~~

•~~the requirement that our compensation committee be composed entirely of independent directors with a written charter addressing the committee’s purpose and responsibilities; and~~

•~~the requirement for an annual performance evaluation of our corporate governance and compensation committees.~~

While affiliates of BC Partners control a majority of the voting power of our outstanding common stock, we intend to rely on these exemptions and, as a result, will not have a majority of independent directors on our board of directors. Our nominating and corporate governance and compensation committees will also not consist entirely of independent directors. Accordingly, holders of our Class A common stock do not have the same protections afforded to stockholders of companies that are subject to all of the corporate governance requirements of the NYSE.

~~General Risk Factors~~

~~Future litigation could have a material adverse effect on our business and results of operations.~~

Lawsuits and other administrative or legal proceedings that may arise in the course of our operations can involve substantial costs, including the costs associated with investigation, litigation and possible settlement, judgment, penalty or fine. In addition, lawsuits and other legal proceedings may be time consuming and may require a commitment of management and personnel resources that will be diverted from our normal business operations. Although we generally maintain insurance to mitigate certain costs, there can be no assurance that costs associated with lawsuits or other legal proceedings will not exceed the limits of insurance policies. Moreover, we may be unable to continue to maintain our existing insurance at a reasonable cost, if at all, or to secure additional coverage, which may result in costs associated with lawsuits and other legal proceedings being uninsured. Our business, financial condition, and results of operations could be adversely affected if a judgment, penalty or fine is not fully covered by insurance.

~~Our ability to raise capital in the future may be limited and our failure to raise capital when needed could prevent us from growing.~~

In the future, we could be required to raise capital through public or private financing or other arrangements. Such financing may not be available on acceptable terms, or at all, and our failure to raise capital when needed could harm our business. We may sell Class A common stock, convertible securities and other equity securities in one or more transactions at prices and in a manner as we may determine from time to time. If we sell any such securities in subsequent transactions, investors in our Class A common stock may be materially diluted. New investors in such subsequent transactions could gain rights, preferences and privileges senior to those of holders of our Class A common stock. Debt financing, if available, may involve restrictive covenants and could reduce our operational flexibility or profitability. If we cannot raise funds on acceptable terms, we may be forced to raise funds on undesirable terms, or our business may contract or we may be unable to grow our business or respond to competitive pressures, any of which could have a material adverse effect on our business, financial condition, and results of operations.

~~We may experience fluctuations in our tax obligations and effective tax rate, which could materially and adversely affect our results of operations.~~

We are subject to U.S. federal and state income taxes. Tax laws, regulations and administrative practices in various jurisdictions may be subject to significant change, with or without advance notice, due to economic, political and other conditions, and significant judgment is required in evaluating and estimating our provision and accruals for these taxes. There are many transactions that occur during the ordinary course of business for which the ultimate tax determination is uncertain. Our effective tax rates could be affected by numerous factors, such as changes in tax, accounting and other laws, regulations,

~~administrative practices, principles and interpretations, the mix and level of earnings in a given taxing jurisdiction or our ownership or capital structures.~~

Further, the U.S. federal income tax legislation enacted in Public Law No. 115-97 (the “Tax Cuts and Jobs Act”) is highly complex, subject to interpretation, and contains significant changes to U.S. tax law, including, but not limited to, a reduction in the corporate tax rate, significant additional limitations on the deductibility of interest, substantial revisions to the taxation of international operations, and limitations on the use of net operating losses generated in tax years beginning after December 31, 2017. The presentation of our financial condition and results of operations is based upon our current interpretation of the provisions contained in the Tax Cuts and Jobs Act. In the future, the Treasury Department and the U.S. Internal Revenue Service (“IRS”) are expected to release regulations and interpretive guidance relating to the legislation contained in the Tax Cuts and Jobs Act. Any significant variance of our current interpretation of such legislation from any future regulations or interpretive guidance could result in a change to the presentation of our financial condition and results of operations and could materially and adversely affect our business, financial condition, and results of operations.

If our internal control over financial reporting or our disclosure controls and procedures are not effective, we may be unable to accurately report our financial results, prevent fraud or file our periodic reports in a timely manner, which may cause investors to lose confidence in our reported financial information and may lead to a decline in our stock price.

Until our initial public offering in June 2019, we were not subject to the internal control and financial reporting requirements that are required of a publicly-traded company. Beginning with the fiscal year ended January 31, 2021,controlled company, we are required to comply with the SEC and the NYSE rules relating to the membership, qualifications, and operations of our Audit Committee.

Based on information provided by each director or director nominee concerning their background, employment, and affiliations, our Board has affirmatively determined that each of Ms. Dickson, Mr. Nelson, Mr. Nesbitt, and Mr. Star satisfy the independence requirements under the corporate governance standards of the NYSE, and none of them have a relationship that would interfere with the exercise of their independent judgment in carrying out the responsibilities of a director. In determining the independence of Mr. Star, our Board considered Longview’s minority, non-controlling interest in Argos Holdings. Our Board also affirmatively determined that each of Ms. Dickson, Mr. Nelson, Mr. Nesbitt, and Mr. Star satisfy the independence requirements of The Sarbanes-Oxley Act of 2002 (the “Sarbanes-Oxley Act”). The Sarbanes-Oxley Act requires that we maintain effective internal control over financial reporting and disclosure controls and procedures. In particular, we must perform system and process evaluation, document our controls and perform testing of our key controls over financial reporting to allow management and our independent public accounting firm to report on the effectiveness of our internal control over financial reporting, as required by Section 404 of the Sarbanes-Oxley Act. Our testing, or the subsequent testing by our independent public accounting firm, may reveal deficiencies in our internal control over financial reporting that are deemed to be material weaknesses. If we are not able to comply with the requirements of Section 404 in a timely manner, or if we or our accounting firm identify deficiencies in our internal control over financial reporting that are deemed to be material weaknesses, the market price of our stock would likely decline and we could be subject to lawsuits, sanctions or investigations by regulatory authorities, which would require additional financial and management resources.

Rule 10A-3

~~The requirements of being a public company may strain our resources, divert management’s attention and affect our ability to attract and retain qualified board members.~~

~~As a public company, we are subject to the reporting requirements~~ of the Exchange ~~Act,~~Act.

Related Party Transactions Policy

We have a written related party transactions policy (the “Related Party Policy”), which is administered by our Audit Committee and includes procedures for the ~~Sarbanes-Oxley Act~~review, approval, ratification, modification, or termination of related party transactions. Pursuant to the Related Party Policy, a related party transaction includes transactions in which Chewy is a participant, the aggregate amount involved will or may be expected to exceed $120,000, and a “related party” has or will have a direct or an indirect material interest. Related parties of Chewy include directors (including

nominees for election as director), executive officers, stockholders that are known to beneficially own more than 5% of Chewy’s voting securities, any immediate family members of the foregoing, and any rules promulgated thereunder, as well as the rules of NYSE. The requirements of these rules and regulations increase our legal and financial compliance costs, make some activities more difficult, time-consumingentity with which such related party is employed, is a general partner, principal, or ~~costly and increase demand on our systems and resources. The Sarbanes-Oxley Act requires, among other things,~~in a similar position, or in which such person has a 10% or greater beneficial interest.

Except for transactions that we maintain effective disclosure controls and procedures and internal controls for financial reporting. In order to maintain and, if required, improve our disclosure controls and procedures and internal control over financial reporting to meet this standard, significant resources and management oversight are required, and, as a result, management’s attention may be diverted from other business concerns. These rules and regulations can also make it more difficult for us to attract and retain qualified independent members of our board of directors. Additionally, these rules and regulations make it more difficult and more expensive for us to obtain director and officer liability insurance. Additionally, we expect these rules and regulations to make it more difficult and more expensive for us to obtain director and officer liability insurance. We may be required to accept reduced coverage or incur substantially higher costs to obtain coverage. The increased costs of compliance with public company reporting requirements and our potential failure to satisfy these requirements can have a material adverse effect on our operations, business, financial condition or results of operations.

~~Item 1B. Unresolved Staff Comments~~

~~None.~~

~~Item 2. Properties~~

Our co-headquarters are located in Dania Beach, Florida and Boston, Massachusetts. In addition, we lease and operate fulfillment centers in 13 locations, at which we receive products from vendors, ship products to customers, and receive and process returns from customers. We also lease and operate customer service centers in four locations. The following table sets forth the location, use and size of certain of our properties as of March 23, 2021:

~~Use~~

~~Location~~

~~Square Footage~~

~~Florida co-headquarters~~

~~1855 Griffin Road, Dania Beach, FL 33004~~

~~113,832~~

~~Boston co-headquarters~~

~~343 Congress Street, Boston, MA 02210~~

~~69,079~~

~~Fulfillment center~~

~~600 New Commerce Boulevard, Wilkes-Barre, PA 18706~~

~~808,160~~

~~Fulfillment center~~

~~255 S. 143rd Avenue, Goodyear, AZ 85338~~

~~801,424~~

~~Fulfillment center~~

~~100 Goodman Drive, Etters, PA 17319~~

~~732,000~~

~~Fulfillment center~~

~~3280 Lightner Road, Dayton, OH 45377~~

~~690,500~~

~~Fulfillment center~~

~~255 Front Creek Road, Salisbury, NC 28146~~

~~690,500~~

~~Fulfillment center~~

~~37 Archbald Heights Road, Jessup, PA 18434~~

~~690,500~~

~~Fulfillment center~~

~~7243 Grady Niblo Road, Dallas, TX 75236~~

~~663,000~~

~~Fulfillment center~~

~~3380 N.W. 35 Avenue Road, Ocala, FL 34475~~

~~611,676~~

~~Fulfillment center~~

~~40 Dauphin Drive, Mechanicsburg, PA 17050~~

~~604,333~~

~~Fulfillment center~~

~~1974 Innovation Boulevard, Clayton, IN 46118~~

~~597,844~~

~~Fulfillment center~~

~~385 Milan Drive, McCarran, NV 89434~~

~~566,866~~

~~Fulfillment center~~

~~30901 West 191st St, Edgerton, KS 66021~~

~~436,866~~

~~Fulfillment center~~

~~11403 Bluegrass Parkway, Suite 650, Louisville, KY 40299~~

~~27,679~~

~~Customer service center~~

~~3251 Hollywood Boulevard, Hollywood, FL 33021~~

~~100,928~~

~~Customer service center~~

~~930 E. Campbell Road, Suite 200, Richardson, TX 75081~~

~~57,120~~

~~Customer service center~~

~~1950 N. Stemmons Freeway, Dallas, TX 75207~~

~~51,934~~

~~Customer service center~~

~~3621 Fern Valley Road, Louisville, KY 40219~~

~~25,274~~

~~We believe that all of our properties~~ have been ~~adequately maintained, are~~pre-approved in ~~good condition,~~accordance with the Related Party Policy, once a related party transaction has been identified, our Audit Committee will review the relevant facts and ~~are generally suitable~~circumstances and ~~adequate for our current needs.~~

~~Item 3. Legal Proceedings~~

Information concerning legal proceedings is provided in Item 8 of Part II, “Financial Statements and Supplementary Data–Note 4 – Commitments and Contingencies–Legal Matters” and is incorporated by reference herein.

~~Item 4. Mine Safety Disclosures~~

~~Not applicable.~~

~~Information About Our Executive Officers~~

~~The following information relates to our executive officers:~~

~~Name~~

~~Age~~

~~Position~~

~~Sumit Singh~~

~~Chief Executive Officer and Director~~

~~Mario Marte~~

~~Chief Financial Officer~~

~~Satish Mehta~~

~~Chief Technology Officer~~

~~Susan Helfrick~~

~~General Counsel and Secretary~~

~~Sumit Singh~~

Mr. Singh is the CEO of Chewy, Inc. and serves on Chewy’s Board of Directors. He was named CEO in March 2018, following a seven-month stint in his role as Chief Operating Officer, and has served as a director since April 2019. In 2019, he led the Company through its IPO. Mr. Singh was subsequently named to the 2020 ‘Bloomberg 50’, ~~Bloomberg Businessweek’s~~ ~~annual list of innovators, entrepreneurs, and leaders who have changed the global business landscape over the past year, and to Comparably’s ‘Best CEOs 2020.’~~

Prior to joining Chewy, Mr. Singh held senior leadership positions at Amazon, where from 2015 to 2017, he served as Worldwide Director of Amazon, Inc.’s Consumables businesses (fresh and pantry) and, from 2013 to 2015, as General Manager for Amazon, Inc.’s North American merchant fulfillment and third-party businesses. Prior to Amazon, Inc., Mr. Singh served in senior management positions at Dell Technologies, Inc. He has nearly 20 years of global leadership experience that spans e-commerce, technology, retail and logistics.

~~He holds a Bachelor of Technology degree from Punjab Technical University and a Master’s in Engineering from the University of Texas at Austin, where, in 2019, he was inducted~~approve or disapprove entry into the ~~Academy of Distinguished Alumni for outstanding achievement. He also holds an MBA from~~transaction. In determining whether to approve or ratify a related party transaction, our Audit Committee takes the ~~University of Chicago, Booth School of Business.~~

~~Mario Marte~~

Mr. Marte has served as our Chief Financial Officer since September 2018. Mr. Marte joined Chewy in April 2015 and had previously been serving as Chewy’s Vice President—Finance & Treasurer. In 2017, he had significant involvement in PetSmart’s acquisition of Chewy and in 2019, he played an active role in leading the Company through its IPO. From September 2011 to April 2015, Mr. Marte served as the Vice President—Financial Planning & Analysis for Hilton Worldwide Holdings, Inc. From July 2003 to September 2011, Mr. Marte worked at American Airlines, serving in various positions, including as the Division Controller—Onboard Service. Mr. Marte has served on the board of directors of Best Buy Co., Inc. (NYSE “BBY”) since January 2021. Mr. Marte holds a B.S. in computer engineering from the University of South Florida, and an M.B.A. from Duke University’s Fuqua School of Business.

~~Satish Mehta~~

Mr. Mehta has served as our Chief Technology Officer since June 2018. From July 2017 to June 2018, Mr. Mehta served as the Vice President—Data and Analytics Solutions for UnitedHealth Group. Prior to that, Mr. Mehta served in various capacities at Staples Inc., including serving as their Vice President, Price—Data & Analytics, Omni-Channel and Innovation Labs from January 2014 to July 2017. Mr. Mehta’s experience also includes over eight years of service, from November 2005 to January 2014, at Yahoo!, in various positions including as their Senior Director, Global Data and Ad Tech. Mr. Mehta holds a B.S. in physics and math from Jawaharlal Nehru University, and an M.B.A. from California Miramar University.

~~Susan Helfrick~~

Ms. Helfrick has served as our General Counsel since December 2014 and as our Secretary since October 2015. From February 2009 to July 2014, Ms. Helfrick served as the General Counsel Americas and Executive Vice President at GfK. Ms. Helfrick has previously also served as the Assistant General Counsel and Vice President of Goldman Sachs from August 2007 to January 2009, as well as the Managing Director and Associate General Counsel of HSBC Securities from May 2005 to August 2007. Ms. Helfrick’s experience also includes serving as a Director at UBS from May 2000 to May 2005, an Associate at Skadden, Arps, Slate, Meagher & Flom LLP from May 1997 to May 2000, and as a staff attorney at the Securities and Exchange Commission from May 1995 to May 1997. Ms. Helfrick holds an LL.M. from Georgetown University Law Center, an M.B.A. from Cornell Jonson Graduate School of Management, a J.D. from the Dickinson School of Law at Pennsylvania State University, and a B.A. from the University of Pittsburgh.

~~PART II~~

~~Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities~~

~~Market Information for Common Stock~~

Our Class A common stock, par value $0.01 per share, is listed on the New York Stock Exchange under the symbol “CHWY” and began trading on June 14, 2019. Prior to that date, there was no public trading market for our Class A common stock. There is no public trading market for our Class B common stock, par value $0.01 per share.

~~Holders of Common Stock~~

As of the close of business on March 23, 2021, there were 73 stockholders of record of our Class A common stock and 3 stockholders of our Class B common stock. The actual number of holders of our Class A common stock is greater than the number of record holders, and includes stockholders who are beneficial owners, but whose shares are held in street name by brokers or other nominees. The number of holders of record present here also do not include stockholders whose shares may be held in trust by other entities.

~~Dividend Policy~~

We have never declared or paid any cash dividends on our capital stock, and we do not currently intend to pay any cash dividends for the foreseeable future. We expect to retain future earnings, if any, to fund the development and growth of our business. Any future determination to pay dividends on our common stock will be made at the discretion of the Board and will depend upon,following considerations into account, among other factors ~~our financial condition, operating results, current and anticipated cash needs, plans for expansion and other factors that~~it deems appropriate:

whether the ~~Board may deem relevant. In addition, the terms of our credit facilities contain restrictions on our ability to declare and pay cash dividends on our capital stock.~~

~~Use of Proceeds and Issuer Purchases of Equity Securities~~

~~Unregistered Sales of Equity Securities~~

~~There were no sales of unregistered equity securities during the thirteen weeks ended January 31, 2021.~~

~~Issuer Purchases of Equity Securities~~

~~There were no repurchases of equity securities during the thirteen weeks ended January 31, 2021.~~

~~Cumulative Stock Performance Graph~~

The following performance graph shall not be deemed “soliciting material” or to be “filed” with the SEC for purposes of Section 18 of the Exchange Act, or otherwise subject to the liabilities under that Section, and shall not be deemed to be incorporated by reference into any filing of Chewy, Inc. under the Securities Act, or the Exchange Act.

The following graph compares the cumulative total return to stockholders of our Class A common stock relative to the cumulative total returns of the S&P 500 Index and DJ Internet Commerce Index. An investment of $100 is assumed to have been made in our Class A common stock and in the indices on June 14, 2019, the date our Class A common stock began trading on the NYSE, and their relative performance is tracked through January 31, 2021. The comparisons are based on historical data and are not indicative of, nor intended to forecast, the future performance of our Class A common stock.

~~Item 6. Selected Consolidated Financial Data~~

~~The Company is not providing information with respect to this Item as it is choosing to voluntarily comply with the amendments to Item 301 of Regulation S-K.~~

~~Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations~~

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with the consolidated financial statements and related notes thereto included in this Annual Report on Form 10-K for fiscal year 2020 (“10-K Report”). This discussion contains forward-looking statements that involve risks and uncertainties. As a result of many factors, such as those set forth under the “Risk Factors” and “Cautionary Note Regarding Forward-Looking Statements” sections herein, our actual results may differ materially from those anticipated in these forward-looking statements. Unless the context requires otherwise, references in this Annual Report on Form 10-K to “Chewy,” the “Company,” “we,” “our,” or “us” refer to Chewy, Inc. and its consolidated subsidiaries.

~~Overview~~

We are the largest pure-play pet e-tailer in the United States, offering virtually every product a pet needs. We launched Chewy in 2011 to bring the best of the neighborhood pet store shopping experience to a larger audience, enhanced by the depth and wide selection of products and around-the-clock convenience that only e-commerce can offer. We believe that we are the preeminent online destination for pet parents as a result of our broad selection of high-quality products, which we offer at great prices and deliver with an exceptional level of care and a personal touch. We are the trusted source for pet parents and continually develop innovative ways for our customers to engage with us. We partner with approximately 2,500 of the best and most trusted brands in the pet industry, and we create and offer our own outstanding proprietary brands. Through our website and mobile applications, we offer our customers more than 70,000 products, compelling merchandising, an easy and enjoyable shopping experience, and exceptional customer service.

~~COVID-19~~

The COVID-19 pandemic has been a highly disruptive economic and societal event that has affected our business and has had a significant impact on consumer shopping behavior. To serve our pet parents while also providing for the safety and well-being of our team members, we have adapted aspects of our logistics, transportation, supply chain and purchasing processes accordingly. As reflected in the discussion below, we have seen customers shift more of their total shopping spend to online channels since the COVID-19 outbreak, which has led to increased sales and order activity for our business. While the COVID-19 outbreak has not had a material adverse impact on our operations to date, it is difficult to predict all of the positive or negative impacts the COVID-19 outbreak will ultimately have on our business.

As this crisis has unfolded, we have continued to monitor conditions and adapt our operations to meet federal, state and local standards. We have done so to continue meeting the needs of our rapidly growing community of pets and pet parents and to ensure the safety and well-being of our team members. We cannot predict the duration or severity of COVID-19 or its ultimate impact on the broader economy or our operations and liquidity. As such, the situation remains unpredictable and risks still remain. Please refer to the “Cautionary Note Regarding Forward-Looking Statements” in this 10-K Report and in the section titled “Risk Factors” in Item 1A of this 10-K Report.

~~Fiscal Year End~~

The Company has a 52 or 53-week fiscal year ending each year on the Sunday that is closest to January 31 of that year. The Company’s 2020 fiscal year ended January 31, 2021 and included 52 weeks (“Fiscal Year 2020”). The Company’s 2019 fiscal year ended February 2, 2020 and included 52 weeks (“Fiscal Year 2019”). The Company’s 2018 fiscal year ended February 3, 2019 and included 53 weeks (“Fiscal Year 2018”).

~~Key Financial and Operating Data~~

We measure our business using both financial and operating data and use the following metrics and measures to assess the near-term and long-term performance of our overall business, including identifying trends, formulating financial projections, making strategic decisions, assessing operational efficiencies, and monitoring our business.

Fiscal Year % change
(in thousands, except net sales per active customer and percentages) 2020 2019 2018 2020 vs. 2019 2019 vs. 2018
Financial and Operating Data
Net sales $ 7,146,264 $ 4,846,743 $ 3,532,837 47.4 % 37.2 %
Net loss (1)
$ (92,486) $ (252,370) $ (267,890) 63.4 % 5.8 %
Net margin (1)
(1.3) % (5.2) % (7.6) %
Adjusted EBITDA(2)
$ 85,157 $ (81,025) $ (228,905) 205.1 % 64.6 %
Adjusted EBITDA margin(2)
1.2 % (1.7) % (6.5) %
Net cash provided by (used in) operating activities $ 132,755 $ 46,581 $ (13,415) 185.0 % n/m
Free cash flow(2)
$ 2,012 $ (2,055) $ (57,575) 197.9 % 96.4 %
Active customers 19,206 13,459 10,585 42.7 % 27.2 %
Net sales per active customer $ 372 $ 360 $ 334 3.3 % 7.8 %
Autoship customer sales $ 4,889,485 $ 3,362,835 $ 2,322,480 45.4 % 44.8 %
Autoship customer sales as a percentage of net sales 68.4 % 69.4 % 65.7 %
n/m - not meaningful
(1) Includes share-based compensation expense, including related taxes, of $129.2 million, $136.2 million, and $14.4 million, for Fiscal Year 2020, Fiscal Year 2019, and Fiscal Year 2018, respectively.
(2) Adjusted EBITDA, adjusted EBITDA margin and free cash flow are non-GAAP financial measures. See “Non-GAAP Financial Measures” below.

~~We define net margin as net loss divided by net sales and adjusted EBITDA margin as adjusted EBITDA divided by net sales.~~

~~Non-GAAP Financial Measures~~

~~Adjusted EBITDA and Adjusted EBITDA Margin~~

~~To provide investors with additional information regarding our financial results, we have disclosed here and elsewhere in this~~

10-K Report adjusted EBITDA, a non-GAAP financial measure that we calculate as net loss excluding depreciation and amortization; share-based compensation expense and related taxes; income tax provision; interest income (expense), net; management fee expense; transaction related costs; and litigation matters and other items that we do not consider representative of our underlying operations. We have provided a reconciliation below of adjusted EBITDA to net loss, the most directly comparable GAAP financial measure.

We have included adjusted EBITDA in this 10-K Report because it is a key measure used by our management and board of directors to evaluate our operating performance, generate future operating plans and make strategic decisions regarding the allocation of capital. In particular, the exclusion of certain expenses in calculating adjusted EBITDA facilitates operating performance comparability across reporting periods by removing the effect of non-cash expenses and certain variable charges. Accordingly, we believe that adjusted EBITDA provides useful information to investors and others in understanding and evaluating our operating results in the same manner as our management and board of directors.

We believe it is useful to exclude non-cash charges, such as depreciation and amortization, share-based compensation expense and management fee expense from our adjusted EBITDA because the amount of such expenses in any specific period may not directly correlate to the underlying performance of our business operations. We believe it is useful to exclude income tax provision; interest income (expense), net; transaction related costs; and litigation matters and other items which are not components of our core business operations. Adjusted EBITDA has limitations as a financial measure and you should not consider it in isolation or as a substitute for analysis of our results as reported under GAAP. Some of these limitations are:

•although depreciation and amortization are non-cash charges, the assets being depreciated and amortized may have to be replaced in the future and adjusted EBITDA does not reflect capital expenditure requirements for such replacements or for new capital expenditures;

•adjusted EBITDA does not reflect share-based compensation and related taxes. Share-based compensation has been, and will continue to be for the foreseeable future, a recurring expense in our business and an important part of our compensation strategy;

•~~adjusted EBITDA does not reflect interest income (expense), net; or changes in, or cash requirements for, our working capital;~~

•adjusted EBITDA does not reflect transaction related costs (e.g. IPO costs) and other items which are either not representative of our underlying operations or are incremental costs that result from an actual or planned transaction and include litigation matters, integration consulting fees, internal salaries and wages (to the extent the individuals are assigned full-time to integration and transformation activities) and certain costs related to integrating and converging IT systems; and

•~~other companies, including companies in our industry, may calculate adjusted EBITDA differently, which reduces its usefulness as a comparative measure.~~

Because of these limitations, you should consider adjusted EBITDA and adjusted EBITDA margin alongside other financial performance measures, including various cash flow metrics, net loss, net margin, and our other GAAP results.

~~The following table presents a reconciliation of net loss to adjusted EBITDA for each of the periods indicated.~~

($ in thousands, except percentages) Fiscal Year
Reconciliation of Net Loss to Adjusted EBITDA 2020 2019 2018
Net loss $ (92,486) $ (252,370) $ (267,890)
Add (deduct):
Depreciation and amortization 35,664 30,645 23,210
Share-based compensation expense and related taxes 129,208 136,237 14,351
Interest expense (income), net 2,022 (356) 124
Management fee expense(1)
1,300 1,300 1,300
Transaction related costs 2,369 1,396 —
Other 7,080 2,123 —
Adjusted EBITDA $ 85,157 $ (81,025) $ (228,905)
Net sales $ 7,146,264 $ 4,846,743 $ 3,532,837
Net Margin (1.3) % (5.2) % (7.6) %
Adjusted EBITDA margin 1.2 % (1.7) % (6.5) %
(1) Management fee expense allocated to us by PetSmart for organizational oversight and certain limited corporate functions provided by its sponsors. Although we are not a party to the agreement governing the management fee, this management fee is reflected as an expense in our consolidated financial statements.

~~Free Cash Flow~~

To provide investors with additional information regarding our financial results, we have also disclosed here and elsewhere in this 10-K Report free cash flow, a non-GAAP financial measure that we calculate as net cash provided by (used in) operating activities less capital expenditures (which consist of purchases of property and equipment, including servers and networking equipment, capitalization of labor related to our website, mobile applications, and software development, and leasehold improvements). We have provided a reconciliation below of free cash flow to net cash provided by (used in) operating activities, the most directly comparable GAAP financial measure.

We have included free cash flow in this 10-K Report because it is an important indicator of our liquidity as it measures the amount of cash we generate. Accordingly, we believe that free cash flow provides useful information to investors and others in understanding and evaluating our operating results in the same manner as our management and board of directors.

Free cash flow has limitations as a financial measure and you should not consider it in isolation or as a substitute for analysis of our results as reported under GAAP. There are limitations to using non-GAAP financial measures, including that other companies, including companies in our industry, may calculate free cash flow differently. Because of these limitations, you should consider free cash flow alongside other financial performance measures, including net cash provided by (used in) operating activities, capital expenditures and our other GAAP results.

~~The following table presents a reconciliation of net cash provided by (used in) operating activities to free cash flow for each of the periods indicated.~~

($ in thousands) Fiscal Year
Reconciliation of Net Cash Provided by (Used in) Operating Activities to Free Cash Flow 2020 2019 2018
Net cash provided by (used in) operating activities $ 132,755 $ 46,581 $ (13,415)
Deduct:
Capital expenditures (130,743) (48,636) (44,160)
Free Cash Flow $ 2,012 $ (2,055) $ (57,575)

Free cash flow may be affected in the near to medium term by the timing of capital investments (such as the launch of new fulfillment centers, customer service centers, and corporate offices and purchases of IT and other equipment), fluctuations in our growth and the effect of such fluctuations on working capital, and changes in our cash conversion cycle due to increases or decreases of vendor payment terms as well as inventory turnover.

~~Key Operating Metrics~~

~~Active Customers~~

As of the last date of each reporting period, we determine our number of active customers by counting the total number of individual customers who have ordered, and for whom an order has shipped, at least once during the preceding 364-day period. The change in active customers in a reporting period captures both the inflow of new customers as well as the outflow of customers who have not made a purchase in the last 364 days. We view the number of active customers as a key indicator of our growth—acquisition and retention of customers—as a result of our marketing efforts and the value we provide to our customers. The number of active customers has grown over time as we acquired new customers and retained previously acquired customers.

~~Net Sales Per Active Customer~~

We define net sales per active customer as the aggregate net sales for the preceding four fiscal quarters, divided by the total number of active customers at the end of that period. We view net sales per active customer as a key indicator of our customers’ purchasing patterns, including their initial and repeat purchase behavior.

~~Autoship and Autoship Customer Sales~~

We define Autoship customers as customers in a given fiscal quarter for whom an order has shipped through our Autoship subscription program during the preceding 364-day period. We define Autoship as our subscription program, which provides automatic ordering, payment, and delivery of products to our customers. We view our Autoship subscription program as a key driver of recurring net sales and customer retention. For a given fiscal quarter, Autoship customer sales consist of sales and shipping revenues from all Autoship subscription program purchases and purchases outside of the Autoship subscription program by Autoship customers, excluding taxes collected from customers, excluding any refund allowance, and net of any promotional offers (such as percentage discounts off current purchases and other similar offers), for that quarter. For a given fiscal year, Autoship customer sales equal the sum of the Autoship customer sales for each of the fiscal quarters in that fiscal year.

~~Autoship Customer Sales as a Percentage of Net Sales~~

We define Autoship customer sales as a percentage of net sales as the Autoship customer sales in a given reporting period divided by the net sales from all orders in that period. We view Autoship customer sales as a percentage of net sales as a key indicator of our recurring sales and customer retention.

~~Components of Results of Consolidated Operations~~

~~Net Sales~~

We derive net sales primarily from sales of both third-party brand and proprietary brand pet food, pet products, pet medications and other pet health products, and related shipping fees. Sales of third-party brand and proprietary brand pet food, pet products and shipping revenues are recorded when products are shipped, net of promotional discounts and refund allowances. Taxes collected from customers are excluded from net sales. Net sales is primarily driven by growth of new customers and active customers, and the frequency with which customers purchase and subscribe to our Autoship subscription program.

We also periodically provide promotional offers, including discount offers, such as percentage discounts off current purchases and other similar offers. These offers are treated as a reduction to the purchase price of the related transaction and are reflected as a net amount in net sales.

~~Cost of Goods Sold~~

Cost of goods sold consists of the cost of third-party brand and proprietary brand products sold to customers, inventory freight, shipping supply costs, inventory shrinkage costs, and inventory valuation adjustments, offset by reductions for promotions and percentage or volume rebates offered by our vendors, which may depend on reaching minimum purchase thresholds. Generally, amounts received from vendors are considered a reduction of the carrying value of inventory and are ultimately reflected as a reduction of cost of goods sold.

~~Selling, General and Administrative~~

Selling, general and administrative expenses consist of payroll and related expenses for employees involved in general corporate functions, including accounting, finance, tax, legal and human resources; costs associated with use by these functions, such as depreciation expense and rent relating to facilities and equipment; professional fees and other general corporate costs; share-based compensation; and fulfillment costs.

Fulfillment costs represent costs incurred in operating and staffing fulfillment and customer service centers, including costs attributable to buying, receiving, inspecting and warehousing inventories, picking, packaging and preparing customer orders for shipment, payment processing and related transaction costs and responding to inquiries from customers. Included within fulfillment costs are merchant processing fees charged by third parties that provide merchant processing services for credit cards.

~~Advertising and Marketing~~

~~Advertising and marketing expenses consist of advertising and payroll related expenses for personnel engaged in marketing, business development and selling activities.~~

~~Presentation of Results of Consolidated Operations and Liquidity and Capital Resources~~

The following discussion and analysis of our Results of Consolidated Operations and Liquidity and Capital Resources includes a comparison of Fiscal Year 2020 to Fiscal Year 2019. A similar discussion and analysis which compares Fiscal Year 2019 to Fiscal Year 2018 may be found in the section titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” of our annual report filed with the Securities and Exchange Commission (the “SEC”) pursuant to Section 13 or 15(d) under the Exchange Act on April 2, 2020.

~~Results of Consolidated Operations~~

The following tables set forth our results of operations for the fiscal years presented and express the relationship of certain line items as a percentage of net sales for those periods. The period-to-period comparison of financial results is not necessarily indicative of future results.

Fiscal Year
% change % of net sales
($ in thousands) 2020 2019 2018 2020 vs. 2019 2019 vs. 2018 2020 2019 2018
Consolidated Statements of Operations
Net sales $ 7,146,264 $ 4,846,743 $ 3,532,837 47.4 % 37.2 % 100.0 % 100.0 % 100.0 %
Costs of goods sold 5,325,457 3,702,683 2,818,032 43.8 % 31.4 % 74.5 % 76.4 % 79.8 %
Gross profit 1,820,807 1,144,060 714,805 59.2 % 60.1 % 25.5 % 23.6 % 20.2 %
Operating expenses:
Selling, general and administrative 1,397,969 969,890 589,507 44.1 % 64.5 % 19.6 % 20.0 % 16.7 %
Advertising and marketing 513,302 426,896 393,064 20.2 % 8.6 % 7.2 % 8.8 % 11.1 %
Total operating expenses 1,911,271 1,396,786 982,571 36.8 % 42.2 % 26.7 % 28.8 % 27.8 %
Loss from operations (90,464) (252,726) (267,766) 64.2 % 5.6 % (1.3) % (5.2) % (7.6) %
Interest (expense) income, net (2,022) 356 (124) n/m n/m — % — % — %
Loss before income tax provision (92,486) (252,370) (267,890) 63.4 % 5.8 % (1.3) % (5.2) % (7.6) %
Income tax provision — — — — % — % — % — % — %
Net loss $ (92,486) $ (252,370) $ (267,890) 63.4 % 5.8 % (1.3) % (5.2) % (7.6) %
n/m - not meaningful

~~Net Sales~~

Fiscal Year 2020 vs. 2019 2019 vs. 2018
($ in thousands) 2020 2019
2018(1)
$ Change % Change $ Change % Change
Consumables $ 4,967,673 $ 3,596,778 $ 2,708,156 $ 1,370,895 38.1 % $ 888,622 32.8 %
Hardgoods 1,153,639 705,087 551,425 448,552 63.6 % 153,662 27.9 %
Other 1,024,952 544,878 273,256 480,074 88.1 % 271,622 99.4 %
Net sales $ 7,146,264 $ 4,846,743 $ 3,532,837 $ 2,299,521 47.4 % $ 1,313,906 37.2 %
(1) Prior periods have been reclassified to conform with current presentation.

~~Net sales for Fiscal Year 2020 increased by $2.3 billion, or 47.4%, to $7.1 billion compared to $4.8 billion for Fiscal Year 2019. This increase~~ was primarily due to growth in our customer base, with the number of active customers increasing by 5.7 million, or 42.7% year-over-year. Spending among our active customers increased with net sales per active customer increasing $12, or 3.3%, to $372 in Fiscal Year 2020 compared to Fiscal Year 2019, driven by catalog expansion and growth across all verticals.

~~Cost of Goods Sold and Gross Profit~~

Cost of goods sold for Fiscal Year 2020 increased by $1.6 billion, or 43.8%, to $5.3 billion compared to $3.7 billion in Fiscal Year 2019. This increase was primarily due to a 48.9% increase in orders shipped and associated product costs, outbound freight, and shipping supply costs. The increase in cost of goods sold was lower than the increase in orders on a percentage basis, primarily as a result of realized supply chain efficiencies and change in mix of sales as hardgoods, healthcare, and proprietary brand businesses continue to grow faster than the overall business.

Gross profit for Fiscal Year 2020 increased by $676.7 million, or 59.2%, to $1.8 billion compared to $1.1 billion in Fiscal Year 2019. This increase was primarily due to the year-over-year increase in net sales as described above. Gross profit as a percentage of net sales for Fiscal Year 2020 increased by approximately 190 basis points compared to Fiscal Year 2019, primarily due to margin expansion across all verticals including continued growth in our proprietary brands, hardgoods, and healthcare businesses.

~~Selling, General and Administrative~~

Selling, general and administrative expenses for Fiscal Year 2020 increased by $428.1 million, or 44.1%, to $1.4 billion compared to $969.9 million in Fiscal Year 2019. This increase was primarily due to an increase of $324.8 million in fulfillment costs largely attributable to increased investments to support overall growth of our business including the opening of new fulfillment centers in Archbald, Pennsylvania, Salisbury, North Carolina, a limited catalog fulfillment center in Kansas City, Missouri, a customer service center in Dallas, Texas, annualization of the Dayton, Ohio facility we launched during the thirteen weeks ended August 4, 2019, growth of fulfillment and customer service headcount, and temporary incentive wages and bonuses as well as incremental cleaning and sanitation costs attributable to COVID-19. Facilities expenses and other general administrative expenses increased by $132.9 million, primarily due to expanding our corporate offices and increased headcount as a result of business growth as well as an increase in expenses incurred due to IT initiatives and operating as a public company. Partially offsetting these increases, we recognized a reduction in non-income tax based reserves of $15.9 million and a decrease of $13.7 million in non-cash share-based compensation expense due to the continued vesting of share-based awards.

~~Advertising and Marketing~~

Advertising and marketing expenses for Fiscal Year 2020 increased by $86.4 million, or 20.2%, to $513.3 million compared to $426.9 million in Fiscal Year 2019. The increase was primarily due to an increase in advertising and marketing spend through existing channels which contributed to an increase in the number of active customers of 5.7 million.

~~Liquidity and Capital Resources~~

We finance our operations and capital expenditures primarily through cash flows generated by operations and equity offerings. Our principal sources of liquidity are expected to be our cash and cash equivalents and our revolving credit facility. Cash and cash equivalents consist primarily of cash on deposit with banks and investments in money market funds. Cash and cash equivalents totaled $563.3 million as of January 31, 2021, an increase of $351.3 million from February 2, 2020.

We believe that our cash and cash equivalents and availability under our revolving credit facility will be sufficient to fund our working capital, capital expenditure requirements, and contractual obligations for at least the next twelve months. In addition, we may choose to raise additional funds at any time through equity or debt financing arrangements, which may or may not be needed for additional working capital, capital expenditures or other strategic investments. Our opinions concerning liquidity are based on currently available information. To the extent this information proves to be inaccurate, or if circumstances change, future availability of trade credit or other sources of financing may be reduced and our liquidity could be adversely affected. Our future capital requirements and the adequacy of available funds will depend on many factors, including those described in the section titled “Risk Factors” in Item 1A of this 10-K Report. Depending on the severity and direct impact of these factors on us, we may be unable to secure additional financing to meet our operating requirements on terms favorable to us, or at all.

We have contractual obligations and other commitments that will need to be funded in the future, in addition to our working capital, capital expenditures and other strategic initiatives. Material contractual obligations generally relate to operating and real estate lease obligations.

Operating and real estate lease obligations relate to fulfillment and customer service centers, corporate offices and certain equipment under non-cancelable operating leases, which expire at various dates through 2034. Real estate obligations include legally binding minimum lease payments for operating lease arrangements which have not yet commenced. As of January 31, 2021, operating and real estate lease obligations included legally binding minimum lease payments of $770.3 million. For additional information related to real estate and operating leases, see Note 6 – Leases, in the “Notes to Consolidated Financial Statements” included in Part II, Item 8, Financial Statements and Supplementary Data, of this 10-K Report.

~~Initial Public Offering~~

During Fiscal Year 2019, we closed our initial public offering (“IPO”), in which we issued and sold 5.6 million shares of our Class A common stock at a public offering price of $22.00 per share, raising $110.3 million in net proceeds after deducting underwriting discounts, commissions, and offering costs of $6.2 million. For additional information, see Note 7 – Stockholders’ Deficit, in the “Notes to Consolidated Financial Statements” included in Part II, Item 8, Financial Statements and Supplementary Data, of this 10-K Report.

~~2020 Equity Offering~~

During Fiscal Year 2020, we issued and sold 5,865,000 shares of Class A common stock at a public offering price of $54.40 per share, raising $318.4 million in net proceeds after deducting offering costs of $0.6 million. For additional information, see Note 7 – Stockholders’ Deficit, in the “Notes to Consolidated Financial Statements” included in Part II, Item 8, Financial Statements and Supplementary Data, of this 10-K Report.

~~Cash Flows~~

Fiscal Year
($ in thousands) 2020 2019 2018
Net cash provided by (used in) operating activities $ 132,755 $ 46,581 $ (13,415)
Net cash (used in) provided by investing activities $ (123,695) $ (49,861) $ 31,838
Net cash provided by financing activities $ 342,197 $ 127,037 $ 1,141

~~Operating Activities~~

Net cash provided by operating activities was $132.8 million for Fiscal Year 2020, which primarily consisted of $92.5 million of net loss, non-cash adjustments such as depreciation and amortization expense of $35.7 million and share-based compensation expense of $121.3 million, and a cash increase of $56.8 million from the management of working capital. Cash increases from working capital were primarily driven by an increase in fulfillment and payroll liabilities, and partially offset by the increase in inventory purchases exceeding the increase in payables.

Net cash provided by operating activities was $46.6 million for Fiscal Year 2019, which primarily consisted of $252.4 million of net loss, non-cash adjustments such as depreciation and amortization expense of $30.6 million and share-based compensation expense of $134.9 million, and a cash increase of $122.2 million from the management of working capital. Cash increases from working capital were primarily driven by an increase in fulfillment liabilities and the increase in payables exceeding the increase in inventory purchases.

~~Investing Activities~~

Net cash used in investing activities was $123.7 million for Fiscal Year 2020, primarily consisting of $130.7 million of capital expenditures related to the launch of new fulfillment centers, the expansion of corporate and customer service offices, and additional investments in IT hardware and software, partially offset by $9.0 million of cash reimbursements, net of advances from PetSmart.

Net cash used in investing activities was $49.9 million for Fiscal Year 2019, primarily consisting of $48.7 million of capital expenditures related to the launch of new fulfillment centers, the expansion of corporate and customer service offices, and additional investments in IT hardware and software, and $1.2 million of cash advances, net of reimbursements from PetSmart.

~~Financing activities~~

Net cash provided by financing activities was $342.2 million for Fiscal Year 2020 primarily consisting of $318.4 million of proceeds from our equity offering in September 2020, net of offering costs and $23.2 million received pursuant to the tax sharing agreement with PetSmart.

Net cash provided by financing activities was $127.0 million for Fiscal Year 2019, primarily consisting of $110.3 million of proceeds from our IPO, net of underwriting discounts, commissions and offering costs and $17.3 million received pursuant to the tax sharing agreement with PetSmart.

~~ABL Credit Facility~~

On June 18, 2019, we entered into a five-year senior secured asset-backed credit facility (the “ABL Credit Facility”) which provides for non-amortizing revolving loans in an aggregate principal amount of up to $300 million, subject to a borrowing base comprised of, among other things, inventory and sales receivables (subject to certain reserves). The ABL Credit Facility provides the right to request incremental commitments and add incremental asset-based revolving loan facilities in an aggregate principal amount of up to $100 million, subject to customary conditions. As of January 31, 2021, we had no outstanding borrowings under the ABL Credit Facility.

For additional information with respect to our ABL Credit Facility, see Note 5 – Debt in the Notes to Consolidated Financial Statements included in Part II, Item 8, Financial Statements and Supplementary Data, of this 10-K Report.

~~Critical Accounting Estimates~~

Our discussion and analysis of our financial condition and results of operations are based upon our consolidated financial statements, which have been prepared in accordance with GAAP. The preparation of our consolidated financial statements and related disclosures requires us to make estimates, assumptions and judgments that affect the reported amounts of assets, liabilities, net sales, costs and expenses and related disclosures. We believe that the estimates, assumptions and judgments involved in the accounting policies described below have the greatest potential impact on our financial statements and, therefore, we consider these to be our critical accounting policies. Accordingly, we evaluate our estimates and assumptions on an ongoing basis. Our actual results may differ from these estimates under different assumptions and conditions. See Note 2 – Summary of Significant Accounting Policies, in the “Notes to Consolidated Financial Statements” included in Part II, Item 8, Financial Statements and Supplementary Data, of this 10-K Report for a description of our significant accounting policies as well as a description of recently adopted accounting pronouncements and recently issued accounting pronouncements not yet adopted as of the date of this 10-K Report.

~~Share-Based Compensation~~

We measure the cost of employee services received in exchange for a grant of a share-based award using the grant-date fair value of the award. For grants of restricted stock units subject to service-based vesting conditions, the fair value is established based on the market price on the date of the grant. The fair value of restricted stock unit grants subject to market-based vesting conditions is determined on the date of grant using a Monte Carlo model to simulate total stockholder return for Chewy and peer companies. The Company accounts for forfeitures as they occur.

The Monte Carlo simulation requires the use of several variables to estimate the grant-date fair value of our share-based compensation awards including our stock price and a number of assumptions, including volatility, performance period, risk-free interest rate and expected dividends. The risk-free interest rate utilized is based on a 5-year term-matched zero-coupon U.S. Treasury security yield at the time of grant. Expected volatility is based on historical volatility of the stock of our peer firms.

~~Income Taxes~~

Estimates of deferred income taxes reflect management’s assessment of actual future taxes to be paid on items reflected in the consolidated financial statements, giving consideration to both timing and the probability of realization. Actual income taxes could vary from these estimates due to future changes in income tax law, state income tax apportionment or the outcome of any review of our tax returns by the IRS, as well as actual operating results that may vary significantly from anticipated results. For additional information on deferred tax assets and liabilities, see Item 8 of Part II, “Financial Statements and Supplementary Data”, Note 9 – Income Taxes.

We also recognize liabilities for uncertain tax positions based on the two-step process prescribed by the accounting guidance for uncertainty in income taxes. We determine whether it is more likely than not that a tax position will be sustained upon examination. The tax benefit of any tax position that meets the more likely than not recognition threshold is calculated as the largest amount that is more than 50% likely of being realized upon resolution of the contingency. This measurement step is inherently difficult and requires subjective estimations of such amounts to determine the probability of various possible outcomes. We consider many factors when evaluating and estimating our tax positions and tax benefits, which may require periodic adjustments and which may not accurately anticipate actual outcomes.

~~Recent Accounting Pronouncements~~

Information regarding recent accounting pronouncements is included in Item 8 of Part II, “Financial Statements and Supplementary Data”, Note 2 in the “Notes to Consolidated Financial Statements” of this 10-K Report.

~~Item 7A. Quantitative and Qualitative Disclosures About Market Risk~~

~~We have operations only within the U.S. and therefore do not have foreign currency exposure. We are exposed to market risks~~undertaken in the ordinary course of our ~~business, including~~business;

whether the ~~effects~~transaction was initiated by us or the related party;

the availability of ~~interest rate changes. Information relating~~other sources of comparable products or services;

whether the transaction is proposed to ~~quantitative~~be, or was, entered on terms no less favorable to us than terms that could have been reached with an unrelated third party;

the purpose of, and ~~qualitative disclosures about these market risks is set forth below.~~

~~Interest Rate Risk~~

~~Our cash equivalents consist primarily~~the potential benefits of, ~~demand and money market accounts and have an original maturity date of 90 days or less. The fair~~the transaction;

the approximate dollar value of ~~our cash and cash equivalents would not be significantly affected by either an increase or decrease~~the amount involved in ~~interest rates due mainly~~the transaction, particularly as it relates to the short term nature of these instruments. Any future borrowings incurred under our revolving credit facility will accrue interest at a floating rate based on a formula tied to certain market rates at the time of incurrence. A 10% increase or decrease in interest rates would not have a material effect on our interest income or expense.related party;

~~Item 8. Financial Statements and Supplementary Data~~

~~CHEWY, INC.~~

~~INDEX TO CONSOLIDATED FINANCIAL STATEMENTS~~


~~Report of Independent Registered Public Accounting Firm~~			48
~~Consolidated Balance Sheets~~			50
~~Consolidated Statements of Operations~~			51
~~Consolidated Statements of Stockholders’ Deficit~~			52
~~Consolidated Statements of Cash Flows~~			53
~~Notes to Consolidated Financial Statements~~			54

~~REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM~~

~~To the Board of Directors and Stockholders of Chewy, Inc.:~~

~~Opinion on the Financial Statements~~

~~We have audited the accompanying consolidated balance sheets of Chewy, Inc. and subsidiaries (the “Company”) as of January 31, 2021, and February 2, 2020,~~

the related ~~consolidated statements of operations,~~party’s interest in the transaction; and ~~stockholders’ deficit, and cash flows, for each~~

any other information regarding the transaction or the related party that would be material to investors in light of the years ended January 31, 2021, February 2, 2020, and February 3, 2019, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial positioncircumstances of the particular transaction.

Our Audit Committee may approve the transaction only if it determines in good faith that, under all the circumstances, the transaction is in, or not inconsistent with, the best interests of our Company asand stockholders.

If we become aware of ~~January 31, 2021, and February 2, 2020, and~~a related party transaction that has not been approved under the results of its operations and its cash flows for the years ended January 31, 2021, February 2, 2020, and February 3, 2019, in conformity with accounting principles generally accepted in the United States of America.

~~We have also audited,~~Related Party Policy, such transaction is reviewed in accordance with the ~~standards~~procedures set out in the Related Party Policy. If our Audit Committee determines it to be appropriate, the transaction is ratified. Where our Audit Committee determines not to ratify a related party transaction that has been commenced without approval, our Audit Committee may direct additional actions including, but not limited to, immediate discontinuation or rescission of the ~~Public Company Accounting Oversight Board (United States) (PCAOB),~~transaction or modification of the ~~Company's internal control over financial reporting~~transaction to make it acceptable for ratification.

Certain Related Party Transactions

Described below are transactions with related parties in which the amounts involved exceeded $120,000 since the beginning of our last fiscal year or may be expected to exceed such amount in the foreseeable future. Other than as described in this section and in the Compensation Discussion and Analysis section above, there were no transactions with related parties in fiscal year 2022, and no transactions are currently proposed, that would require disclosure under Item 404 of Regulation S-K. The disclosure in this section is set forth as of ~~January 31, 2021, based on criteria established in Internal Control — Integrated Framework (2013) issued by~~ the ~~Committee of Sponsoring Organizations of the Treadway Commission and our report dated March 30, 2021, expressed an unqualified opinion on the Company's internal control over financial reporting.~~

Disclosure Date (as defined below).

~~Change in Accounting Principle~~

The Company changed its method of accounting for leases beginning with the year ended February 2, 2020 due to the adoption of Accounting Standards Update No. 2016-02 Leases (Topic 842). Our opinion is not modified with respect to this matter.

~~Basis for Opinion~~

These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company's financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

~~Critical Audit Matter~~

The critical audit matter communicated below is a matter arising from the current-period audit of the financial statements that was communicated or required to be communicated to the audit committee and that (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

~~Vendor Rebates — Refer to Note 2 to the financial statements~~

~~Critical Audit Matter Description~~

The Company has agreements with vendors to primarily receive either percentage or volume based rebates. Amounts received from vendors are considered a reduction of the carrying value of the Company’s inventory and, therefore, such amounts are ultimately recorded as a reduction of cost of goods sold in the consolidated statements of operations.

Given the significance of vendor rebates to the financial statements, the terms and the significant number of the individual vendor agreements, auditing vendor rebates was complex and subjective due to the extent of effort required to evaluate whether the vendor rebates were recorded in accordance with the terms of the vendor agreements and that the rebates deferred as a reduction of the carrying value of inventory were complete and accurate.

~~How the Critical Audit Matter Was Addressed in the Audit~~

Our audit procedures related to evaluating whether the vendor rebates were recorded in accordance with the terms of the vendor agreements and the completeness and accuracy of deferred vendor rebates included the following, among others:

• We tested the effectiveness of controls over the recording of vendor rebates, including management's controls over the calculation of vendor rebates earned and the determination of the deferred vendor rebates recorded as a reduction to inventory.

~~• We selected a sample of vendor rebates earned during the year and, using the terms of the vendor agreement, recalculated the amount recorded as a reduction of the carrying value of inventory.~~

• We tested the amount of the deferred vendor rebates recorded as a reduction of cost of goods sold by developing an expectation of the amount based on the turnover of inventory in the current year and compared our expectation to the amount recorded.

~~/s/ Deloitte & Touche LLP~~

~~Phoenix, Arizona~~

~~March 30, 2021~~

~~We have served as the Company’s auditor since 2017.~~

~~CHEWY, INC.~~

~~CONSOLIDATED BALANCE SHEETS~~

~~(in thousands, except share and per share data)~~

As of
January 31,
2021 February 2,
2020
Assets
Current assets:
Cash and cash equivalents $ 563,345 $ 212,088
Accounts receivable 100,699 80,478
Inventories 513,304 317,808
Due from Parent, net 21,869 626
Prepaid expenses and other current assets 27,561 18,789
Total current assets 1,226,778 629,789
Property and equipment, net 210,017 118,731
Operating lease right-of-use assets 297,213 179,052
Other non-current assets 6,902 4,749
Total assets $ 1,740,910 $ 932,321
Liabilities and stockholders’ deficit
Current liabilities:
Trade accounts payable $ 778,365 $ 683,049
Accrued expenses and other current liabilities 602,497 417,489
Total current liabilities 1,380,862 1,100,538
Operating lease liabilities 328,231 200,439
Other long-term liabilities 33,821 35,318
Total liabilities 1,742,914 1,336,295
Commitments and contingencies (Note 4) 0 0
Stockholders’ deficit:
Preferred stock, $0.01 par value per share, 5,000,000 shares authorized, 0 shares issued and outstanding as of January 31, 2021 and February 2, 2020 0 0
Class A common stock, $0.01 par value per share, 1,500,000,000 shares authorized, 97,708,518 and 66,445,422 shares issued and outstanding as of January 31, 2021 and February 2, 2020, respectively 977 665
Class B common stock, $0.01 par value per share, 395,000,000 shares authorized, 317,338,356 and 334,922,454 shares issued and outstanding as of January 31, 2021 and February 2, 2020, respectively 3,173 3,349
Additional paid-in capital 1,930,804 1,436,484
Accumulated deficit (1,936,958) (1,844,472)
Total stockholders’ deficit (2,004) (403,974)
Total liabilities and stockholders’ deficit $ 1,740,910 $ 932,321

~~See accompanying Notes to Consolidated Financial Statements.~~

~~CHEWY, INC.~~

~~CONSOLIDATED STATEMENTS OF OPERATIONS~~

~~(in thousands, except per share data)~~

Fiscal Year
2020 2019 2018
Net sales $ 7,146,264 $ 4,846,743 $ 3,532,837
Cost of goods sold 5,325,457 3,702,683 2,818,032
Gross profit 1,820,807 1,144,060 714,805
Operating expenses:
Selling, general and administrative 1,397,969 969,890 589,507
Advertising and marketing 513,302 426,896 393,064
Total operating expenses 1,911,271 1,396,786 982,571
Loss from operations (90,464) (252,726) (267,766)
Interest (expense) income, net (2,022) 356 (124)
Loss before income tax provision (92,486) (252,370) (267,890)
Income tax provision 0 0 0
Net loss $ (92,486) $ (252,370) $ (267,890)
Net loss per share attributable to common Class A and Class B stockholders, basic and diluted $ (0.23) $ (0.63) $ (0.68)
Weighted average common shares used in computing net loss per share attributable to common Class A and Class B stockholders, basic and diluted 407,240 398,256 393,000

~~See accompanying Notes to Consolidated Financial Statements.~~

~~CHEWY, INC.~~

~~CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ DEFICIT~~

~~(in thousands)~~

Class A and Class B Common Stock Additional Paid-in Capital Accumulated Deficit Total Stockholders’ Deficit
Shares Amount
Balance as of January 28, 2018 0 0 $ 1,240,509 $ (1,324,212) $ (83,703)
Share-based compensation expense — — 14,351 — 14,351
Contribution from Parent — — 1,300 — 1,300
Net loss — — — (267,890) (267,890)
Balance as of February 3, 2019 0 0 1,256,160 (1,592,102) (335,942)
Issuance of Class A common stock upon initial public offering, net of underwriting discounts, commissions and offering costs 5,600 56 110,293 — 110,349
Change in capital structure 393,000 3,930 (3,930) — 0
Distribution to Parent 83 1 (1) — 0
Share-based compensation expense — — 134,926 — 134,926
Vesting of share-based compensation awards 2,685 27 (251) — (224)
Contribution from Parent — — 1,300 — 1,300
Tax sharing agreement with Parent — — 17,497 — 17,497
Termination of loan from Parent — — (79,510) — (79,510)
Net loss — — — (252,370) (252,370)
Balance as of February 2, 2020 401,368 4,014 1,436,484 (1,844,472) (403,974)
Issuance of Class A common stock, net of offering costs 5,865 59 318,329 — 318,388
Share-based compensation expense — — 121,265 — 121,265
Vesting of share-based compensation awards 7,533 74 (74) — 0
Distribution to Parent 280 3 (3) — 0
Contribution from Parent — — 1,300 — 1,300
Tax sharing agreement with Parent — — 53,503 — 53,503
Net loss — — — (92,486) (92,486)
Balance as of January 31, 2021 415,046 4,150 $ 1,930,804 $ (1,936,958) $ (2,004)

~~See accompanying Notes to Consolidated Financial Statements.~~

~~CHEWY, INC.~~

~~CONSOLIDATED STATEMENTS OF CASH FLOWS~~

~~(in thousands)~~

Fiscal Year
2020 2019 2018
Cash flows from operating activities
Net loss $ (92,486) $ (252,370) $ (267,890)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Depreciation and amortization 35,664 30,645 23,210
Share-based compensation expense 121,265 134,926 14,351
Non-cash lease expense 25,996 18,208 —
Amortization of deferred rent — — 9,872
Other 306 2,511 670
Net change in operating assets and liabilities:
Accounts receivable (20,221) (31,740) (12,208)
Inventories (195,496) (96,953) (54,851)
Prepaid expenses and other current assets (9,661) (10,134) (5,530)
Other non-current assets (442) (2,125) 797
Trade accounts payable 95,316 180,169 167,453
Accrued expenses and other current liabilities 186,895 80,824 102,041
Operating lease liabilities (12,884) (10,304) —
Other long-term liabilities (1,497) 2,924 8,670
Net cash provided by (used in) operating activities 132,755 46,581 (13,415)
Cash flows from investing activities
Capital expenditures (130,743) (48,636) (44,160)
Cash reimbursements from Parent, net of advances 9,048 (1,225) 75,998
Other (2,000) 0 0
Net cash (used in) provided by investing activities (123,695) (49,861) 31,838
Cash flows from financing activities
Proceeds from issuance of common stock, net of offering costs 318,388 0 0
Proceeds from initial public offering, net of underwriting discounts, commissions and offering costs 0 110,349 0
Proceeds from tax sharing agreement with Parent 23,212 17,300 0
Contribution from Parent 1,300 1,300 1,300
Payment of debt issuance costs 0 (1,459) 0
Principal repayments of finance lease obligations (703) (229) (159)
Other 0 (224) 0
Net cash provided by financing activities 342,197 127,037 1,141
Net increase in cash and cash equivalents 351,257 123,757 19,564
Cash and cash equivalents, as of beginning of period 212,088 88,331 68,767
Cash and cash equivalents, as of end of period $ 563,345 $ 212,088 $ 88,331
Supplemental disclosure of cash flow information
Cash paid for interest $ 1,896 $ 375 $ 34

~~See accompanying Notes to Consolidated Financial Statements.~~

~~CHEWY, INC.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

1.~~Description of Business~~

~~Chewy, Inc.~~BC Partners and its wholly-owned subsidiaries (collectively “Chewy” or the “Company”) is a pure play e-commerce business geared toward pet products for dogs, cats, fish, birds, small pets, horses, and reptiles. Chewy serves its customers through its retail website, www.chewy.com, and its mobile applications and focuses on delivering exceptional customer service, competitive prices, outstanding convenience (including Chewy’s Autoship subscription program, fast shipping, and hassle-free returns), and a large selection of high-quality pet food, treats and supplies, and pet healthcare products.

Affiliates

During the fiscal year ended January 31, 2021, the Company was controlled by PetSmart, Inc. (“PetSmart” or the “Parent”), PetSmart is wholly-owned by a consortium including private investment funds advised by

Transactions with BC Partners La Caisse de dépôt et placement du Québec, affiliates of GIC Special Investments Pte Ltd, affiliates of StepStone Group LP and funds advised by Longview Asset Management, LLC (collectively, the “Sponsors”and/or its affiliates:

In connection with our IPO, Chewy entered into a master transaction agreement (the “MTA”)~~, and controlled by affiliates of BC Partners.~~

On with PetSmart. The MTA was amended in February ~~12,~~ 2021 ~~PetSmart completed a refinancing transaction and~~ in connection with ~~such transaction~~PetSmart’s distribution of all ~~shares~~ of its Chewy stock to reflect our ongoing contractual relationship with PetSmart. The MTA governs the ~~Company’s common stock held~~provision of certain administrative and support services provided by PetSmart ~~and its subsidiaries were distributed to affiliates of BC Partners. Subsequent to the distribution, PetSmart no longer directly or indirectly owns any shares of the Company’s common stock.~~

~~2. Basis of Presentation and Significant Accounting Policies~~

~~Basis of Presentation~~

The Company’s accompanying consolidated financial statements and related notes have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) as set forth in the Financial Accounting Standards Board’s (“FASB”) accounting standards codification (“ASC”).

~~Fiscal Year~~

~~Principles of Consolidation~~

The consolidated financial statements and related notes include the accounts of Chewy, Inc. and its wholly-owned subsidiaries. All intercompany balances and transactions have been eliminated in consolidation.

~~Use of Estimates~~

GAAP requires management to make certain estimates, judgments, and assumptions that affect reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. On an ongoing basis, management evaluates these estimates and judgments. Actual results could differ from those estimates.

Key estimates relate primarily to determining the net realizable value and demand for inventory, useful lives associated with property and equipment, valuation allowances with respect to deferred tax assets, contingencies, self-insurance accruals, evaluation of sales tax positions, and the valuation and assumptions underlying share-based compensation. On an ongoing basis, management evaluates its estimates compared to historical experience and trends, which form the basis for making judgments about the carrying value of assets and liabilities.

~~Cash and Cash Equivalents~~

The Company considers all highly liquid investments with an original maturity of 90 days or less to be cash equivalents. Cash equivalents primarily consist of institutional money market funds and are carried at cost, which approximates fair value.

~~Concentration of Credit Risk~~

The Company maintains the majority of its cash and cash equivalents in accounts with large financial institutions. At times, balances in these accounts may exceed federally insured limits; however, to date, the Company has not incurred any losses on its deposits of cash and cash equivalents.

~~Accounts Receivable~~

The Company’s accounts receivable are comprised of customer and vendor receivables. The Company’s net customer receivables were $81.1 million and $58.3 million as of January 31, 2021 and February 2, 2020, respectively, and consist of credit and debit card receivables from banks, which typically settle within five business days. The Company’s vendor receivables were $19.6 million and $22.2 million as of January 31, 2021 and February 2, 2020, respectively. The Company does not maintain an allowance for doubtful accounts as historical losses on customer and vendor receivables have not been significant.

~~Inventories~~

The Company’s inventories represent finished goods, consist of products available for sale and are accounted for using the first-in, first-out (FIFO) method and valued at the lower of cost or net realizable value.

Inventory costs consist of product and inbound shipping and handling costs. Inventory valuation requires the Company to make judgments, based on currently available information, about the likely method of disposition, such as through sales to individual customers or returns to product vendors. Inventory valuation losses are recorded as cost of goods sold and historical losses have not been significant.

~~Due from Parent, net~~

Transactions between the Company and the Parent relate to funding operations and capital contributions. Balances that are due from and due to Parent are regularly cash settled and have been included in the consolidated balance sheets on a net basis. Cash advances provided to and reimbursed by the Parent to fund Parent operations has been classified on a net basis in the consolidated statements of cash flows as investing activities. Cash received from the Parent in connection with the tax sharing agreement and cash received as capital contributions have been classified in the consolidated statements of cash flows as financing activities. For more information, see Note 11 – “Certain Relationships and Related Party Transactions”.

~~Property and Equipment, net~~

Property and equipment are stated at cost less accumulated depreciation and amortization. Depreciation is calculated over the estimated useful lives of the related assets using the straight-line method. Amortization of leasehold improvements is computed using the straight-line method over the shorter of the remaining lease term (including renewals that are reasonably assured) or the estimated useful lives of the improvements. For software application projects which develop new software or enhance existing licensed or internally-developed software, external costs and certain internal costs, including payroll and payroll-related costs of employees, directly associated with developing these software applications for internal use are capitalized subsequent to the preliminary stage of development. Internal-use software costs are amortized using the straight-line method over the estimated useful life of the software when the project is substantially complete and ready for its intended use.

~~The estimated useful lives of property and equipment are principally as follows:~~


~~Furniture, fixtures and equipment~~			~~5 to 10 years~~
~~Computer equipment and software~~			~~3 to 5 years~~
~~Leasehold improvements and finance lease assets~~			~~Shorter of the lease term or estimated useful life~~

Expenditures for major additions and improvements are capitalized and minor replacements, maintenance, and repairs are expensed as incurred. When property and equipment are retired or otherwise disposed of, the cost and accumulated depreciation are removed from the accounts and any resulting gains or losses are included in the Company’s results of operations for the respective period.

~~Impairment of Long-Lived Assets~~

The Company’s long-lived assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Conditions that would necessitate an impairment assessment include a significant decline in the observable market value of an asset, a significant change in the extent or manner in which an asset is used, or any other significant adverse change that would indicate that the carrying amount of an asset or group of assets may not be recoverable. For asset groups held and used, the carrying value of the asset group is considered recoverable when the estimated undiscounted future cash flows expected to be generated from the use and eventual disposition of the asset group exceed the respective carrying value. In the event that the carrying value is not considered recoverable, an impairment charge would be recognized for the asset group to be held and used equal to the excess of the carrying value above the estimated fair value of the asset group. Impairment charges are recognized within selling, general and administrative expenses in the consolidated statements of operations. The Company did 0t have any impairment charges for Fiscal Year 2020, Fiscal Year 2019, and Fiscal Year 2018.

~~Accrued Expenses and Other Current Liabilities~~

~~The following table presents the components of accrued expenses and other current liabilities (in thousands):~~

As of
January 31, 2021 February 2, 2020
Outbound fulfillment $ 310,700 $ 182,589
Advertising and marketing 85,835 96,836
Payroll liabilities 72,467 30,791
Accrued expenses and other 133,495 107,273
Total accrued expenses and other current liabilities $ 602,497 $ 417,489

~~Self-Insurance Accruals~~

The Company uses a combination of self-insurance programs and large-deductible purchased insurance to provide for the costs of medical and workers’ compensation claims. The Company periodically evaluates its level of insurance coverage and adjusts its insurance levels based on risk tolerance and premium expense. Liabilities for the risks the Company retains, including estimates of claims incurred but not reported, are not discounted and are estimated, in part, by considering historical cost experience, demographic and severity factors, and judgments about current and expected levels of cost per claim and retention levels. Additionally, claims may emerge in future years for events that occurred in a prior year at a rate that differs from previous actuarial projections. The Company believes the actuarial methods are appropriate for measuring these self-insurance accruals. However, based on the number of claims and the length of time from incurrence of the claims to ultimate settlement, the use of any estimation method is sensitive to the assumptions and factors described above. Accordingly, changes in these assumptions and factors can affect the estimated liability and those amounts may be different than the actual costs paid to settle the claims.

~~Defined Contribution Plans~~

The Company maintains a 401(k) defined contribution plan which covers all employees who meet minimum requirements and elect to participate. The Company is currently matching employee contributions, up to specified percentages of those contributions.

~~Revenue Recognition~~

Chewy recognizes revenues from product sales when the customer orders an item through Chewy’s website or mobile applications via the electronic shopping cart, funds are collected from the customer and the item is shipped from one of the Company’s fulfillment centers and delivered to the carrier. Certain products are shipped directly from manufacturers to Chewy ~~customers. For all of the preceding, the Company is considered~~and fees payable by Chewy to ~~be a principal to these transactions and revenue is recognized on a gross basis as the Company is (i) the primary entity responsible~~PetSmart for fulfilling the promise to provide the specified products in the arrangement with the customer and provides the primary customer service for all products sold on Chewy’s website or mobile applications, (ii) has inventory risk before the products have been transferred to a customer and maintains inventory risk upon accepting returns, ~~and (iii) has discretion in establishing the price for the specified products sold on Chewy’s website or mobile applications.~~

Chewy generates net sales from sales of pet food, pet products, pet medications and other pet health products, and related shipping fees. Revenue is measured as the amount of consideration the Company expects to receive in exchange for transferring products. To encourage customers to purchase its products, the Company periodically provides incentive offers. Generally, these promotions include current discount offers, such as percentage discounts off current purchases and other similar offers. These offers, when accepted by customers, are treated as a reduction to the transaction price. Revenue typically consists of the consideration received from the customer when the order is executed less a refund allowance, which is estimated using historical experience.

~~Taxes collected from customers for remittance to governmental authorities are excluded from net sales.~~

~~Cost of Goods Sold~~

Cost of goods sold includes the purchase price of inventory sold, freight costs associated with inventory, shipping supply costs, inventory shrinkage costs and valuation adjustments and reductions for promotions and discounts offered by the Company’s vendors.

~~Vendor Rebates~~

The Company has agreements with vendors to receive either percentage or volume rebates. Additionally, certain vendors provide funding for discounts relating to the Autoship subscription program which are passed on to the Company’s customers. The Company primarily receives agreed upon percentage rebates from vendors, however,guaranteeing certain of its vendor rebates are dependent upon reaching minimum purchase thresholds. In these instances, the Company evaluates the likelihood of reaching purchase thresholds using past experience and current year forecasts. When volume rebates can be reasonably estimated and it is probable that minimum purchase thresholds will be met, the Company records a portion of the rebate as it makes progress towards the purchase threshold. The Company also receives vendor funding in the form of advertising agreementsChewy’s lease related to general marketing activities. Amounts received from vendors are considered a reduction of the carrying value of the Company’s inventory and, therefore, such amounts are ultimately recorded as a reduction of cost of goods sold in the consolidated statements of operations.

~~Vendor Concentration Risk~~

The Company purchases inventory from several hundred vendors worldwide. Sales of products from the Company’s three largest vendors represented approximately 32.6%, 32.5%, and 30.1% of the Company’s net sales for Fiscal Year 2020, Fiscal Year 2019, and Fiscal Year 2018, respectively.

~~Selling, General and Administrative~~

Selling, general and administrative expenses consist of payroll and related expenses for employees involved in general corporate functions, including accounting, finance, tax, legal, and human resources; costs associated with use by these functions of facilities and equipment, such as depreciation expense and rent; share-based compensation expense, professional fees and other general corporate costs.

~~Fulfillment~~

Fulfillment costs represent those costs incurred in operating and staffing fulfillment and customer service centers, including costs attributable to buying, receiving, inspecting and warehousing inventories, picking, packaging and preparing customer orders for shipment, payment processing and related transaction costs, and responding to inquiries from customers. For Fiscal Year 2020, Fiscal Year 2019, and Fiscal Year 2018 the Company recorded fulfillment costs of $871.0 million, $546.2 million, and $403.9 million, respectively, which are included within selling, general and administrative expenses in the consolidated statements of operations. Included within fulfillment costs are merchant processing fees charged by third parties that provide merchant processing services for credit cards. For Fiscal Year 2020, Fiscal Year 2019, and Fiscal Year 2018, the Company recorded merchant processing fees of $146.0 million, $101.0 million, and $74.1 million, respectively, which are included within selling, general and administrative expenses in the consolidated statements of operations.

~~Share-Based Compensation~~

The Company recognizes share-based compensation expense based on the equity award’s grant date fair value. For grants of restricted stock units subject to service-based vesting conditions, the fair value is established based on the market price on the date of the grant. For grants of restricted stock units subject to market-based vesting conditions, the fair value is established using the Monte Carlo simulation lattice model. The determination of the fair value of share-based awards is affected by the Company’s stock price and a number of assumptions, including volatility, performance period, risk-free interest rate and expected dividends. The Company accounts for forfeitures as they occur. The grant date fair value of each restricted stock unit is amortized over the requisite service period.

~~Advertising and Marketing~~

Advertising and marketing expenses primarily consist of advertising and payroll and related expenses for personnel engaged in marketing, business development and selling activities. Advertising and marketing costs are expensed in the period that the advertising first takes place.

~~Leases~~

The Company has operating and finance lease agreements for its fulfillment and customer service centers, corporate offices, and certain equipment. The Company determines if an arrangement contains a lease at inception based on the ability to control a physically distinct asset. Operating and finance lease right-of-use assets are recorded in the consolidated balance sheets based on the initial measurement of the lease liability as adjusted to include prepaid rent and initial direct costs less any lease incentives received. Lease liabilities are measured at the commencement date based on the present value of the lease payments over the lease term. Lease payments are generally fixed but may include provisions for future rent increases based on a market index. The Company separately accounts for lease and non-lease components within lease agreements; the non-lease components primarily relate to common area maintenance for real estate leases. The Company uses its incremental borrowing rate to present value the lease liability as key inputs to determine the interest rate implicit in the lease are not shared by lessors.

Operating lease expense is recorded on a straight-line basis over the lease term. Right-of-use assets and lease liabilities for short-term leases are not recognized in the consolidated balance sheets. Payments for short-term leases are recognized in the consolidated statements of operations on a straight-line basis over the lease term.

~~Income and Other Taxes~~

Income taxes are accounted for under the asset and liability method, under which deferred tax assets and liabilities are recognized for the future tax consequences of events that have been recognized in the Company’s financial statements or tax returns. The Company’s calculation relies on several factors, including pre-tax earnings and losses, differences between tax laws and accounting rules, statutory tax rates, uncertain tax positions, and valuation allowances. Valuation allowances are established when, in the Company’s judgment, it is more likely than not that its deferred tax assets will not be realized based on all available evidence. Management considers all available evidence, both positive and negative, including historical levels of income, expectations and risks associated with estimates of future taxable income and ongoing tax planning strategies in assessing the need for a valuation allowance.

Chewy determines whether it is more likely than not that a tax position will be sustained upon examination. If it is not more likely than not that a position will be sustained, no amount of benefit attributable to the position is recognized. The tax benefit of any tax position that meets the more likely than not recognition threshold is calculated as the largest amount that is more than 50% likely of being realized upon resolution of the contingency.

The Company collects and remits sales tax in jurisdictions in which it has a physical presence or it believes nexus exists. The Company maintains liabilities for potential exposure in states where taxability is uncertain and the Company did not collect sales tax.

~~Segments~~

Operating segments are defined as components of an entity for which separate financial information is available and that is regularly reviewed by the Chief Operating Decision Maker (“CODM”) in deciding how to allocate resources to an individual segment and in assessing performance. The Company’s CODM is its Chief Executive Officer. The Company has determined that it operates in 1 operating segment and 1 reportable segment, as the CODM reviews financial information presented on a consolidated basis for purposes of making operating decisions, allocating resources, and evaluating financial performance.

~~Loss Contingencies~~

Certain conditions may exist which may result in a loss to the Company, but which will only be resolved when one or more future events occur or fail to occur. The Company’s management assesses such contingent liabilities and such assessment inherently involves an exercise of judgment. In assessing loss contingencies related to legal proceedings that are pending against the Company, or unasserted claims that may result in such proceedings, the Company evaluates the perceived merits of any legal proceedings or unasserted claims as well as the perceived merits of the amount of relief sought or expected to be sought therein.

If the assessment of a contingency indicates that it is probable that a material loss has been incurred and the amount of the liability is estimable, the liability would be accrued in the Company’s consolidated financial statements. If the assessment indicates that a potentially material loss contingency is not probable but is reasonably possible, or is probable but cannot be estimated, the nature of the contingent liability, together with an estimate of the range of possible loss, if determinable and material, would be disclosed.

Loss contingencies considered remote are generally not disclosed. Unasserted claims that are not considered probable of being asserted and those for which an unfavorable outcome is not reasonably possible have not been disclosed.

~~Fair Value of Financial Instruments~~

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. To increase the comparability of fair value measures, the following hierarchy prioritizes the inputs to valuation methodologies used to measure fair value:

~~Level 1-Valuations based on quoted prices (unadjusted) in active markets for identical assets or liabilities.~~

~~Level 2-Valuations based on inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly.~~

Level 3-Valuations based on unobservable inputs reflecting the Company’s assumptions, consistent with reasonably available assumptions made by other market participants. These valuations require significant judgment.

The Company’s cash equivalents are classified within Level 1 of the fair value hierarchy because they are valued using quoted market prices. The carrying amounts of the Company’s cash and cash equivalents, accounts receivable, trade accounts payable, and accrued expenses and other current liabilities approximate fair value based on the short-term maturities of these instruments.

~~Recent Accounting Pronouncements~~

~~Recently Adopted Accounting Pronouncements~~

~~ASU 2018-15, Intangibles-Goodwill and Other-Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement.~~ In August 2018, the FASB issued this Accounting Standards Update (“ASU”) to align the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software. This update became effective atobligations. From the beginning of ~~the Company’s 2020~~ fiscal ~~year. The adoption of this ASU did not have a material impact on the Company’s consolidated financial statements and disclosures.~~year 2022 through May 17, 2023 (the “Disclosure Date”), Chewy paid PetSmart $36,756.

~~ASU 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments.~~ In June 2016, the FASB issued this ASU to amend the current accounting guidance which requires the measurement of all expected losses to be based on historical experience, current conditions and reasonable and supportable forecasts. For trade receivables, loans, and other financial instruments, the Company will be required to use a forward-looking expected loss model that reflects probable losses rather than the incurred loss model for recognizing credit losses. This update became effective at the beginning of the Company’s 2020 fiscal year. The adoption of this ASU did not have a material impact on the Company’s consolidated financial statements and disclosures.

~~Recently Issued Accounting Pronouncements~~

~~ASU 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes.~~ In December 2019, the FASB issued this ASU to simplify the accounting for income taxes by eliminating certain exceptions related to the approach for intraperiod tax allocation, the methodology for calculating income taxes in an interim period, and the recognition of deferred tax liabilities for outside basis differences. This ASU also clarifies and simplifies other aspects of the accounting for income taxes. This update is effective at the beginning of the Company’s 2021 fiscal year. The adoption of this standard will not have a material impact on the Company’s consolidated financial statements.

~~3. Property and Equipment, net~~

~~The following is a summary of property and equipment, net (in thousands):~~

As of
January 31, 2021 February 2, 2020
Furniture, fixtures and equipment $ 91,496 $ 67,894
Computer equipment 43,347 32,259
Internal-use software 56,977 30,222
Leasehold improvements 80,641 39,447
Construction in progress 41,914 18,927
314,375 188,749
Less: accumulated depreciation and amortization 104,358 70,018
Property and equipment, net $ 210,017 $ 118,731

Internal-use software includes labor and license costs associated with software development for internal use. As of January 31, 2021 and February 2, 2020, the Company had accumulated amortization related to internal-use software of $22.5 million and $15.9 million, respectively.

Construction in progress is stated at cost, which includes the cost of construction and other directly attributable costs. No provision for depreciation is made on construction in progress until the relevant assets are completed and put into use.

For Fiscal Year 2020, Fiscal Year 2019, and Fiscal Year 2018, the Company recorded depreciation expense on property and equipment of $28.3 million, $22.0 million, and $17.9 million, respectively, and amortization expense related to internal-use software costs of $7.4 million, $8.6 million, and $5.3 million, respectively. The aforementioned depreciation and amortization expenses were included within selling, general and administrative expenses in the consolidated statements of operations.

~~4. Commitments and Contingencies~~

~~Various legal claims arise from time to time in the normal course~~

Certain of business. In assessing loss contingencies related to legal proceedings that are pending against the Company, or unasserted claims that may result in such proceedings, the Company evaluates the perceived merits of any legal proceedings or unasserted claims as well as the perceived merits of the amount of relief sought or expected to be sought therein.

The Company believes that it has adequately accrued for the potential impact of loss contingencies that are probable and reasonably estimable. The Company does not believe that the ultimate resolution of any matters to which it is presently a party will have a material adverse effect on the Company’s results of operations, financial condition or cash flows. However, the results of these matters cannot be predicted with certainty, and an unfavorable resolution of one or more of these matters could have a material adverse effect on the Company’s financial condition, results of operations or cash flows.

International Business Machines Corporation (“IBM”) alleges that the Company is infringing 4 of its patents by operation of the Chewy.com website. On February 15, 2021, the Company filed a declaration judgment action in the United States District Court for the Southern District of New York against IBM seeking the court’s declaration that the Company is not infringing the 4 asserted IBM patents. The Company denies the allegations of any infringement and intends to vigorously defend itself in this matter. The possible loss or range of loss associated with this matter is not estimable.

~~ABL Credit Facility~~

On June 18, 2019, the Company entered into a five-year senior secured asset-backed credit facility (the “ABL Credit Facility”) which provides for non-amortizing revolving loans in an aggregate principal amount of up to $300 million, subject to a borrowing base comprised of, among other things, inventory and sales receivables (subject to certain reserves). The ABL Credit Facility provides the right to request incremental commitments and add incremental asset-based revolving loan facilities in an aggregate principal amount of up to $100 million, subject to customary conditions.

Borrowings under the ABL Credit Facility bear interest at a rate per annum equal to an applicable margin, plus, at the Company’s option, either a base rate or a LIBOR rate. The applicable margin is generally determined based on the average excess liquidity during the immediately preceding fiscal quarter as a percentage of the maximum borrowing amount under the ABL Credit Facility, and is between 0.25% and 0.75% for base rate loans and between 1.25% and 1.75% for LIBOR loans. The Company is also required to pay a commitment fee of between 0.25% and 0.375% with respect to the undrawn portion of the commitments, which is generally based on average daily usage of the facility.

All obligations under the ABL Credit Facility are guaranteed on a senior secured first-lien basis by the Company’s wholly-owned domestic subsidiaries, subject to certain exceptions, and secured, subject to permitted liens and other exceptions, by a perfected first-priority security interest in substantially all of the Company’s and its wholly-owned domestic subsidiaries’ assets.

~~The ABL Credit Facility contains a number of covenants that, among other things, restrict the Company’s and its restricted subsidiaries’ ability to:~~

•~~incur or guarantee additional debt and issue certain equity securities;~~

•~~make certain investments and acquisitions;~~

•~~make certain restricted payments and payments of certain indebtedness;~~

•~~incur certain liens or permit them to exist;~~

•~~enter into certain types of transactions with affiliates;~~

•~~merge or consolidate with another company; and~~

•~~transfer, sell or otherwise dispose of assets.~~

~~Each of these restrictions is subject to various exceptions.~~

In addition, the ABL Credit Facility requires the Company to maintain a minimum fixed charge coverage ratio of 1.0:1.0 if excess availability under the facility is less than the greater of 10% of the maximum borrowing amount and $30.0 million for a certain period of time. The ABL Credit Facility also contains certain customary affirmative covenants and events of default for facilities of this type, including an event of default upon a change in control. As of January 31, 2021, the Company had 0 outstanding borrowings under the ABL Credit Facility.

The Company leases all of its fulfillment and customer service centers and corporate offices under non-cancelable operating lease agreements. The terms of the Company’s real estate leases generally range from 5 to 15 years and typically allow for the leases to be renewed for up to 3 additional five-year terms. Fulfillment and customer service centers and corporate office leases expire at various dates through 2034, excluding renewal options. The Company also leases certain equipment under operating and finance leases. The terms of equipment leases generally range from 3 to 5 years and do not contain renewal options. These leases expire at various dates through 2025.

The Company’s finance leases as of January 31, 2021 and February 2, 2020 were not material and were included in property and equipment, on the Company's consolidated balance sheets. The table below presents the operating lease-related assets and liabilities recorded on the consolidated balance sheets (in thousands):

As of
Leases Balance Sheet Classification January 31, 2021 February 2, 2020
Assets
Operating Operating lease right-of-use assets $ 297,213 $ 179,052
Total operating lease assets $ 297,213 $ 179,052
Liabilities
Current
Operating Accrued expenses and other current liabilities $ 19,142 $ 15,491
Non-current
Operating Operating lease liabilities 328,231 200,439
Total operating lease liabilities $ 347,373 $ 215,930

For Fiscal Year 2020 and Fiscal Year 2019, assets acquired in exchange for new operating lease liabilities were $119.0 million and $30.7 million, respectively. Lease expense primarily related to operating lease costs and were included within selling, general and administrative expenses in the consolidated statements of operations. Lease expense for Fiscal Year 2020 and Fiscal Year 2019 was $62.2 million, and $47.9 million, of which short-term and variable lease payments were $12.2 million and $9.3 million, respectively.

As of January 31, 2021, the weighted-average remaining lease term and weighted-average discount rate for operating leases was 12.3 years and 9.8%, respectively. As of February 2, 2020, the weighted-average remaining lease term and weighted-average discount rate for operating leases was 10.4 years and 11.3%, respectively.

~~Operating cash flows related to cash paid for operating leases were approximately $52.9 million and $37.9 million for Fiscal Years 2020 and 2019, respectively.~~

~~The table below presents the maturity of lease liabilities as of January 31, 2021 (in thousands):~~

Operating Leases
2021 $ 42,983
2022 51,005
2023 48,003
2024 44,135
2025 43,856
Thereafter 372,801
Total lease payments 602,783
Less: interest 255,410
Present value of lease liabilities $ 347,373

The table above includes all locations for which the Company had the right to control the use of the property. In addition, as of January 31, 2021, the Company had lease arrangements which had not yet commenced with total future lease payments of $167.5 million. The lease term for these lease arrangements is approximately 17.0 years.

On August 12, 2020, the Company finalized agreements with a local government agency for certain ad valorem tax benefits provided to the Company in connection with a maximum capital investment of $70.0 million in property, plant, and equipment purchases for a new fulfillment center over a three-year timeframe. To facilitate the incentives, the government agency will issue its Taxable Industrial Development Revenue Bonds, Series 2020 (the “Bonds”), in a maximum aggregate principal amount of $70.0 million. In exchange for the Bonds, the Company will convey the purchased equipment to the local government agency and will lease the equipment from this agency. The Company will not pay any cash for the Bonds nor receive any cash for the conveyance of the equipment. Upon termination of the lease, including early termination, the equipment will be conveyed to the Company for a nominal fee.

~~7. Stockholders’ Deficit~~

~~Initial Public Offering~~

On June 18, 2019, the Company closed its initial public offering (“IPO”), in which it issued and sold 5,600,000 shares of its Class A common stock. The price at IPO was $22.00 per share. The Company received net proceeds of approximately $110.3 million from the IPO after deducting underwriting discounts and commissions of $6.2 million and offering costs.

Prior to the completion of the IPO, the Company amended and restated its certificate of incorporation to authorize Class A and Class B common stock and reclassify the 100 outstanding shares of common stock into 393,000,000 shares of Class B common stock. In connection with the IPO, 47,875,000 shares of the Company’s Class B common stock were reclassified into shares of Class A common stock on a 1-to-one basis. Upon completion of the IPO, 53,475,000 shares of the Company’s Class A common stock and 345,125,000 shares of Class B common stock were outstanding. The Class A common stock outstanding includes the shares issued in the IPO.

~~2020 Equity Offering~~

On September 21, 2020, the Company issued and sold 5,100,000 shares of Class A common stock in an underwritten public offering at a price of $54.40 per share to Morgan Stanley & Co. LLC, who acted as sole underwriter in the offering. The Company had granted the underwriter an option to purchase up to an additional 765,000 shares of Class A common stock at a price of $54.40 per share (“Option Shares”), which was exercised on September 30, 2020. The Company raised $318.4 million in net proceeds through the equity offering (including proceeds from the sale of the Option Shares) after deducting offering costs of approximately $0.6 million.

Holders of the Company’s Class A and Class B common stock are entitled to vote together as a single class on all matters submitted to a vote or for the consent of the stockholders of the Company, unless otherwise required by law or the Company’s amended and restated certificate of incorporation. Holders of Class A common stock are entitled to 1 vote per share and holders of Class B common stock are entitled to 10 votes per share.

Subject to the preferences applicable to any series of preferred stock, if any, outstanding, holders of Class A and Class B common stock are entitled to share equally, on a per share basis, in dividends and other distributions of cash, property or securities of the Company.

Subject to the preferences applicable to any series of preferred stock, if any, outstanding, in the event of the voluntary or involuntary liquidation, dissolution, distribution of assets or winding up of the Company, all assets of the Company available for distribution to common stockholders would be divided among and paid ratably to holders of Class A and Class B common stock.

~~Conversion of Class B Common Stock~~

~~Voluntary Conversion~~

~~Each share of Class B common stock is convertible into 1 fully paid and nonassessable share of Class A common stock at the option of the holder thereof with the prior written consent of the Company.~~

On December 20, 2019, a wholly-owned subsidiary of PetSmart, converted 6,352,546 shares of the Company’s Class B common stock into Class A common stock and sold such Class A common stock. Subsequently, on January 6, 2020, a wholly-owned subsidiary of PetSmart, converted 3,850,000 shares of the Company’s Class B common stock into Class A common stock and sold such Class A common stock.

On May 8, 2020, Buddy Chester Sub LLC, a wholly-owned subsidiary of PetSmart, converted 17,584,098 shares of the Company’s Class B common stock into Class A common stock. On May 11, 2020, Buddy Chester Sub LLC entered into a variable forward purchase agreement to deliver up to 17,584,098 shares of the Company’s Class A common stock at the exchange date, which is expected to be May 16, 2023. The number of shares to be issued will be based on the trading price of the common stock at that time.

~~Automatic Conversion~~

All shares of Class B common stock shall automatically, without further action by any holder, be converted into an identical number of shares of fully paid and nonassessable Class A common stock (i) on the first trading day on or after the date on which the outstanding shares of Class B common stock constitute less than 7.5% of the aggregate number of shares of common stock then outstanding, or (ii) upon the occurrence of an event, specified by the affirmative vote (or written consent) of the holders of a majority of the then-outstanding shares of Class B common stock, voting as a separate class.

In addition, each share of Class B common stock will convert automatically into 1 share of Class A common stock (i) upon the sale or transfer of such share of Class B common stock, except for certain transfers described in the Company’s amended and restated certificate of incorporation, including transfers to affiliates of the holder and another holder of Class B common stock, or (ii) if the holder is not an affiliate of any of the Sponsors.

Preferred stock may be issued from time to time by the Company for such consideration as may be fixed by the board of directors. Except as otherwise required by law, holders of any series of preferred stock shall be entitled to only such voting rights, if any, as shall expressly be granted by the Company’s amended and restated certificate of incorporation.

~~8. Share-Based Compensation~~

~~2019 Omnibus Incentive Plan~~

In June 2019, the Company’s board of directors adopted and approved the 2019 Omnibus Incentive Plan (the “2019 Plan”). The 2019 Plan became effective on June 13, 2019 and allows for the issuance of up to 31,864,865 shares of Class A common stock. No awards may be granted under the 2019 Plan after June 2029.

The 2019 Plan provides for the grant of stock options, including incentive stock options, non-qualified stock options, restricted stock, dividend equivalents, stock payments, restricted stock units, performance shares, other incentive awards, stock appreciation rights, and cash awards (collectively “awards”). The awards may be granted to the Company’s employees, consultants, and directors, and the employees and consultants of the Company’s affiliates and subsidiaries.

~~Service and Performance-Based Awards~~

Beginning in June 2019, the Company granted restricted stock units that vest upon satisfaction of both a service-based vesting condition and a performance-based condition (“PRSUs”) as described below.

The service-based vesting condition was or will be satisfied with respect to 25% of an employee’s PRSUs on either (i) the first anniversary of the registration date (as defined in the 2019 Plan) or (ii) the first anniversary of the vesting commencement date, and will then be satisfied with respect to 12.5% of an employee’s PRSUs at the end of each six month period thereafter, subject to the employee’s continued employment with the Company through the applicable vesting date.

The performance-based vesting condition was or will be be satisfied with respect to a percentage of an employee’s PRSUs, as and when the price per share of Class A common stock specified is achieved, on a volume adjusted weighted-average basis, on every trading day during a consecutive 45-trading day period completed prior to the fifth anniversary of the 2019 Plan’s effective date subject to the employee’s continued employment with the Company through the applicable vesting date. As of June 13, 2020, the performance-based vesting condition was fully satisfied.

~~Service-Based Awards~~

During the fiscal year ended January 31, 2021, the Company granted restricted stock units with a service-based vesting condition (“RSUs”). The service-based vesting condition for employees will be satisfied with respect to 25% of an employee’s RSUs on the one-year anniversary of the vesting commencement date and 12.5% of an employee’s RSUs at the end of each six month period thereafter, subject to the employee’s continued employment with the Company through the applicable vesting date. The Company records share-based compensation expense for RSUs on a straight-line basis over the requisite service period. The Company accounts for forfeitures as they occur.

~~Service and Performance-Based Awards Activity~~

~~The following table summarizes the activity related to the Company’s PRSUs for Fiscal Year 2020 (in thousands, except for weighted average grant date fair value):~~

Number of PRSUs Weighted Average Grant Date Fair Value
Outstanding as of February 2, 2020 21,284 $ 36.20
Granted 805 $ 32.30
Vested (7,823) $ 36.42
Forfeited (1,255) $ 34.94
Unvested and outstanding as of January 31, 2021 13,011 $ 35.95

The total fair value of PRSUs that vested during Fiscal Year 2020 and Fiscal Year 2019 was $784.4 million and $103.3 million, respectively. As of January 31, 2021, total unrecognized compensation expense related to unvested PRSUs was $82.5 million and is expected to be recognized over a weighted-average expected performance period of 1.7 years.

During Fiscal Year 2020 and Fiscal Year 2019, vesting occurred for 279,925 and 82,941 PRSUs, respectively, previously granted to a director of the Company. For accounting purposes, the issuance of Class A common stock upon vesting of these PRSUs is treated as a distribution to the Parent because such director is an employee of the Parent.

The fair value of the PRSUs with share price hurdles was determined on the date of grant using a Monte Carlo model to simulate total stockholder return for the Company and peer companies with the following assumptions:


~~Performance period~~			~~5 years~~
~~Weighted-average risk-free interest rate~~			~~1.8%~~
~~Weighted-average volatility~~			~~49.6%~~
~~Weighted-average dividend yield~~			0%

The risk-free interest rate utilized is based on a 5-year term-matched zero-coupon U.S. Treasury security yield at the time of grant. Expected volatility is based on historical volatility of the stock of the Company’s peer firms.

~~Service-Based Awards Activity~~

~~The following table summarizes the activity related to the Company’s RSUs for Fiscal Year 2020 (in thousands, except for weighted average grant date fair value):~~

Number of RSUs Weighted Average Grant Date Fair Value
Outstanding as of February 2, 2020 0 $ 0
Granted 774 $ 48.28
Forfeited (61) $ 41.81
Unvested and outstanding as of January 31, 2021 713 $ 48.58

As of January 31, 2021, total unrecognized compensation expense related to unvested RSUs was $29.3 million and is expected to be recognized over a weighted-average expected performance period of 3.4 years.

~~The fair value for RSUs is established based on the market price of the Company’s Class A common stock on the date of grant.~~

~~As of January 31, 2021, there were 7.5 million additional shares of Class A common stock reserved for future issuance under the 2019 Plan.~~

~~Citrus Profits Interest Plan~~

Subsequent to the PetSmart Acquisition of the Company in 2017, the Company’s share-based compensation included profits interests units (“PIUs”) granted by Citrus Intermediate Holdings L.P. (the “Citrus Partnership”), a Delaware limited partnership (the “Citrus Profits Interest Plan”). The Citrus Partnership is a parent company of PetSmart and a wholly-owned subsidiary of the Sponsors. The Company recognized share-based compensation as equity contributions from the Citrus Partnership in its consolidated financial statements for awards granted under the Citrus Profits Interest Plan as it relates to grantees’ services as employees of the Company.

~~As of June 13, 2019, an aggregate of 768,785 profits interests units under the Citrus Profits Interest Plan were held by employees of Chewy, Inc. and were canceled.~~

~~Share-Based Compensation Expense~~

Share-based compensation expense is included within selling, general and administrative expenses in the consolidated statements of operations. The Company recognized share-based compensation expense as follows (in thousands):

Fiscal Year
2020 2019 2018
PRSUs $ 115,505 $ 124,761 $ 0
RSUs 5,760 0 0
PIUs 0 10,165 14,351
Total share-based compensation expense $ 121,265 $ 134,926 $ 14,351

Chewy is subject to taxation in the U.S. and various state and local jurisdictions. The Company’s losses and tax attributes were previously included in PetSmart’s consolidated tax return activity at the U.S. federal level and any applicable state and local level. Income taxes as presented in the Company’s consolidated financial statements have been prepared based on the separate return method. As of January 31, 2021, Chewy is no longer a member of PetSmart’s affiliated group for U.S. federal income tax purposes. For presentation purposes, the Company has reduced the deferred tax attributes previously utilized by PetSmart, along with the associated valuation allowances, from the financial statements in order to properly reflect the deferred tax attributes available to the Company; this had no net impact on the Company’s income tax expense.

~~The Company did 0t have a current or deferred provision for income taxes for any taxing jurisdiction during Fiscal Year 2020, Fiscal Year 2019, and Fiscal Year 2018.~~

~~The Company’s effective income tax rate reconciliation is as follows for the periods presented:~~

Fiscal Year
2020 2019 2018
Federal statutory rate 21.0 % 21.0 % 21.0 %
State income taxes, net of federal tax benefit 20.6 % 4.4 % 1.5 %
Change in tax rate 1.7 % 0.6 % 0 %
Share-based compensation 73.0 % 4.0 % 0 %
Research and development tax credit 7.8 % 1.3 % 0 %
Other 0.9 % (3.4) % (1.1) %
Change in valuation allowance (125.0) % (27.9) % (21.4) %
Effective rate 0 % 0 % 0 %

~~The temporary differences which comprise the Company’s deferred taxes are as follows for the periods presented (in thousands):~~

As of
January 31, 2021 February 2, 2020
Deferred tax assets:
Operating lease liabilities $ 89,117 $ 53,578
Inventories 3,883 7,485
Share-based compensation 31,372 29,639
Accrued expenses and reserves 22,865 10,814
Other 4,044 12,882
Net operating loss carryforwards 87,881 190,307
Total deferred tax assets 239,162 304,705
Less: valuation allowance 124,012 242,974
Deferred tax assets, net of valuation allowance 115,150 61,731
Deferred tax liabilities:
Operating lease right-of-use assets 76,249 44,428
Depreciation 37,821 15,681
Prepaids 1,080 1,622
Total deferred tax liabilities 115,150 61,731
Net deferred tax assets $ 0 $ 0

~~Valuation Allowance~~

The valuation allowance decreased by $119.0 million during Fiscal Year 2020. The decrease in the valuation allowance primarily relates to: (i) a decrease of $233.8 million relating to write-offs of attributes utilized by PetSmart, (ii) an increase of $1.5 million relating to changes to the Company’s state blended rate, (iii) an increase of $106.8 million relating to current year activity, and (iv) an increase of $6.5 million relating to miscellaneous adjustments to the Company’s deferred tax assets and liabilities.

The ultimate realization of deferred tax assets depends on the generation of future taxable income during the periods in which those temporary differences are deductible. The Company considers the scheduled reversal of deferred tax liabilities (including the effect of available carryback and carryforward periods) in making this assessment. To fully utilize the net operating loss (“NOL”) and tax credits carryforwards the Company will need to generate sufficient future taxable income in each respective jurisdiction. Due to the Company’s history of losses, it is more likely than not that its deferred tax assets will not be realized as of January 31, 2021. Accordingly, the Company has established a full valuation allowance on its net deferred tax assets. A valuation allowance is recorded when it is more likely than not that some portion of the deferred tax assets will not be realized. To the extent that a valuation allowance has been established and it is subsequently determined that it is more likely than not that the deferred tax assets will be recovered, the valuation allowance will be released.

~~The following summarizes the activity related to valuation allowances on deferred tax assets (in thousands):~~

Fiscal Year
2020 2019 2018
Valuation allowance, as of beginning of period $ 242,974 $ 172,481 $ 115,143
Valuation allowances established 113,286 69,009 57,232
Changes to existing valuation allowances 1,528 1,484 106
Reduction of valuation allowance as a result of deconsolidation (233,776) 0 0
Valuation allowance, as of end of period $ 124,012 $ 242,974 $ 172,481

~~Net Operating Loss and Tax Credit Carryforwards~~

As of January 31, 2021, the Company had federal and state NOL carryforwards of $295.8 million and $522.1 million, respectively, of which $25.1 million expire by 2032. The remaining $792.8 million expire after 2032, with $226.6 million having definitive expiration dates and the remaining $566.2 million with no expiration but can only be used to offset 80% of the Company’s future taxable income. The state NOLs are presented as an apportioned amount. NOLs generated in jurisdictions that were previously filed on a combined basis with PetSmart were reduced by $890.4 million in Fiscal Year 2020 as separate return accounting under ASC 740, ~~Income Taxes,~~ was no longer being applied. Therefore, all NOLs reported as of January 31, 2021 consist of amounts generated in previously consolidated jurisdictions post-tax deconsolidation, and in jurisdictions with separate entity filing since Chewy’s nexus inception date.

As of January 31, 2021, the Company recorded a deferred tax asset of $87.9 million, before any valuation allowance, with respect to federal and state NOL carryforwards. These deferred tax assets expire as follows (in thousands):

2021 $ 36
2025 75
2028 10
2030 444
2032 881
Thereafter 11,605
Indefinite 74,830
Total loss carryforwards $ 87,881

~~The Company participates in various federal and state credit programs which provide credits against current and future tax liabilities.Credits not used in the current year are carried forward to future years.~~

~~As of January 31, 2021, the Company had the following tax credit carryforwards (in thousands):~~

Year of Expiration Research and Development Work Opportunity Total
2022 $ 62 $ 0 $ 62
2023 82 0 82
2039 1,536 0 1,536
2040 2,909 339 3,248
$ 4,589 $ 339 $ 4,928

~~Accounting for Uncertain Tax Positions~~

The benefits of uncertain tax positions (“UTP”) are recorded in the Company’s consolidated financial statements only after establishing a more likely than not probability that the UTP will withstand challenge, if any, from tax authorities.

~~As of January 31, 2021 and February 2, 2020, the Company did 0t have any uncertain tax positions.~~

The Company is currently not involved in any income tax audits. During Fiscal Year 2020, the Company closed a federal income tax examination with the Internal Revenue Service (“IRS”) for the period from March 17, 2016 through December 31, 2016, which represents the stub period after the Company’s conversion to a corporation. The Company may be subject to examination by the IRS and various states for the year ended May 30, 2017 and thereafter.

~~Tax Sharing Agreement~~

Concurrent with the IPO in Fiscal Year 2019, the Company and PetSmart entered into a tax sharing agreement which governs the respective rights, responsibilities, and obligations of the Company and PetSmart with respect to tax matters, including taxes attributable to PetSmart, entitlement to refunds, allocation of tax attributes, preparation of tax returns, certain tax elections, control of tax contests and other tax matters regarding U.S. federal, state, and local income taxes.

During Fiscal Years 2020 and 2019, the Company collected $23.2 million and $17.3 million, respectively, pursuant to the tax sharing agreement, which covers the periods prior to the tax deconsolidation. Though the tax sharing agreement was effectively terminated upon tax deconsolidation, future settlements will occur upon the filing of final tax returns. As of January 31, 2021, the Company had a $30.5 million receivable related to the tax sharing agreement which is expected to be collected during the next fiscal year.

~~10.Net Loss per Share~~

Basic and diluted net loss per share attributable to common stockholders is presented using the two class method required for participating securities. Under the two class method, net loss attributable to common stockholders is determined by allocating undistributed earnings between common stock and participating securities. Undistributed earnings for the periods presented are calculated as net loss less distributed earnings. Undistributed earnings are allocated proportionally to common Class A and Class B stockholders as both classes are entitled to share equally, on a per share basis, in dividends and other distributions.

Basic and diluted net loss per share is calculated by dividing net loss attributable to common stockholders by the weighted-average shares outstanding during the period. The weighted-average shares outstanding during the periods presented reflects the reclassification of the 100 outstanding shares of pre-IPO common stock into 393,000,000 shares of Class B common stock.

For Fiscal Year 2020, Fiscal Year 2019, and Fiscal Year 2018, the Company’s basic and diluted net loss per share attributable to common Class A and Class B stockholders are the same because the Company has generated a net loss to common stockholders and common stock equivalents are excluded from diluted net loss per share as they have an antidilutive impact. For Fiscal Year 2020 and Fiscal Year 2019, the computation of net loss per share attributable to common stockholders does not include 13.7 million and 21.3 million potential common shares, respectively, as the effect of their inclusion would have been antidilutive.

~~11.Certain Relationships and Related Party Transactions~~

The Company’s consolidated financial statements include management fee expenses of $1.3 million allocated to the Company by the Parent for organizational oversight and certain limited corporate functions provided by its sponsors for Fiscal Year 2020, Fiscal Year 2019, and Fiscal Year 2018. Allocated costs are included within selling, general and administrative expenses in the consolidated statements of operations.

From time to time, prior to the completion of the IPO, the Company used funding from or provided funding to the Parent, as needed, in the normal course of business. The Company and PetSmart were parties to an intercompany loan agreement pursuant to which each party made loans from time to time to the other. In connection with the signing of an underwriting agreement pursuant to which the Company received substantially all of the net proceeds from the Company’s sale of shares of Class A common stock as part of the IPO, the loan agreement was terminated without cash repayment of the outstanding loan. The termination of the intercompany loan resulted in a $79.5 million reduction of the Company’s due from Parent balance during Fiscal Year 2019.

~~Since July 2, 2018, certain of the Company’s~~our pharmacy operations ~~have been and continue to be~~are conducted through Chewy Pharmacy KY, LLC (“Chewy KY”), a wholly-owned subsidiary of PetSmart. ~~The Company has~~We have entered into a services agreement with ~~PetSmart~~Chewy KY that provides for the payment of a management fee ~~due~~to us for providing services to Chewy KY. Pursuant to the terms of this agreement, Chewy received $8,561,081 from Chewy KY from the beginning of fiscal year 2022 through the Disclosure Date.

~~PetSmart Guarantees~~

PetSmart previously provided a guarantee of payment with respect to certain equipment and other leases that the Company entered into and served as a guarantor in respect of the Company’s obligations under a credit insurance policy in favor of certain of the Company’s suppliers. As of February 12, 2021, all such guarantees had been released, with the exception of guarantees pertaining to 3 of the Company’s lease agreements.

~~Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure~~

~~Item 9A. Controls and Procedures~~

~~Management’s Evaluation of Disclosure Controls and Procedures~~

We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in the reports that we file or submit under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and that such information is accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate, to allow timely decisions regarding required financial disclosure.

TMA. As of the ~~end~~Disclosure Date, we had approximately $3,845,378 of outstanding payables to PetSmart and Argos Intermediate Holdco I Inc. pursuant to the ~~period covered~~TMA.

~~Management’s Annual Report on Internal Control Over Financial Reporting~~

Our management is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act). Management conducted an assessment of the effectiveness of the Company’s internal control over financial reporting2,827 PRSUs, subject to vesting based on the ~~criteria set forth~~achievement of certain Company performance conditions. Of the RSUs granted in Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework). Management has concluded that its internal control over financial reporting was effective as of January 31, 2021 to provide reasonable assurance regarding the reliability of financial reportingApril 2022, 3,863 RSUs vested on February 1, 2023 and the ~~preparation of financial statements~~remaining 8,561 RSUs are scheduled to vest in accordance with ~~U.S. GAAP. The effectiveness~~a specified vesting schedule, subject to Ms. Malhotra’s continued employment through the applicable vesting date. In March 2023, the Company’s Compensation Committee certified the achievement of ~~our internal control over financial reporting as of January 31, 2021, has been audited by Deloitte & Touche LLP, an independent registered public accounting firm, as stated~~the performance condition for the April 2022 PRSUs, which resulted in ~~their report, which appears in Part II, Item 8 of this Annual Report~~2,121 PRSUs that vest on ~~Form 10-K.~~February 1, 2025, subject to her

~~Changes in Internal Control over Financial Reporting~~


Title of each class	~~Trading Symbol(s)~~	Trading Symbol(s)	Name of each exchange on which registered
Class A Common Stock, par value $0.01 per share	~~CHWY~~	CHWY	New York Stock Exchange


Class		Outstanding as of March ~~23, 2021~~15, 2023
Class A Common Stock, $0.01 par value per share		~~97,923,779~~115,757,139
Class B Common Stock, $0.01 par value per share		~~317,338,356~~311,188,356


		Page
PART III		~~Page~~	1
~~Part I.~~
~~Item 1.~~			~~Business~~		2
~~Item 1A.~~			~~Risk Factors~~		7
~~Item 1B.~~			~~Unresolved Staff Comments~~		32
~~Item 2.~~			~~Properties~~		33
~~Item 3.~~			~~Legal Proceedings~~		33
~~Item 4.~~			~~Mine Safety Disclosures~~		33
			~~Information About Our Executive Officers~~		34

~~Part II.~~
~~Item 5.~~			~~Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities~~		35
~~Item 6.~~			~~Selected Consolidated Financial Data~~		36
~~Item 7.~~			~~Management’s Discussion and Analysis of Financial Condition and Results of Operations~~		37
~~Item 7A~~.			~~Quantitative and Qualitative Disclosures About Market Risk~~		46
~~Item 8.~~			~~Financial Statements and Supplementary Data~~		47
~~Item 9.~~			~~Changes in and Disagreements with Accountants on Accounting and Financial Disclosure~~		70
~~Item 9A.~~			~~Controls and Procedures~~		71
~~Item 9B.~~			~~Other Information~~		73

~~Part III.~~
Item 10.			Directors, Executive Officers and Corporate Governance		73	1
Item 11.	11. Executive Compensation			73	7
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters			73	22
Item 13.	Certain Relationships and Related Transactions, and Director Independence			73	25
Item 14.	Principal ~~Account and~~Accountant Fees and Services				28

PART IV			29
73Item 15. Exhibits and Financial Statement Schedules			29
Item 16. Form 10-K Summary			31

SIGNATURES			32


	January 29, 2023		January 30, 2022
Audit Fees⁽¹⁾	$	2,289,000	$	1,964,000
Audit-Related Fees⁽²⁾		15,000		—
Tax Fees		—		—
All Other Fees		—		—
Total Fees	$	2,304,000	$	1,964,000


					CHEWY, INC.

Date: January 8, 2024	~~March 30, 2021~~	~~By:~~		By:	/s/ ~~Mario Marte~~Da-Wai Hu
			~~Mario Marte~~		Da-Wai Hu
			~~Chief Financial Officer~~


Delaware	90-1020167
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
~~1855 Griffin Road, Suite B-428, Dania Beach, Florida~~		~~33004~~
7700 West Sunrise Boulevard, Plantation, Florida	33322
(Address of principal executive offices)	(Zip Code)


Auditor Name: Deloitte & Touche LLP		Auditor Location: Tempe, Arizona		Auditor Firm ID: 34


	Fiscal Year									% change
(in thousands, except net sales per active customer and percentages)	2020			2019			2018			2020 vs. 2019		2019 vs. 2018
Financial and Operating Data
Net sales	$	7,146,264		$	4,846,743		$	3,532,837		47.4	%	37.2	%
Net loss (1)	$	(92,486)		$	(252,370)		$	(267,890)		63.4	%	5.8	%
Net margin (1)	(1.3)		%	(5.2)		%	(7.6)		%
Adjusted EBITDA(2)	$	85,157		$	(81,025)		$	(228,905)		205.1	%	64.6	%
Adjusted EBITDA margin(2)	1.2		%	(1.7)		%	(6.5)		%
Net cash provided by (used in) operating activities	$	132,755		$	46,581		$	(13,415)		185.0	%	n/m
Free cash flow(2)	$	2,012		$	(2,055)		$	(57,575)		197.9	%	96.4	%
Active customers	19,206			13,459			10,585			42.7	%	27.2	%
Net sales per active customer	$	372		$	360		$	334		3.3	%	7.8	%
Autoship customer sales	$	4,889,485		$	3,362,835		$	2,322,480		45.4	%	44.8	%
Autoship customer sales as a percentage of net sales	68.4		%	69.4		%	65.7		%
n/m - not meaningful
(1) Includes share-based compensation expense, including related taxes, of $129.2 million, $136.2 million, and $14.4 million, for Fiscal Year 2020, Fiscal Year 2019, and Fiscal Year 2018, respectively.
(2) Adjusted EBITDA, adjusted EBITDA margin and free cash flow are non-GAAP financial measures. See “Non-GAAP Financial Measures” below.


($ in thousands, except percentages)	Fiscal Year
Reconciliation of Net Loss to Adjusted EBITDA	2020			2019			2018
Net loss	$	(92,486)		$	(252,370)		$	(267,890)
Add (deduct):
Depreciation and amortization	35,664			30,645			23,210
Share-based compensation expense and related taxes	129,208			136,237			14,351

Interest expense (income), net	2,022			(356)			124
Management fee expense(1)	1,300			1,300			1,300
Transaction related costs	2,369			1,396			—
Other	7,080			2,123			—
Adjusted EBITDA	$	85,157		$	(81,025)		$	(228,905)
Net sales	$	7,146,264		$	4,846,743		$	3,532,837
Net Margin	(1.3)		%	(5.2)		%	(7.6)		%
Adjusted EBITDA margin	1.2		%	(1.7)		%	(6.5)		%
(1) Management fee expense allocated to us by PetSmart for organizational oversight and certain limited corporate functions provided by its sponsors. Although we are not a party to the agreement governing the management fee, this management fee is reflected as an expense in our consolidated financial statements.


($ in thousands)	Fiscal Year
Reconciliation of Net Cash Provided by (Used in) Operating Activities to Free Cash Flow	2020		2019		2018
Net cash provided by (used in) operating activities	$	132,755	$	46,581	$	(13,415)
Deduct:
Capital expenditures	(130,743)		(48,636)		(44,160)
Free Cash Flow	$	2,012	$	(2,055)	$	(57,575)


	Fiscal Year
							% change				% of net sales
($ in thousands)	2020		2019		2018		2020 vs. 2019		2019 vs. 2018		2020		2019		2018
Consolidated Statements of Operations
Net sales	$	7,146,264	$	4,846,743	$	3,532,837	47.4	%	37.2	%	100.0	%	100.0	%	100.0	%
Costs of goods sold	5,325,457		3,702,683		2,818,032		43.8	%	31.4	%	74.5	%	76.4	%	79.8	%
Gross profit	1,820,807		1,144,060		714,805		59.2	%	60.1	%	25.5	%	23.6	%	20.2	%
Operating expenses:
Selling, general and administrative	1,397,969		969,890		589,507		44.1	%	64.5	%	19.6	%	20.0	%	16.7	%
Advertising and marketing	513,302		426,896		393,064		20.2	%	8.6	%	7.2	%	8.8	%	11.1	%
Total operating expenses	1,911,271		1,396,786		982,571		36.8	%	42.2	%	26.7	%	28.8	%	27.8	%
Loss from operations	(90,464)		(252,726)		(267,766)		64.2	%	5.6	%	(1.3)	%	(5.2)	%	(7.6)	%
Interest (expense) income, net	(2,022)		356		(124)		n/m		n/m		—	%	—	%	—	%
Loss before income tax provision	(92,486)		(252,370)		(267,890)		63.4	%	5.8	%	(1.3)	%	(5.2)	%	(7.6)	%
Income tax provision	—		—		—		—	%	—	%	—	%	—	%	—	%
Net loss	$	(92,486)	$	(252,370)	$	(267,890)	63.4	%	5.8	%	(1.3)	%	(5.2)	%	(7.6)	%
n/m - not meaningful


	As of
	January 31, 2021		February 2, 2020
Assets
Current assets:
Cash and cash equivalents	$	563,345	$	212,088
Accounts receivable	100,699		80,478
Inventories	513,304		317,808
Due from Parent, net	21,869		626
Prepaid expenses and other current assets	27,561		18,789
Total current assets	1,226,778		629,789
Property and equipment, net	210,017		118,731
Operating lease right-of-use assets	297,213		179,052
Other non-current assets	6,902		4,749
Total assets	$	1,740,910	$	932,321
Liabilities and stockholders’ deficit
Current liabilities:
Trade accounts payable	$	778,365	$	683,049
Accrued expenses and other current liabilities	602,497		417,489
Total current liabilities	1,380,862		1,100,538
Operating lease liabilities	328,231		200,439
Other long-term liabilities	33,821		35,318
Total liabilities	1,742,914		1,336,295
Commitments and contingencies (Note 4)	0		0
Stockholders’ deficit:
Preferred stock, $0.01 par value per share, 5,000,000 shares authorized, 0 shares issued and outstanding as of January 31, 2021 and February 2, 2020	0		0
Class A common stock, $0.01 par value per share, 1,500,000,000 shares authorized, 97,708,518 and 66,445,422 shares issued and outstanding as of January 31, 2021 and February 2, 2020, respectively	977		665
Class B common stock, $0.01 par value per share, 395,000,000 shares authorized, 317,338,356 and 334,922,454 shares issued and outstanding as of January 31, 2021 and February 2, 2020, respectively	3,173		3,349
Additional paid-in capital	1,930,804		1,436,484
Accumulated deficit	(1,936,958)		(1,844,472)
Total stockholders’ deficit	(2,004)		(403,974)
Total liabilities and stockholders’ deficit	$	1,740,910	$	932,321


	Class A and Class B Common Stock			Additional Paid-in Capital	Accumulated Deficit	Total Stockholders’ Deficit
		Shares	Amount
Balance as of January 28, 2018		0	0				$	1,240,509	$	(1,324,212)	$	(83,703)
Share-based compensation expense		—	—				14,351		—		14,351
Contribution from Parent		—	—				1,300		—		1,300
Net loss		—	—				—		(267,890)		(267,890)
Balance as of February 3, 2019		0	0				1,256,160		(1,592,102)		(335,942)
Issuance of Class A common stock upon initial public offering, net of underwriting discounts, commissions and offering costs		5,600	56				110,293		—		110,349
Change in capital structure		393,000	3,930				(3,930)		—		0
Distribution to Parent		83	1				(1)		—		0
Share-based compensation expense		—	—				134,926		—		134,926
Vesting of share-based compensation awards		2,685	27				(251)		—		(224)
Contribution from Parent		—	—				1,300		—		1,300
Tax sharing agreement with Parent		—	—				17,497		—		17,497
Termination of loan from Parent		—	—				(79,510)		—		(79,510)
Net loss		—	—				—		(252,370)		(252,370)
Balance as of February 2, 2020		401,368	4,014				1,436,484		(1,844,472)		(403,974)
Issuance of Class A common stock, net of offering costs		5,865	59				318,329		—		318,388
Share-based compensation expense		—	—				121,265		—		121,265
Vesting of share-based compensation awards		7,533	74				(74)		—		0
Distribution to Parent		280	3				(3)		—		0
Contribution from Parent		—	—				1,300		—		1,300
Tax sharing agreement with Parent		—	—				53,503		—		53,503
Net loss		—	—				—		(92,486)		(92,486)
Balance as of January 31, 2021		415,046	4,150				$	1,930,804	$	(1,936,958)	$	(2,004)


	As of
	January 31, 2021		February 2, 2020
Outbound fulfillment	$	310,700	$	182,589
Advertising and marketing	85,835		96,836
Payroll liabilities	72,467		30,791
Accrued expenses and other	133,495		107,273
Total accrued expenses and other current liabilities	$	602,497	$	417,489


		As of
Leases	Balance Sheet Classification	January 31, 2021		February 2, 2020
Assets
Operating	Operating lease right-of-use assets	$	297,213	$	179,052
Total operating lease assets		$	297,213	$	179,052

Liabilities
Current
Operating	Accrued expenses and other current liabilities	$	19,142	$	15,491
Non-current
Operating	Operating lease liabilities	328,231		200,439
Total operating lease liabilities		$	347,373	$	215,930


	Operating Leases
2021	$	42,983
2022	51,005
2023	48,003
2024	44,135
2025	43,856
Thereafter	372,801
Total lease payments	602,783
Less: interest	255,410
Present value of lease liabilities	$	347,373


	Number of PRSUs	Weighted Average Grant Date Fair Value




Outstanding as of February 2, 2020	21,284	$	36.20
Granted	805	$	32.30
Vested	(7,823)	$	36.42
Forfeited	(1,255)	$	34.94
Unvested and outstanding as of January 31, 2021	13,011	$	35.95


	Number of RSUs	Weighted Average Grant Date Fair Value
Outstanding as of February 2, 2020	0	$	0
Granted	774	$	48.28

Forfeited	(61)	$	41.81
Unvested and outstanding as of January 31, 2021	713	$	48.58


2021	$	36
2025	75
2028	10
2030	444
2032	881
Thereafter	11,605
Indefinite	74,830
Total loss carryforwards	$	87,881


Year of Expiration	Research and Development		Work Opportunity		Total
2022	$	62	$	0	$	62
2023	82		0		82
2039	1,536		0		1,536
2040	2,909		339		3,248
	$	4,589	$	339	$	4,928

Sumit Singh

Chief Executive Officer

Mario Marte⁽²⁾

Chief Financial Officer

Satish Mehta

Chief Technology Officer

Susan Helfrick⁽³⁾

General Counsel & Secretary