Document and Entity Information
Document and Entity Information - shares | 3 Months Ended | |
May 05, 2019 | Jul. 11, 2019 | |
Entity Information [Line Items] | ||
Document Type | 10-Q | |
Amendment Flag | false | |
Period End Date | May 5, 2019 | |
Fiscal Period Focus | Q1 | |
Fiscal Year Focus | 2019 | |
Entity Registrant Name | CHEWY, INC. | |
Entity Central Index Key | 0001766502 | |
Current Fiscal Year End Date | --02-02 | |
Entity Filer Category | Non-accelerated Filer | |
Emerging Growth Company | false | |
Entity Small Business | false | |
Entity Shell Company | false | |
Entity Current Reporting Status | No | |
Class A | ||
Entity Information [Line Items] | ||
Entity common Stock, Shares Outstanding | 53,475,000 | |
Class B | ||
Entity Information [Line Items] | ||
Entity common Stock, Shares Outstanding | 345,125,000 |
CONDENSED CONSOLIDATED BALANCE
CONDENSED CONSOLIDATED BALANCE SHEETS - USD ($) $ in Thousands | May 05, 2019 | Feb. 03, 2019 |
Current assets: | ||
Cash and cash equivalents | $ 29,298 | $ 88,331 |
Accounts receivable | 58,984 | 48,738 |
Inventories | 254,140 | 220,855 |
Due from Parent, net | 74,655 | 78,712 |
Prepaid expenses and other current assets | 13,048 | 11,949 |
Total current assets | 430,125 | 448,585 |
Property and equipment, net | 93,544 | 91,691 |
Operating lease right-of-use assets | 157,139 | |
Other non-current assets | 1,505 | 1,346 |
Total assets | 682,313 | 541,622 |
Current liabilities: | ||
Trade accounts payable | 519,597 | 502,880 |
Accrued expenses and other current liabilities | 309,054 | 311,150 |
Total current liabilities | 828,651 | 814,030 |
Operating lease liabilities | 177,636 | |
Other long-term liabilities | 33,967 | 63,534 |
Total liabilities | 1,040,254 | 877,564 |
Commitments and contingencies (Note 4) | ||
Stockholders’ deficit: | ||
Voting common stock, $0.01 par value per share, 1,000 shares authorized, 100 shares issued and outstanding as of May 5, 2019 and February 3, 2019 | 0 | 0 |
Additional paid-in capital | 1,263,715 | 1,256,160 |
Accumulated deficit | (1,621,656) | (1,592,102) |
Total stockholders’ deficit | (357,941) | (335,942) |
Total liabilities and stockholders’ deficit | $ 682,313 | $ 541,622 |
CONDENSED CONSOLIDATED BALANC_2
CONDENSED CONSOLIDATED BALANCE SHEETS (Parenthetical) - $ / shares | May 05, 2019 | Feb. 03, 2019 |
Statement of Financial Position [Abstract] | ||
Voting common stock par value (in dollars per share) | $ 0.01 | $ 0.01 |
Voting common stock authorized (in shares) | 1,000 | 1,000 |
Voting common stock issued (in shares) | 100 | 100 |
Voting common stock outstanding (in shares) | 100 | 100 |
CONDENSED CONSOLIDATED STATEMEN
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS UNAUDITED - USD ($) shares in Thousands, $ in Thousands | 3 Months Ended | |
May 05, 2019 | Apr. 29, 2018 | |
Income Statement [Abstract] | ||
Net sales | $ 1,108,872 | $ 763,462 |
Cost of goods sold | 854,982 | 613,474 |
Gross profit | 253,890 | 149,988 |
Operating expenses: | ||
Selling, general and administrative | 181,897 | 123,152 |
Advertising and marketing | 102,263 | 86,661 |
Total operating expenses | 284,160 | 209,813 |
Loss from operations | (30,270) | (59,825) |
Interest income, net | 716 | 10 |
Loss before income tax provision | (29,554) | (59,815) |
Income tax provision | 0 | 0 |
Net loss | $ (29,554) | $ (59,815) |
Net loss per share attributable to common stockholders, basic and diluted (in dollars per share) | $ (0.08) | $ (0.15) |
Weighted average common shares used in computing net loss per share attributable to common stockholders, basic and diluted (in shares) | 393,000 | 393,000 |
CONDENSED CONSOLIDATED STATEM_2
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' DEFICIT UNAUDITED - USD ($) $ in Thousands | Total | Common Stock | Additional Paid-in Capital | Accumulated Deficit |
Beginning balance (in shares) at Jan. 28, 2018 | 0 | |||
Beginning balance at Jan. 28, 2018 | $ (83,703) | $ 0 | $ 1,240,509 | $ (1,324,212) |
Increase (Decrease) in Stockholders' Equity [Roll Forward] | ||||
Share-based compensation expense | 3,273 | 3,273 | ||
Contribution from Parent | 325 | 325 | ||
Net loss | (59,815) | (59,815) | ||
Ending balance (in shares) at Apr. 29, 2018 | 0 | |||
Ending balance at Apr. 29, 2018 | $ (139,920) | $ 0 | 1,244,107 | (1,384,027) |
Beginning balance (in shares) at Feb. 03, 2019 | 100 | 0 | ||
Beginning balance at Feb. 03, 2019 | $ (335,942) | $ 0 | 1,256,160 | (1,592,102) |
Increase (Decrease) in Stockholders' Equity [Roll Forward] | ||||
Share-based compensation expense | 7,230 | 7,230 | ||
Contribution from Parent | 325 | 325 | ||
Net loss | $ (29,554) | (29,554) | ||
Ending balance (in shares) at May. 05, 2019 | 100 | 0 | ||
Ending balance at May. 05, 2019 | $ (357,941) | $ 0 | $ 1,263,715 | $ (1,621,656) |
CONDENSED CONSOLIDATED STATEM_3
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS UNAUDITED - USD ($) $ in Thousands | 3 Months Ended | |
May 05, 2019 | Apr. 29, 2018 | |
Cash flows from operating activities | ||
Net loss | $ (29,554) | $ (59,815) |
Adjustments to reconcile net loss to net cash used in operating activities: | ||
Depreciation and amortization | 6,949 | 4,718 |
Share-based compensation expense | 7,230 | 3,273 |
Non-cash lease expense | 4,012 | |
Amortization of deferred rent | 2,200 | |
Other | 1,820 | 7 |
Net change in operating assets and liabilities: | ||
Accounts receivable | (10,246) | 4,255 |
Inventories | (33,285) | (32,543) |
Prepaid expenses and other current assets | (3,090) | 828 |
Other non-current assets | (159) | 487 |
Trade accounts payable | 16,716 | 34,317 |
Accrued expenses and other current liabilities | (11,190) | (4,758) |
Operating lease liabilities | (2,121) | |
Other long-term liabilities | 1,777 | 1,758 |
Net cash used in operating activities | (51,141) | (45,273) |
Cash flows from investing activities | ||
Capital expenditures | (12,222) | (13,461) |
Cash advances provided to Parent | (11,493) | (115) |
Cash reimbursements of advances provided to Parent | 15,550 | 10,090 |
Net cash used in investing activities | (8,165) | (3,486) |
Cash flows from financing activities | ||
Contribution from Parent | 325 | 325 |
Principal repayments of finance lease obligations | (52) | |
Net cash provided by financing activities | 273 | 325 |
Net decrease in cash and cash equivalents | (59,033) | (48,434) |
Cash and cash equivalents, as of beginning of period | 88,331 | 68,767 |
Cash and cash equivalents, as of end of period | 29,298 | 20,333 |
Supplemental disclosures of non-cash investing and financing activities: | ||
Capital expenditures included in accrued expenses and other current liabilities | 2,041 | 6,589 |
Leasehold improvements paid by tenant allowances | 758 | $ 110 |
Assets acquired in exchange for new operating lease liabilities | $ 165 |
Description of Business and Bas
Description of Business and Basis of Presentation | 3 Months Ended |
May 05, 2019 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Description of Business and Basis of Presentation | Description of Business and Basis of Presentation Description of Business Chewy, Inc. 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, a large selection of high-quality pet food, treats and supplies, price, convenience (including Chewy’s Autoship subscription program), fast shipping, and hassle-free returns. PetSmart Acquisition On May 31, 2017, the Company was acquired by PetSmart, Inc. (“PetSmart” or the “Parent”), a leading specialty provider of products, services and solutions for the lifetime needs of pets. This change-in-control event is referred to as the “PetSmart Acquisition”. 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 (collectively, the “Sponsors”), and controlled by affiliates of BC Partners. Initial Public Offering On June 18, 2019 , the Company closed its initial public offering (“IPO”), in which it issued and sold 5.6 million shares of its Class A common stock. The price at IPO was $22.00 per share. The Company received net proceeds of approximately $111.5 million from the IPO after deducting underwriting discounts and commissions of $6.2 million and offering expenses. 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 one-to-one basis. As of June 18, 2019 , 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. Basis of Presentation The accompanying unaudited condensed 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. The unaudited condensed consolidated financial statements and notes thereto of Chewy, Inc. have been prepared in accordance with the rules and regulations of the Securities and Exchange Commission (the “SEC”) for interim financial reporting and, therefore, omit or condense certain footnotes and other information normally included in financial statements 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. In the opinion of management, all adjustments necessary for a fair statement of the financial information, which are of a normal and recurring nature, have been made for the interim periods reported. Results of operations for the quarterly period ended May 5, 2019 are not necessarily indicative of the results for the entire fiscal year. The unaudited condensed consolidated financial statements and notes thereto included in this Quarterly Report on Form 10-Q for the quarterly period ended May 5, 2019 (“10-Q Report”) should be read in conjunction with the audited consolidated financial statements and notes thereto included in the Company’s final prospectus filed with the SEC pursuant to Rule 424(b) under the Securities Act of 1933, as amended, on June 17, 2019 (the “Prospectus”). Fiscal Year 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. Each fiscal year generally consists of four 13-week fiscal quarters, with each fiscal quarter ending on the Sunday that is closest to the last day of the last month of the quarter. |
Summary of Significant Accounti
Summary of Significant Accounting Policies | 3 Months Ended |
May 05, 2019 | |
Accounting Policies [Abstract] | |
Summary of Significant Accounting Policies | Summary of Significant Accounting Policies Other than policies noted within Recent Accounting Pronouncements below, there have been no significant changes from the significant accounting policies disclosed in Note 2 of the “Notes to Consolidated Financial Statements” included in the Prospectus. 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 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. Recent Accounting Pronouncements Recently Adopted Accounting Pronouncements ASU 2016-02, Leases. In February 2016, the FASB issued this Accounting Standards Update (“ASU”) to provide a comprehensive lease accounting model that requires lessees to recognize lease liabilities and corresponding right-of-use assets for most leases. The new guidance also changes the definition of a lease and requires enhanced disclosures of pertinent quantitative and qualitative information about an entity’s leasing activities. The FASB subsequently issued ASU 2018-10 allowing entities to initially apply ASU 2016-02 at the adoption date and recognize a cumulative effect adjustment to the opening balance of retained earnings in the period of adoption. These ASUs became effective at the beginning of the Company’s 2019 fiscal year. The Company adopted this ASU by applying the new guidance to new and existing leases effective February 4, 2019, with no restatement of comparative periods. The Company elected the package of practical expedients, which permitted the Company to not reassess under the new standard its prior conclusions about lease identification, lease classification and initial direct costs. The Company also made an accounting policy election to not recognize right-of-use assets and lease liabilities arising from short-term leases on its condensed consolidated balance sheets. The adoption of this ASU did not result in a cumulative effect adjustment to accumulated deficit. Upon adoption, the Company recognized operating lease right-of-use assets of $162.8 million and operating lease liabilities of $193.6 million . The adoption of this new guidance did not have a material net impact on the Company’s condensed consolidated statements of operations or condensed consolidated statements of cash flows. 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 condensed 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 condensed consolidated balance sheets. Payments for short-term leases are recognized in the condensed consolidated statements of operations on a straight-line basis over the lease term. ASU 2018-07, Stock Compensation; Improvements to Nonemployee Share-Based Payment Accounting . In June 2018, the FASB issued this ASU to expand the scope of Topic 718, Compensation-Stock Compensation to include share-based payment awards to be issued to non-employees in exchange for acquiring goods and services. The ASU aligned the accounting for awards issued to non-employees to be similar to employee awards. This update became effective at the beginning of the Company’s 2019 fiscal year. The adoption of this ASU did not have a material impact on the Company’s condensed consolidated financial statements and disclosures. Recently Issued 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 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 is effective at the beginning of the Company’s 2020 fiscal year. The Company does not believe the adoption of this new guidance will have a material impact on its consolidated financial statements and disclosures. |
Accrued Expenses and Other Curr
Accrued Expenses and Other Current Liabilities | 3 Months Ended |
May 05, 2019 | |
Payables and Accruals [Abstract] | |
Accrued Expenses And Other Current Liabilities | Accrued Expenses and Other Current Liabilities The following table presents the components of accrued expenses and other current liabilities (in thousands): As of May 5, 2019 February 3, 2019 Outbound fulfillment $ 143,620 $ 147,610 Advertising and marketing 68,006 85,421 Accrued expenses and other 97,428 78,119 Total accrued expenses and other current liabilities $ 309,054 $ 311,150 |
Commitments and Contingencies
Commitments and Contingencies | 3 Months Ended |
May 05, 2019 | |
Commitments and Contingencies Disclosure [Abstract] | |
Commitments and Contingencies | Commitments and Contingencies As of May 5, 2019 , there were no material changes to the Company’s advertising and services purchase commitments and legal matters disclosed in Note 5 of the “Notes to Consolidated Financial Statements” included in the Prospectus. |
Debt
Debt | 3 Months Ended |
May 05, 2019 | |
Debt Disclosure [Abstract] | |
Debt | Debt Interest Income and Expense The following table provides information about the Company’s interest income (expense), net (in thousands): 13 Weeks Ended May 5, 2019 April 29, 2018 Interest income $ 720 $ 10 Interest expense (4 ) — $ 716 $ 10 ABL Credit Facility On June 18, 2019 , the Company entered into a new 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 a pay 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. |
Leases
Leases | 3 Months Ended |
May 05, 2019 | |
Leases [Abstract] | |
Leases | Leases 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 three additional five -year terms. Fulfillment and customer service centers and corporate office leases, including exercised renewal options, expire at various dates through 2031. 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 2024. The Company’s finance leases as of May 5, 2019 were not material. The table below presents the operating lease-related assets and liabilities recorded on the condensed consolidated balance sheets (in thousands): Leases Balance Sheet Classification As of May 5, 2019 Assets Operating Operating lease right-of-use assets $ 157,139 Total operating lease assets $ 157,139 Liabilities Current Operating Accrued expenses and other current liabilities $ 13,310 Non-current Operating Operating lease liabilities 177,636 Total operating lease liabilities $ 190,946 Lease expense primarily related to operating lease costs. Lease expense for the thirteen weeks ended May 5, 2019 was $11.0 million , of which short-term and variable lease payments were $2.2 million , and were included within selling, general and administrative expenses in the condensed consolidated statements of operations. As of May 5, 2019 , the weighted-average remaining lease term and weighted-average discount rate for operating leases was 11.3 years and 11.8% , respectively. Operating cash flows related to cash paid for operating leases were approximately $8.3 million for the thirteen weeks ended May 5, 2019 . The table below presents the maturity of lease liabilities as of May 5, 2019 (in thousands): Operating Leases Remainder of 2019 $ 22,569 2020 35,946 2021 33,555 2022 31,248 2023 26,695 Thereafter 215,409 Total lease payments 365,422 Less: interest 174,476 Present value of lease liabilities $ 190,946 The table above includes all locations for which the Company had the right to control the use of the property. In addition, as of May 5, 2019 the Company had executed lease agreements which had not yet commenced with total future lease payments of $111.1 million . The weighted-average lease term for these leases is 16.1 years . |
Share-Based Compensation
Share-Based Compensation | 3 Months Ended |
May 05, 2019 | |
Share-based Payment Arrangement [Abstract] | |
Share-Based Compensation | Share-Based Compensation Citrus Profits Interest Plan Subsequent to the PetSmart Acquisition, the Company’s share-based compensation included profits interests units granted by Citrus Intermediate Holdings L.P. (the “Citrus Partnership”), a newly established 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 recognizes share-based compensation as equity contributions from the Citrus Partnership in its condensed consolidated financial statements for awards granted under the Citrus Profits Interest Plan as it relates to grantees’ services as employees of the Company. During the thirteen weeks ended May 5, 2019 and April 29, 2018 , the Company recognized share-based compensation expense of $7.2 million and $3.3 million , respectively, in connection with awards granted under the Citrus Profits Interest Plan. Share-based compensation expense is included within selling, general and administrative expenses in the condensed consolidated statements of operations. 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. The 2019 Plan provides for the grant of stock options, including incentive stock options (“ISOs”), non-qualified stock options (“NSOs”), restricted stock, dividend equivalents, stock payments, restricted stock units (“RSUs”), performance shares, other incentive awards, SARs, 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. In connection with the consummation of the IPO, the Company granted the following RSUs under the 2019 Plan: • 2,711,689 RSUs, which were fully vested upon consummation of the IPO, • 362,629 RSUs, which will vest within one year of consummation of the IPO, and • 21,693,634 RSUs, which will vest based on time-vesting conditions and share price hurdles. There are 7,096,913 additional shares of Class A common stock reserved for future issuance under the 2019 Plan. |
Income Taxes
Income Taxes | 3 Months Ended |
May 05, 2019 | |
Income Tax Disclosure [Abstract] | |
Income Taxes | Income Taxes Subsequent to the PetSmart Acquisition, the Company’s losses were included with PetSmart’s consolidated U.S. federal and state income tax returns. Income taxes as presented in the Company’s condensed consolidated financial statements have been prepared on the separate return method as if the Company were a taxpayer separate from PetSmart. The Company did not have a current or deferred provision for income taxes for any taxing jurisdiction during the thirteen weeks ended May 5, 2019 and April 29, 2018 . Concurrent with the IPO, 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, local, and foreign income taxes. |
Net Loss per Share
Net Loss per Share | 3 Months Ended |
May 05, 2019 | |
Earnings Per Share [Abstract] | |
Net Loss per Share | 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. 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 period reflects the reclassification of the 100 outstanding shares of common stock into 393,000,000 shares of Class B common stock. There were no shares of Class A common stock outstanding for the thirteen weeks ended May 5, 2019 or April 29, 2018 . For the thirteen weeks ended May 5, 2019 and April 29, 2018 , the Company’s basic and diluted net loss per share attributable to common 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. The following table sets forth basic and diluted net loss per share attributable to common stockholders for the periods presented (in thousands, except per share data): 13 Weeks Ended May 5, 2019 April 29, 2018 Common stockholders Numerator: Net loss $ (29,554 ) $ (59,815 ) Net loss attributable to common stockholders $ (29,554 ) $ (59,815 ) Denominator: Weighted average shares used in computing net loss per share attributable to common stockholders, basic and diluted 393,000 393,000 Net loss per share attributable to common stockholders, basic and diluted $ (0.08 ) $ (0.15 ) |
Certain Relationships and Relat
Certain Relationships and Related Party Transactions | 3 Months Ended |
May 05, 2019 | |
Related Party Transactions [Abstract] | |
Certain Relationships and Related Party Transactions | Certain Relationships and Related Party Transactions The Company’s condensed consolidated financial statements include management fee expenses of $0.3 million allocated to the Company by the Sponsors and the Parent for organizational oversight and certain limited corporate functions for the thirteen weeks ended May 5, 2019 and April 29, 2018 , respectively. Allocated costs are included within selling, general and administrative expenses in the condensed 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. As of May 5, 2019 , PetSmart owed the Company $74.7 million under the agreement. 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. Certain of the Company’s pharmacy operations are currently, and have been since launch on July 2, 2018, conducted through a wholly-owned subsidiary of PetSmart. The Company has entered into a services agreement with PetSmart that provides for the payment of a management fee due from PetSmart with respect to this arrangement. The Company recognized $10.5 million within net sales in the condensed consolidated statement of operations for the services provided during the thirteen weeks ended May 5, 2019 . The services agreement will remain in place for so long as the Company conducts any pharmacy operations through a PetSmart subsidiary. In connection with the IPO, the Company was released from its obligations under the Parent’s asset-backed revolving credit facility in accordance with its terms. PetSmart Guarantees PetSmart currently provides a guarantee of payment with respect to certain equipment and other leases that the Company has entered into and serves as a guarantor in respect of the Company’s obligations under a credit insurance policy in favor of certain of the Company’s current or future suppliers. The Company has historically not paid PetSmart for any of these guarantees. |
Subsequent Events
Subsequent Events | 3 Months Ended |
May 05, 2019 | |
Subsequent Events [Abstract] | |
Subsequent Events | Subsequent Events On June 13, 2019, the Company’s 2019 Omnibus Incentive Plan became effective. See Note 7 for additional information. On June 18, 2019 , the Company completed its IPO. See Note 1 for additional information. On June 18, 2019 , the Company entered into a new five -year senior secured asset-backed credit facility. See Note 5 for additional information. |
Summary of Significant Accoun_2
Summary of Significant Accounting Policies - (Policies) | 3 Months Ended |
May 05, 2019 | |
Accounting Policies [Abstract] | |
Basis of Presentation | Basis of Presentation The accompanying unaudited condensed 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. The unaudited condensed consolidated financial statements and notes thereto of Chewy, Inc. have been prepared in accordance with the rules and regulations of the Securities and Exchange Commission (the “SEC”) for interim financial reporting and, therefore, omit or condense certain footnotes and other information normally included in financial statements 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. In the opinion of management, all adjustments necessary for a fair statement of the financial information, which are of a normal and recurring nature, have been made for the interim periods reported. Results of operations for the quarterly period ended May 5, 2019 are not necessarily indicative of the results for the entire fiscal year. The unaudited condensed consolidated financial statements and notes thereto included in this Quarterly Report on Form 10-Q for the quarterly period ended May 5, 2019 (“10-Q Report”) should be read in conjunction with the audited consolidated financial statements and notes thereto included in the Company’s final prospectus filed with the SEC pursuant to Rule 424(b) under the Securities Act of 1933, as amended, on June 17, 2019 (the “Prospectus”). Fiscal Year 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. Each fiscal year generally consists of four 13-week fiscal quarters, with each fiscal quarter ending on the Sunday that is closest to the last day of the last month of the quarter. |
Use of Estimates | 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 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. |
Recent Accounting Pronouncements | Recent Accounting Pronouncements Recently Adopted Accounting Pronouncements ASU 2016-02, Leases. In February 2016, the FASB issued this Accounting Standards Update (“ASU”) to provide a comprehensive lease accounting model that requires lessees to recognize lease liabilities and corresponding right-of-use assets for most leases. The new guidance also changes the definition of a lease and requires enhanced disclosures of pertinent quantitative and qualitative information about an entity’s leasing activities. The FASB subsequently issued ASU 2018-10 allowing entities to initially apply ASU 2016-02 at the adoption date and recognize a cumulative effect adjustment to the opening balance of retained earnings in the period of adoption. These ASUs became effective at the beginning of the Company’s 2019 fiscal year. The Company adopted this ASU by applying the new guidance to new and existing leases effective February 4, 2019, with no restatement of comparative periods. The Company elected the package of practical expedients, which permitted the Company to not reassess under the new standard its prior conclusions about lease identification, lease classification and initial direct costs. The Company also made an accounting policy election to not recognize right-of-use assets and lease liabilities arising from short-term leases on its condensed consolidated balance sheets. The adoption of this ASU did not result in a cumulative effect adjustment to accumulated deficit. Upon adoption, the Company recognized operating lease right-of-use assets of $162.8 million and operating lease liabilities of $193.6 million . The adoption of this new guidance did not have a material net impact on the Company’s condensed consolidated statements of operations or condensed consolidated statements of cash flows. 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 condensed 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 condensed consolidated balance sheets. Payments for short-term leases are recognized in the condensed consolidated statements of operations on a straight-line basis over the lease term. ASU 2018-07, Stock Compensation; Improvements to Nonemployee Share-Based Payment Accounting . In June 2018, the FASB issued this ASU to expand the scope of Topic 718, Compensation-Stock Compensation to include share-based payment awards to be issued to non-employees in exchange for acquiring goods and services. The ASU aligned the accounting for awards issued to non-employees to be similar to employee awards. This update became effective at the beginning of the Company’s 2019 fiscal year. The adoption of this ASU did not have a material impact on the Company’s condensed consolidated financial statements and disclosures. Recently Issued 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 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 is effective at the beginning of the Company’s 2020 fiscal year. The Company does not believe the adoption of this new guidance will have a material impact on its consolidated financial statements and disclosures. |
Accrued Expenses and Other Cu_2
Accrued Expenses and Other Current Liabilities - (Tables) | 3 Months Ended |
May 05, 2019 | |
Payables and Accruals [Abstract] | |
Schedule of Accrued Liabilities | The following table presents the components of accrued expenses and other current liabilities (in thousands): As of May 5, 2019 February 3, 2019 Outbound fulfillment $ 143,620 $ 147,610 Advertising and marketing 68,006 85,421 Accrued expenses and other 97,428 78,119 Total accrued expenses and other current liabilities $ 309,054 $ 311,150 |
Debt - (Tables)
Debt - (Tables) | 3 Months Ended |
May 05, 2019 | |
Debt Disclosure [Abstract] | |
Interest Income and Interest Expense | The following table provides information about the Company’s interest income (expense), net (in thousands): 13 Weeks Ended May 5, 2019 April 29, 2018 Interest income $ 720 $ 10 Interest expense (4 ) — $ 716 $ 10 |
Leases - (Tables)
Leases - (Tables) | 3 Months Ended |
May 05, 2019 | |
Leases [Abstract] | |
Assets and Liabilities, Lessee | The table below presents the operating lease-related assets and liabilities recorded on the condensed consolidated balance sheets (in thousands): Leases Balance Sheet Classification As of May 5, 2019 Assets Operating Operating lease right-of-use assets $ 157,139 Total operating lease assets $ 157,139 Liabilities Current Operating Accrued expenses and other current liabilities $ 13,310 Non-current Operating Operating lease liabilities 177,636 Total operating lease liabilities $ 190,946 |
Lessee, Operating Lease, Liability, Maturity | The table below presents the maturity of lease liabilities as of May 5, 2019 (in thousands): Operating Leases Remainder of 2019 $ 22,569 2020 35,946 2021 33,555 2022 31,248 2023 26,695 Thereafter 215,409 Total lease payments 365,422 Less: interest 174,476 Present value of lease liabilities $ 190,946 |
Net Loss per Share - (Tables)
Net Loss per Share - (Tables) | 3 Months Ended |
May 05, 2019 | |
Earnings Per Share [Abstract] | |
Schedule of Earnings Per Share, Basic and Diluted | The following table sets forth basic and diluted net loss per share attributable to common stockholders for the periods presented (in thousands, except per share data): 13 Weeks Ended May 5, 2019 April 29, 2018 Common stockholders Numerator: Net loss $ (29,554 ) $ (59,815 ) Net loss attributable to common stockholders $ (29,554 ) $ (59,815 ) Denominator: Weighted average shares used in computing net loss per share attributable to common stockholders, basic and diluted 393,000 393,000 Net loss per share attributable to common stockholders, basic and diluted $ (0.08 ) $ (0.15 ) |
Description of Business and B_2
Description of Business and Basis of Presentation - Narrative (Details) - USD ($) $ / shares in Units, $ in Millions | Jun. 18, 2019 | Jun. 13, 2019 | May 05, 2019 | Feb. 03, 2019 | Apr. 29, 2018 |
Subsidiary, Sale of Stock [Line Items] | |||||
Common stock outstanding (in shares) | 100 | 100 | |||
Subsequent Event | |||||
Subsidiary, Sale of Stock [Line Items] | |||||
Underwriting discounts and commissions | $ 6.2 | ||||
Subsequent Event | IPO | |||||
Subsidiary, Sale of Stock [Line Items] | |||||
Sale of stock (in dollars per share) | $ 22 | ||||
Sale of stock | $ 111.5 | ||||
Class B | Subsequent Event | |||||
Subsidiary, Sale of Stock [Line Items] | |||||
Common stock outstanding (in shares) | 345,125,000 | ||||
Conversion of stock (in shares) | (47,875,000) | 393,000,000 | |||
Class A | |||||
Subsidiary, Sale of Stock [Line Items] | |||||
Common stock outstanding (in shares) | 0 | 0 | |||
Class A | Subsequent Event | |||||
Subsidiary, Sale of Stock [Line Items] | |||||
Common stock outstanding (in shares) | 53,475,000 | ||||
Conversion of stock (in shares) | 47,875,000 | ||||
Class A | Subsequent Event | IPO | |||||
Subsidiary, Sale of Stock [Line Items] | |||||
Sale of stock (in shares) | 5,600,000 |
Summary of Significant Accoun_3
Summary of Significant Accounting Policies - Narrative (Details) - USD ($) $ in Thousands | May 05, 2019 | Feb. 04, 2019 |
New Accounting Pronouncements or Change in Accounting Principle [Line Items] | ||
Operating lease right-of-use assets | $ 157,139 | |
Operating lease liabilities | $ 190,946 | |
Accounting Standards Update 2016-02 | ||
New Accounting Pronouncements or Change in Accounting Principle [Line Items] | ||
Operating lease right-of-use assets | $ 162,800 | |
Operating lease liabilities | $ 193,600 |
Accrued Expenses and Other Cu_3
Accrued Expenses and Other Current Liabilities - Schedule of Accrued Liabilities (Details) - USD ($) $ in Thousands | May 05, 2019 | Feb. 03, 2019 |
Payables and Accruals [Abstract] | ||
Outbound fulfillment | $ 143,620 | $ 147,610 |
Advertising and marketing | 68,006 | 85,421 |
Accrued expenses and other | 97,428 | 78,119 |
Total accrued expenses and other current liabilities | $ 309,054 | $ 311,150 |
Debt - Schedule of Interest In
Debt - Schedule of Interest Income and Expense (Details) - USD ($) $ in Thousands | 3 Months Ended | |
May 05, 2019 | Apr. 29, 2018 | |
Debt Disclosure [Abstract] | ||
Interest income | $ 720 | $ 10 |
Interest expense | (4) | 0 |
Interest income, net | $ 716 | $ 10 |
Debt - Narrative (Details)
Debt - Narrative (Details) - Line of Credit - Subsequent Event - Revolving Credit Facility | Jun. 18, 2019USD ($) |
Line of Credit Facility [Line Items] | |
Debt instrument term | 5 years |
Line of credit facility principal | $ 300,000,000 |
Line of credit facility additional aggregate principal increase limit | $ 100,000,000 |
Minimum fixed charge coverage ratio | 1 |
Excess availability as percent of maximum borrowing amount | 10.00% |
Excess availability maximum borrowing amount | $ 30,000,000 |
Minimum | |
Line of Credit Facility [Line Items] | |
Commitment fee percentage | 0.25% |
Maximum | |
Line of Credit Facility [Line Items] | |
Commitment fee percentage | 0.375% |
Base Rate | Minimum | |
Line of Credit Facility [Line Items] | |
Basis spread on variable rate | 0.25% |
Base Rate | Maximum | |
Line of Credit Facility [Line Items] | |
Basis spread on variable rate | 0.75% |
London Interbank Offered Rate (LIBOR) | Minimum | |
Line of Credit Facility [Line Items] | |
Basis spread on variable rate | 1.25% |
London Interbank Offered Rate (LIBOR) | Maximum | |
Line of Credit Facility [Line Items] | |
Basis spread on variable rate | 1.75% |
Leases - Narrative (Details)
Leases - Narrative (Details) $ in Millions | May 05, 2019USD ($)renewal_option | May 05, 2019USD ($)renewal_option |
Lessee, Lease, Description [Line Items] | ||
Lease expense | $ 11 | |
Short-term and variable lease cost | $ 2.2 | |
Weighted average remaining lease term | 11 years 3 months 26 days | 11 years 3 months 26 days |
Weighted average discount rate | 11.80% | 11.80% |
Operating lease payments | $ 8.3 | |
Lease not yet commenced minimum lease payments | $ 111.1 | $ 111.1 |
Lease not yet commenced term | 16 years 1 month 6 days | |
Real Estate | ||
Lessee, Lease, Description [Line Items] | ||
Number of renewal options | renewal_option | 3 | 3 |
Renewal term | 5 years | 5 years |
Minimum | Real Estate | ||
Lessee, Lease, Description [Line Items] | ||
Lease term | 5 years | 5 years |
Minimum | Equipment | ||
Lessee, Lease, Description [Line Items] | ||
Lease term | 3 years | 3 years |
Maximum | Real Estate | ||
Lessee, Lease, Description [Line Items] | ||
Lease term | 15 years | 15 years |
Maximum | Equipment | ||
Lessee, Lease, Description [Line Items] | ||
Lease term | 5 years | 5 years |
Leases - Schedule of Lease Asse
Leases - Schedule of Lease Assets and Liabilities (Details) $ in Thousands | May 05, 2019USD ($) |
Assets | |
Operating | $ 157,139 |
Current | |
Operating | 13,310 |
Non-current | |
Operating | 177,636 |
Total operating lease liabilities | $ 190,946 |
Leases - Schedule of Lease Matu
Leases - Schedule of Lease Maturity (Details) $ in Thousands | May 05, 2019USD ($) |
Operating Leases | |
Remainder of 2019 | $ 22,569 |
2020 | 35,946 |
2021 | 33,555 |
2022 | 31,248 |
2023 | 26,695 |
Thereafter | 215,409 |
Total lease payments | 365,422 |
Less: interest | 174,476 |
Present value of lease liabilities | $ 190,946 |
Share-Based Compensation - Nar
Share-Based Compensation - Narrative (Details) - USD ($) $ in Millions | 1 Months Ended | 3 Months Ended | ||
Jun. 30, 2019 | May 05, 2019 | Apr. 29, 2018 | Jun. 13, 2019 | |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||
Share-based compensation expense | $ 7.2 | $ 3.3 | ||
Subsequent Event | Restricted Stock Units (RSUs) | Awards Vested Upon Consummation of the IPO | ||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||
Grants in period (in shares) | 2,711,689 | |||
Subsequent Event | Restricted Stock Units (RSUs) | Awards Vested Within One Year of Consummation of the IPO | ||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||
Grants in period (in shares) | 362,629 | |||
Award vesting period | 1 year | |||
Subsequent Event | Restricted Stock Units (RSUs) | Awards Vested on Time-Vesting Conditions and Share Price Hurdles | ||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||
Grants in period (in shares) | 21,693,634 | |||
Class A | Subsequent Event | ||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||
Common stock reserved for future issuance (in shares) | 7,096,913 | |||
2019 Omnibus Incentive Plan | Class A | Subsequent Event | Common Stock | ||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||
Shares allowed for issuance (in shares) | 31,864,865 |
Income Taxes - Narrative (Deta
Income Taxes - Narrative (Details) - USD ($) | 3 Months Ended | |
May 05, 2019 | Apr. 29, 2018 | |
Income Tax Disclosure [Abstract] | ||
Current income tax provision | $ 0 | $ 0 |
Deferred income tax provision | $ 0 | $ 0 |
Net Loss per Share - Narrative
Net Loss per Share - Narrative (Details) - shares | Jun. 18, 2019 | Jun. 13, 2019 | May 05, 2019 | Feb. 03, 2019 | Apr. 29, 2018 |
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | |||||
Common stock outstanding (in shares) | 100 | 100 | |||
Class A | |||||
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | |||||
Common stock outstanding (in shares) | 0 | 0 | |||
Subsequent Event | Class B | |||||
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | |||||
Common stock outstanding (in shares) | 345,125,000 | ||||
Conversion of stock (in shares) | (47,875,000) | 393,000,000 | |||
Subsequent Event | Class A | |||||
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | |||||
Common stock outstanding (in shares) | 53,475,000 | ||||
Conversion of stock (in shares) | 47,875,000 |
Net Loss per Share - Schedule
Net Loss per Share - Schedule of Net Loss per Share (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands | 3 Months Ended | |
May 05, 2019 | Apr. 29, 2018 | |
Numerator: | ||
Net loss | $ (29,554) | $ (59,815) |
Net loss attributable to common stockholders | $ (29,554) | $ (59,815) |
Denominator: | ||
Weighted average common shares used in computing net loss per share attributable to common stockholders, basic and diluted (in shares) | 393,000 | 393,000 |
Net loss per share attributable to common stockholders, basic and diluted (in dollars per share) | $ (0.08) | $ (0.15) |
Certain Relationships and Rel_2
Certain Relationships and Related Party Transactions - Narrative (Details) - USD ($) $ in Thousands | 3 Months Ended | ||
May 05, 2019 | Apr. 29, 2018 | Feb. 03, 2019 | |
Related Party Transaction [Line Items] | |||
Due from Parent, net | $ 74,655 | $ 78,712 | |
Sponsors and Parent | Management Fee | |||
Related Party Transaction [Line Items] | |||
Management fee | 300 | $ 300 | |
Affiliated Entity | |||
Related Party Transaction [Line Items] | |||
Net sales | $ 10,500 |
Subsequent Events - Narrative (
Subsequent Events - Narrative (Details) | Jun. 18, 2019 |
Revolving Credit Facility | Line of Credit | Subsequent Event | |
Subsequent Event [Line Items] | |
Debt instrument term | 5 years |