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What changed in Chewy, Inc.'s 10-K — 2024 vs 2025

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Paragraph-level year-over-year comparison of Chewy, Inc.'s 2024 and 2025 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2025 report.

+302 added−289 removedSource: 10-K (2025-03-26) vs 10-K (2024-03-20)

Top changes in Chewy, Inc.'s 2025 10-K

302 paragraphs added · 289 removed · 244 edited across 8 sections

Item 1. Business

Business — how the company describes what it does

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Biggest changeOur Strengths • Our 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.
Biggest changeWe believe that the trend of increased subscription-based purchasing behavior within the broader trend towards online shopping supports higher levels of customer retention and revenue visibility. Our Strengths • Our 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.
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.
In addition, we have developed integrated technology that enables us to capture profiles for each of our customers as well as their pets so that we may provide them with personalized recommendations.
Customers have historically spent more per purchase on our websites and mobile applications after their first year as they discover the wide range of our product and service offerings, 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. 5 • Acquire new customers.
Customers have historically spent more per purchase on our websites and mobile applications after their first year as they discover the wide range of our product and service offerings, 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.
In 2023, we expanded our CarePlus offering, allowing us to meet the needs of a broader range of pet parents. In 2022, we also completed our acquisition of Petabyte Technology Inc. (“Petabyte”), a provider of cloud-based technology solutions to the veterinary sector.
In 2023, we expanded our CarePlus offering, allowing us to meet the needs of a broader range of pet parents. In 2022, we also completed our acquisition of Petabyte Technology Inc. (“Petabyte”), a provider of veterinary cloud-based technology solutions.
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.
Competition in the pet products and services industry is strong, particularly within the e-commerce channel as the industry continues to experience a shift from in-store to online shopping.
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. 4 • We offer a wide assortment of pet products and services across health and retail categories—and we continue to grow that assortment—which we offer at competitive prices.
The expertise of our CSRs, combined with the 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 a wide assortment of pet products and services across health and retail categories—and we continue to grow that assortment—which we offer at competitive prices.
“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 research conducted by Packaged Facts, 96% of pet owners in the U.S. consider their pets to be a part of their family.
“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 research conducted by Packaged Facts, 93% of pet owners in the U.S. consider their pets to be a part of their family.
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.
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 to optimize their productivity.
By leveraging our extensive infrastructure of our supply chain consisting of sixteen fulfillment centers, we are typically able to offer our products in a localized manner with the capability to serve over 80% of the U.S. population overnight and almost 100% in two days.
By leveraging our extensive supply chain infrastructure consisting of fulfillment centers located in the U.S. and Canada, we are typically able to offer our products in a localized manner with the capability to serve over 80% of the U.S. population overnight and almost 100% in two days.
We serve pet parents across the U.S. and expanded into Canada in September 2023. 6 Competition 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.
We serve pet parents across the U.S. and in Canada. Competition 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.
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 offerings 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 addition, we offer a wide range of free educational media (such as blogs, videos, and tutorials on our website, Be.Chewy.com and pet health focused content on our website, PetMD.com) to enhance our product offerings 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.
We partner with approximately 3,500 of the best and most trusted brands in the pet industry, and we create and offer our own private brands. Through our websites and mobile applications, we offer our customers approximately 115,000 products and services offerings, to bring what we believe is a high-bar, customer-centric experience to our customers.
We partner with approximately 3,200 of the best and most trusted brands in the pet industry, and we create and offer our own private brands. Through our websites and mobile applications, we offer our customers approximately 130,000 products and services offerings, to bring what we believe is a high-bar, customer-centric experience to our customers.
Chewy Vet Care practices will be powered by our own custom-built technology platform offering a seamless and efficient experience for pet parents and vet care providers alike. • Our highly efficient and effective distribution network provides exceptional delivery with ongoing cost advantages and superior customer service.
Chewy Vet Care practices are powered by our own custom-built technology platform offering a seamless and efficient experience for pet parents and vet care providers alike. 4 • Our highly efficient and effective distribution network provides exceptional delivery with ongoing cost advantages and superior customer service.
We engage with pet parents thousands of times per day, 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.
We engage with pet parents thousands of times per day, and we embrace the opportunity to “WOW” our customers each time, from surprising them with a hand-painted pet portrait to sending personalized expressions of sympathy to a family who has recently lost their pet.
Packaged Facts projects the U.S. pet market to grow at an estimated CAGR of approximately 7% from 2023 through 2027. Consistency of spending and resilience during economic downturns Spending on pets is a necessity and most customers purchase frequently and at regular intervals.
Packaged Facts projects the U.S. pet market to grow at an estimated CAGR of approximately 4% from 2024 through 2028. Consistency of spending and resilience during economic downturns Spending on pets is a necessity and most customers purchase frequently and at regular intervals.
We carry approximately 3,500 carefully selected brands and approximately 115,000 products, representing many of the best and most popular products, and we regularly add new products as we strive to offer everything that pet parents may need or want for their pets.
We carry approximately 3,200 carefully selected brands and approximately 130,000 products and service offerings, representing many of the best and most popular products, and we regularly add new products as we strive to offer everything that pet parents may need or want for their pets.
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 due to the COVID-19 pandemic, further increasing demand and the continued humanization of pets.
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 due to the COVID-19 pandemic, further increasing demand and the continued humanization of pets.
We believe that our intellectual property has substantial value and has significantly contributed to our success to date. Seasonality 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 weight between quarters reflects the consistent nature of customer purchasing of our product assortment.
We believe that our intellectual property has substantial value and has significantly contributed to our success to date. Seasonality 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 reflect consistent customer purchasing behavior between quarters.
We believe there is significant room to grow our private brands through continued growth of our current brands and the launch of new ones. • Expand further into pet healthcare. We provide customers with what we believe is a one-stop shop for their prescription and special diet needs with our over-the-counter and veterinarian diet offerings and Chewy Pharmacy products.
We believe there is significant room to grow our private brands through continued growth of our current brands and the launch of new ones. 5 • Expand further into pet healthcare. We provide customers with a broad and comprehensive selection of over-the-counter and veterinarian diet offerings and Chewy Pharmacy products for their prescription and special diet needs.
Chewy, Inc. completed the initial public offering of its 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.
Chewy, Inc. completed the initial public offering of its Class A common stock, par value $0.01 per share (the “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.
As of January 28, 2024, we have approximately 15,000 veterinary practices enrolled in the platform, representing an estimated 50% of all U.S. vet clinics. In 2022, we launched and expanded the CarePlus product suite of Insurance and Wellness plans to provide diversified offerings across price points and coverage options.
As of February 2, 2025, we have approximately 17,000 veterinary practices enrolled in the platform, representing an estimated 50% of all U.S. vet clinics. In 2022, we launched and expanded the CarePlus product suite of Insurance and Wellness plans to provide diversified offerings across price points and coverage options.
Customers and Markets We serve customers through our websites 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 strengths of our platform may enable us to sell directly to businesses in addition to consumers. Customers and Markets We serve customers through our websites 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.
Historical and projected growth in pet spending According to Packaged Facts, spending on the U.S. pet market has grown from $87 billion in 2017 to an estimated $144 billion in 2023, or at an 8.9% compounded annual growth rate (“CAGR”) over that time.
Historical and projected growth in pet spending According to Packaged Facts, spending in the U.S. pet market has grown from $92 billion in 2018 to an estimated $151 billion in 2024, or at an 8.7% compounded annual growth rate (“CAGR”) over that time.
We own a number of trademark registrations and applications in the U.S. and in foreign jurisdictions. These trademarks include, among others, “American Journey,” “Blue Box Event,” “Careplus,” “Chewy,” “Chewy.com,” “Chewy Vet Care,” “Dr.
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. and in foreign jurisdictions. These trademarks include, among others, “American Journey,” “Blue Box Event,” “Careplus,” “Chewy,” “Chewy.com,” “Chewy Vet Care,” “Dr.
In 2023, we announced the forthcoming launch of our own veterinary clinics under the brand name “Chewy Vet Care,” offering pet health services including routine appointments, urgent care and surgery.
In 2024, we opened and operated eight veterinary clinics under the brand name “Chewy Vet Care,” offering pet health services including routine appointments, urgent care and surgery.
We strive to further our mission by offering competitive compensation and benefits, focusing on employee safety, sharing opportunities for positive societal impact through participation in philanthropic endeavors, and fostering a workplace in which everyone feels empowered to do their best work. 7 We employed approximately 18,100 full-time and part-time employees as of January 28, 2024 and occasionally engage staffing agencies to supplement our workforce.
We strive to further our mission by offering competitive compensation and benefits, focusing on employee safety, sharing opportunities for positive societal impact through participation in philanthropic endeavors, and fostering a workplace in which everyone feels empowered to do their best work.
As of March 13, 2024, none of our employees were represented by a labor union or covered by a collective bargaining agreement. We provide our employees with support resources and programs that advance employee engagement, communication, and feedback, such as an annual engagement survey and quarterly pulse surveys, which we use to assess and improve our practices and policies.
We provide our employees with support resources and programs that advance employee engagement, communication, and feedback, such as an annual engagement survey and quarterly pulse surveys, which we use to assess and improve our practices and policies.
We accomplish this, in part, by recruiting, hiring, training, and motivating employees who share our core values of delivering superior customer service and caring about the needs of pets and their parents.
Human Capital Our employees are critical to us fulfilling our mission of being the most trusted and convenient destination for pet parents and partners everywhere. We accomplish this, in part, by recruiting, hiring, training, and motivating employees who share our core values of delivering superior customer service and caring about the needs of pets and their parents.
Examples of our scalable technology include our rollout of PracticeHub in 2021, an e-commerce solution for veterinarians that allows them to integrate their existing practice management software with our fulfillment and customer service capabilities, and our sponsored ads business which has evolved from a beta version in 2022 to increasing our sponsored product and sponsored brand offerings in 2023, which provide dedicated, premium placements on Chewy.com that promote specific products or brands from select vendors.
Examples of our scalable technology include i) our rollout of PracticeHub in 2021, which is an e-commerce solution for veterinarians that allows them to integrate their existing practice management software with our fulfillment and customer service capabilities, as well as ii) our sponsored ads business which has evolved from a beta version in 2022 to a more comprehensive suite of ad product offerings for our vendor partners.
In 2020, we launched “Connect with a Vet,” an industry-leading telehealth service that allows pet parents to connect directly with licensed veterinarians for pet care, and in 2021, we expanded paid access to all customers with continued complimentary access for our Autoship customers, and in 2022 we expanded complimentary access to all registered customers.
In 2020, we launched “Connect with a Vet,” an industry-leading telehealth service that allows pet parents to connect directly with licensed veterinarians or veterinary technicians for pet care.
We empower our CSRs to go above and beyond for our customers, and they do so with the knowledge that our commitment to our customers is our number one priority.
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 with the knowledge that our commitment to our customers is our number one priority.
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.
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. 6 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.
Furthermore, according to Packaged Facts, pet parents look for products that improve their pet’s health and wellness, with 74% of pet parents willing to pay more for foods with extra health and wellness benefits.
Additionally, 85% of pet owners agree with the statement that pets are central to their home life, and 73% would go as far as to say they consider themselves a “pet parent.” Furthermore, according to Packaged Facts, pet parents look for products that improve their pet’s health and wellness, with 74% of pet parents willing to pay more for foods with extra health and wellness benefits.
Further, pet owners are increasingly focused on the health and wellness of their pet with 21% of dog owners and 22% of cat owners paying closer attention to their pet’s health and wellness because of COVID-19, according to Packaged Facts. 3 While the COVID-19 pandemic and subsequent economic downturn have impacted consumer spending broadly, the pet industry continues to demonstrate resiliency and the stickiness of pet care spending.
While the COVID-19 pandemic and subsequent economic downturn have impacted consumer spending broadly, the pet industry continues to demonstrate resiliency and the stickiness of pet care spending.
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.
We expect to remain highly thoughtful, deliberate and ROI-focused as we evaluate expansion into additional international markets. • 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, including additional pet services, should we choose to do so.
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.
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.
Given the fast and consistent payback levels from our customers, we invest our free cash flow in marketing to attract new customers. Additionally, we expect to continue to invest in new growth areas across our business, including Chewy Health and international expansion following our 2023 launch in Canada.
Additionally, we expect to continue to invest in new growth areas across our business, including expansion of Chewy’s health products and services offerings following the launch of Chewy Vet Care clinics in 2024.
In 2019, e-commerce claimed the top spot of pet food sales by channel and online shopping continues to take market share from brick-and-mortar retail. Packaged Facts reports that online shopping grew from 16% of U.S. retail pet product sales in 2017 to an estimated 36% in 2023 with over $23 billion of pet food and treats sold online.
Packaged Facts reports that online shopping grew from 20% of U.S. retail pet product sales in 2018 to an estimated 38% in 2024 with over $37 billion of pet food and treats sold online. This represents a 23% CAGR for online pet retail over that time frame.
During fiscal year 2023, we donated $55 million in products and supplies to animal shelters and rescues. Diversity, Equity, and Inclusion . We recognize the importance of a diverse and inclusive workforce and fostering safe working environments in which our employees can be their authentic and best selves.
During fiscal year 2024, we donated $54 million in products and supplies to animal shelters and rescues. 7 People and Culture . We strive to foster inclusive, engaging and safe working environments in which our employees can be their authentic and best selves. We hire, retain, and promote exceptional talent that values different backgrounds, experiences, and perspectives.
In 2023, we announced the forthcoming launch of our own veterinary clinics under the brand name “Chewy Vet Care,” offering pet health services including routine appointments, urgent care, and surgery.
In 2024, we opened and operated eight veterinary clinics under the brand name “Chewy Vet Care,” offering pet health services including routine appointments, urgent care and surgery. Chewy Vet Care practices are powered by our customized technology platform offering a seamless and efficient experience for pet parents and vet care providers alike. • Expand into new markets.
Canada has a large and growing pet market with over 9 million pet owning households. Our goal is to provide all pet parents with the same convenient delivery experience, broad assortment, and high-quality service that our U.S. customers enjoy.
Our goal is to provide all pet parents with the same convenient delivery experience, broad assortment, and high-quality service that our U.S. customers enjoy. We believe Chewy’s value proposition and business model can extend beyond North America and believe there is an opportunity to expand into additional international markets in the future.
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.
From the moment they join Chewy, our CSRs receive extensive training from our knowledgeable team, learning about the world of pets and our product offerings. Thereafter, they continue learning about brands and pets of all types via recurring training.
According to Packaged Facts, as of October 2023, only 7% of pet owners agreed that they were spending less on pet food compared to the preceding 12 months. Further, according to the U.S. Bureau of Labor Statistics, between 2013 and 2021, growth in pet-related spending outpaced spending in other consumer categories.
According to Packaged Facts, as of August 2024, only 10% of pet owners agreed that they were spending less on pet food compared to the preceding 12 months. 3 Rapid shift to online shopping, with significant remaining opportunity The pet industry, like many other industries in the U.S., continues to shift from in-store to online purchases as internet shopping continues to take market share from brick-and-mortar retail.
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Amongst dog owners, 93% agree that pets are central to their home life, with 90% of cat owners and 85% of other pet owners agreeing with that statement.
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The impacts of COVID-19 remain prominent in pet health trends, with 46% of dog and cat owners noting they still pay closer attention to their pets’ health and wellness because of COVID-19, according to Packaged Facts.
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Rapid shift to online shopping, with significant remaining opportunity The pet industry, like many other industries 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.
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According to Packaged Facts, 56% of pet product shoppers surveyed in January 2024 had purchased pet products through a website in the last 12 months, and 36% through a smartphone application.
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This represents a 28% CAGR for online pet retail over that time frame. This shift to e-commerce well exceeds pre-COVID estimates as of 2019 of 25% channel share by 2023. According to Packaged Facts, 55% of pet product shoppers surveyed in February 2023 had purchased pet products online in the last 12 months.
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Growing trend of subscription-based purchasing Additionally, according to a Packaged Facts survey conducted in January 2024, among those who buy pet products online, 54% have used an Autoship/subscription purchasing program within the last 12 months for pet-related products.
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Growing trend of subscription-based purchasing Additionally, according to a Packaged Facts survey conducted in February 2023, 39% of pet product shoppers had a current pet-related subscription for products including pet food, pet treats, litter and grooming products. Subscription-based purchasing has become significantly more popular among consumers born between 1965 and 2020, who are increasingly becoming pet parents.
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According to Packaged Facts, 28% of pet parents surveyed in January 2024 used subscription-based purchasing for pet food in the prior 12 months, which was up from 22% of pet parents surveyed in January 2023.
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Packaged Facts found that usage rates for pet-related products including pet food, pet treats, litter and grooming products are dramatically higher for Millennials/Gen Zers (53%) or Gen Xers (24%) than for Boomers (14%). 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.
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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.
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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.
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We expanded paid access for this service to all customers with complimentary access for our Autoship customers in 2021, and in 2022 we expanded complimentary access for this service to all registered customers.
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Chewy Vet Care practices will be powered by our own custom-built technology platform offering a seamless and efficient experience for pet parents and vet care providers alike. • Expand into new markets. In 2023, we launched Chewy Canada, bringing Chewy’s compelling value proposition to millions of pet parents in Canada.
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In 2023, we launched Chewy Canada, bringing Chewy’s compelling value proposition to millions of pet parents in Canada. Canada has a large and growing pet market, with a June 2024 Packaged Facts report estimating that approximately 63% of Canadian households have pets.
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We believe Chewy’s value proposition and business model can extend beyond North America and believe there is an opportunity to expand into additional international markets in the future. We expect to remain highly thoughtful, deliberate and ROI-focused as we evaluate expansion into additional international markets. • Explore broader platform opportunities.
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We recognized 24%, 24%, 24% and 28% of our annual net sales during the first, second, third, and fourth quarters of fiscal year 2024, respectively, and the fourth quarter of fiscal year 2024 included the impact of a 53rd week.
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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.
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We employed approximately 18,000 full-time and part-time employees as of February 2, 2025 and engage staffing agencies to supplement our workforce. As of March 19, 2025, none of our employees were represented by a labor union or covered by a collective bargaining agreement.
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We recognized 25% of our annual net sales during each of the four quarters of fiscal year 2023. Human Capital Our employees are critical to us fulfilling our mission of being the most trusted and convenient destination for pet parents and partners everywhere.
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Our seven Team Member Resource Groups, which are available to all full-time employees and led by employee volunteers, seek to provide opportunities for employees to build connections and understanding through awareness programs and events. Available Information Our website address is www.chewy.com, and our investor relations website is investor.chewy.com.
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Our diversity, equity, and inclusion (“DEI”) mission is to hire, retain, and promote exceptional talent that values and is inclusive of diverse backgrounds and perspectives. We are focused on this mission through a variety of initiatives and programs, including assessments of current processes and policies.
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During fiscal year 2023, we expanded our DEI course offerings, and provided five team member resource groups in support of our DEI mission. Available Information Our website address is www.chewy.com, and our investor relations website is investor.chewy.com.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeRisks 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. • Anti-takeover provisions in our charter documents and under Delaware law could make an acquisition of the 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. • Our amended and restated certificate of incorporation includes exclusive forum provisions, which could limit our stockholders’ ability to obtain a favorable judicial forum for disputes with us or our directors, officers, or employees. • The BCP Stockholder Parties control the direction of our business and the concentrated ownership of our common stock will prevent other stockholders from influencing significant decisions. • We are a “controlled company” within the meaning of the rules of NYSE and rely on exemptions from certain corporate governance requirements.
Biggest changeRisks 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. 9 • Anti-takeover provisions in our charter documents and under Delaware law could make an acquisition of the 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. • Our amended and restated certificate of incorporation includes exclusive forum provisions, which could limit our stockholders’ ability to obtain a favorable judicial forum for disputes with us or our directors, officers, or employees. • The BCP Stockholder Parties control the direction of our business and the concentrated ownership of our common stock will prevent other stockholders from influencing significant decisions. • We are a “controlled company” within the meaning of the rules of NYSE and rely on exemptions from certain corporate governance requirements. • Restrictions in our revolving credit facility could adversely affect our operating flexibility. • The terms of our revolving credit facility may restrict our ability to pay dividends. • We cannot guarantee that our Repurchase Program (as defined below) will be fully consummated or that it will enhance long-term stockholder value.
There can be no assurance that we will be able to maintain or enhance our reputation, and failure to do so could materially adversely affect our business, financial condition, and results of operations. If we are unable to maintain or enhance consumer awareness of our brand cost-effectively, our business, results of operations and financial condition could be materially adversely affected.
There can be no assurance that we will be able to maintain or enhance our reputation, and failure to do so could materially adversely affect our business, financial condition and results of operations. If we are unable to maintain or enhance consumer awareness of our brand cost-effectively, our business, financial condition and results of operations could be materially adversely affected.
Further, if the BCP Stockholder Parties sell a controlling interest in the Company to a third party, any outstanding indebtedness may be subject to acceleration and our commercial agreement and relationships could be impacted, all of which may adversely affect our ability to run our business and may have a material adverse effect on our results of operations and financial condition.
Further, if the BCP Stockholder Parties sell a controlling interest in the Company to a third party, any outstanding indebtedness may be subject to acceleration and our commercial agreement and relationships could be impacted, all of which may adversely affect our ability to run our business and may have a material adverse effect on our business, financial condition and results of operations.
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; • losses we may incur as a result of declines in the value of an investment or as a result of incorporating an investee’s financial performance into our financial results; • diversion of management’s attention from our existing business; • adverse effects on existing business relationships with suppliers, outsourced private 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; • the risks associated with businesses we acquire or invest in, which may differ from or be more significant than the risks our other businesses face; • potential unknown liabilities associated with a business we acquire or in which we invest; and • increased legal and accounting compliance costs.
Acquisitions, investments and other strategic alliances involve numerous risks, including: 23 • 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; • losses we may incur as a result of declines in the value of an investment or as a result of incorporating an investee’s financial performance into our financial results; • diversion of management’s attention from our existing business; • adverse effects on existing business relationships with suppliers, outsourced private 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; • the risks associated with businesses we acquire or invest in, which may differ from or be more significant than the risks our other businesses face; • potential unknown liabilities associated with a business we acquire or in which we invest; and • increased legal and accounting compliance costs.
Under these rules, a listed company of 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 certain corporate governance requirements, including: • the requirement that a majority of the board of directors consist of independent directors; • the requirement that our nominating and corporate governance committee be composed entirely of independent directors; 33 • the requirement that our compensation committee be composed entirely of independent directors; and • the requirement for an annual performance evaluation of our corporate governance and compensation committees.
Under these rules, a listed company of 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 certain corporate governance requirements, including: • the requirement that a majority of the board of directors consist of independent directors; • the requirement that our nominating and corporate governance committee be composed entirely of independent directors; • the requirement that our compensation committee be composed entirely of independent directors; and • the requirement for an annual performance evaluation of our corporate governance and compensation committees.
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. Certain of our principal suppliers currently provide us with incentives related to various trade allowances, cooperative advertising and market development funds.
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. 13 Certain of our principal suppliers currently provide us with incentives related to various trade allowances, cooperative advertising and market development funds.
In addition, we also collect, store, and transmit employees’ health information for certain reasons, such as administering employee benefits; accommodating disabilities and injuries; complying with public health requirements; and maintaining employee safety in the workplace. 22 Laws and regulations relating to privacy, data protection, cybersecurity, advertising and marketing, and consumer protection are evolving and subject to potentially differing interpretations.
In addition, we also collect, store, and transmit employees’ health information for certain reasons, such as administering employee benefits; accommodating disabilities and injuries; complying with public health requirements; and maintaining employee safety in the workplace. Laws and regulations relating to privacy, data protection, cybersecurity, advertising and marketing, and consumer protection are evolving and subject to potentially differing interpretations.
In addition, our amended and restated certificate of incorporation provides that unless we consent in writing to the selection of an alternative forum, the federal district courts of the United States of America will, to the fullest extent permitted by law, be the exclusive forum for the resolution of any complaint asserting a cause of action arising under the Securities Act.
In addition, our amended and restated certificate of incorporation provides that unless we consent in writing to the selection of an alternative forum, the 28 federal district courts of the United States of America will, to the fullest extent permitted by law, be the exclusive forum for the resolution of any complaint asserting a cause of action arising under the Securities Act.
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. From time-to-time the FDA, the Association of American Feed Control Officials, or state regulatory authorities may enact a regulation, requirement or other guidance that impacts pet food packaging, labeling, or marketing materials.
In addition, we may produce new products that may be subject to FDA pre-market review before we can market and sell such products. From time to time the FDA, the Association of American Feed Control Officials, or state regulatory authorities may enact a regulation, requirement or other guidance that impacts pet food packaging, labeling, or marketing materials.
In addition to the aforementioned federal income tax implications pursuant to Sections 382 and 383 of the Code, most states follow the general provisions of Sections 382 and 383 of the Code, either explicitly or implicitly resulting in separate state net operating loss and tax credit limitations. We may be unable to adequately protect our intellectual property rights.
In addition to the aforementioned federal income tax implications pursuant to Sections 382 and 383 of the Code, most states follow the general provisions of Sections 382 and 383 of the Code, either explicitly or implicitly resulting in separate state net operating loss and tax credit limitations. 21 We may be unable to adequately protect our intellectual property rights.
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. 24 We may be subject to personal injury, workers’ compensation, product liability, labor and employment, and other claims in the ordinary course of business.
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 may be subject to personal injury, workers’ compensation, product liability, labor and employment, and other claims in the ordinary course of business.
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 may be subject to personal injury, workers’ compensation, product liability, labor and employment, and other claims in the ordinary course of business. • We rely on the performance of members of management and highly skilled personnel and our business could be harmed if we are unable to attract, develop, motivate, and retain highly-qualified and skilled employees. 9 • Uncertainties in economic conditions, industry trends, and market conditions, and their impact on the pet market, could adversely impact our business, financial condition, and results of operations. • Significant merchandise returns or refunds could harm our business. • We may seek to grow our business through acquisitions or investments in new or complementary businesses, technologies, or offerings, or through other strategic transactions, and the failure to manage these acquisitions, investments, or strategic transactions, or to integrate them with our existing business, could have a material adverse effect on us. • Our business results could be adversely affected if our new offerings are unsuccessful. • Regulation of the sale of insurance for pets is subject to change, and future regulations could harm our business, operating results, and financial condition. • 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. and Canada.
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 may be subject to personal injury, workers’ compensation, product liability, labor and employment, and other claims in the ordinary course of business. • We rely on the performance of members of management and highly-skilled personnel, and our business could be harmed if we are unable to attract, develop, motivate, and retain highly-qualified and skilled employees. • Uncertainties in economic conditions, industry trends, and market conditions, and their impact on the pet market, could adversely impact our business, financial condition and results of operations. • Significant merchandise returns or refunds could harm our business. • We may seek to grow our business through acquisitions or investments in new or complementary businesses, technologies, or offerings, or through other strategic transactions, and the failure to manage these acquisitions, investments, or strategic transactions, or to integrate them with our existing business, could have a material adverse effect on us. • Our business results could be adversely affected if our new offerings are unsuccessful. • Regulation of the sale of insurance for pets is subject to change, and future regulations could adversely affect our business, financial condition and results of operations. • 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. and Canada.
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. 23 Our ability to utilize net operating loss and tax credit carryforwards, and other tax attributes may be subject to certain limitations.
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 and tax credit carryforwards, and other tax attributes may be subject to certain limitations.
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. 15 We may add additional fulfillment center capacity as our business continues to grow and our offerings expand.
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 may add additional fulfillment center capacity as our business continues to grow and our offerings expand.
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 a material adverse effect on our business, financial condition, and results of operations.
Any compromise or breach of our security measures, or those of our third-party service providers, could violate applicable privacy, data security and other 17 laws, and cause significant legal and financial exposure, adverse publicity and a loss of confidence in our security measures, which could have a material adverse effect on our business, financial condition and results of operations.
Any web or mobile platform interruption or inadequacy that causes performance issues or interruptions in the availability of our websites or mobile applications could reduce consumer satisfaction and result in a reduction in the number of consumers using our products and services. 17 We depend on the development and maintenance of the Internet and mobile infrastructure.
Any web or mobile platform interruption or inadequacy that causes performance issues or interruptions in the availability of our websites 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.
As a result, we may need to incur material costs to change our packaging, labeling, or marketing to comply with such regulation or requirement 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. 21 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.
As a result, we may need to incur material costs to change our packaging, labeling, or marketing to comply with such regulation or requirement 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. 19 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.
Any significant interruptions or delays in service on our websites 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. • Disruptions to software-as-a-service technologies from third parties may adversely affect our business and results of operations. • Our failure or the failure of third-party service providers to protect our websites, networks, and systems against cybersecurity incidents, or to otherwise protect our confidential information, could damage our reputation and brand and harm our business, financial condition, and results of operations. • Safety, quality, and health concerns regarding our products 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 laws and regulations and we may incur material liabilities or costs related to complying with existing or future laws and regulations, and our failure to comply may result in enforcements, penalties, recalls, and other adverse actions. • We may inadvertently not comply with various state or federal laws and regulations covering our pet health business, which may subject us to reprimands, sanctions, probations, fines, suspensions, or the loss of one or more of our licenses. • Resistance from veterinarians to authorize prescriptions, or their efforts 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. • Failure to comply with laws and regulations relating to privacy, data protection, cybersecurity, marketing and advertising and consumer protection, could adversely affect our business, financial condition, and results of operations. • Our ability to utilize net operating loss and tax credit carryforwards, and other tax attributes may be subject to certain limitations. • We may be unable to adequately protect our intellectual property rights.
Any significant interruptions or delays in service on our websites 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. 8 • Disruptions to software-as-a-service (“SaaS”) technologies from third parties may adversely affect our business, financial condition and results of operations. • Our failure or the failure of third-party service providers to protect our websites, networks, and systems against cybersecurity incidents, or to otherwise protect our confidential information, could damage our reputation and brand and harm our business, financial condition and results of operations. • Safety, quality, and health concerns regarding our products could affect our business, financial condition and results of operations. • 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 laws and regulations and we may incur material liabilities or costs related to complying with existing or future laws and regulations, and our failure to comply may result in enforcements, penalties, recalls, and other adverse actions. • We may inadvertently not comply with various laws and regulations covering our pet health business, which may subject us to reprimands, sanctions, probations, fines, suspensions, or the loss of one or more of our licenses. • Resistance from veterinarians to authorize prescriptions, or their efforts to discourage pet owners from purchasing from us, could cause our sales to decrease and could adversely affect our business, financial condition and results of operations. • Failure to comply with laws and regulations relating to privacy, data protection, cybersecurity, marketing and advertising and consumer protection, could adversely affect our business, financial condition and results of operations. • Our ability to utilize net operating loss and tax credit carryforwards, and other tax attributes may be subject to certain limitations. • We may be unable to adequately protect our intellectual property rights.
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.
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 business, financial condition and results of operations may be materially adversely affected.
If any of the following risks actually occur, or other risks that we are not aware of become material, our business, financial condition, results of operations and future prospects could be materially and adversely affected. 8 Summary Risk Factors Our business faces significant risks.
If any of the following risks actually occur, or other risks that we are not aware of become material, our business, financial condition, results of operations and future prospects could be materially and adversely affected. Summary Risk Factors Our business faces significant risks.
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.
Any such claims, proceedings or actions could hurt our reputation, brand and business, force us to incur significant expenses in defense of such 20 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.
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. 31 The dual class structure of our common stock may adversely affect the trading market for our Class A common stock.
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.
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.
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. 11 We also use paid and non-paid advertising.
Also, while we employ several different methodologies to assess potential business opportunities, the new businesses or investments may not meet or exceed our expectations or desired objectives. 26 Our business results could be adversely affected if our new offerings are unsuccessful.
Also, while we employ several different methodologies to assess potential business opportunities, the new businesses or investments may not meet or exceed our expectations or desired objectives. Our business results could be adversely affected if our new offerings are unsuccessful.
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.
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 applicable regulatory requirements.
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.
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.
Although model laws are available to guide individual states and business, it is difficult to predict how these or any other new laws and regulations will impact our business, but, in some cases, changes in insurance laws, regulations and guidelines may be incompatible with various aspects of our business and require that we make significant modifications to our existing technology or practices, which may be costly and time-consuming to implement and could also harm our business, operating results and financial condition.
Although model laws are available to guide individual states and business, it is difficult to predict how these or any other new laws and regulations will impact our business, but, in some cases, changes in insurance laws, regulations and guidelines may be incompatible with various aspects of our business and require that we make significant modifications to our existing technology or practices, which may be costly and time-consuming to implement and could also harm our business, financial condition and results of operations.
As a result, our customer growth could be harmed and our business, financial condition, and results of operations may be materially and adversely affected. 16 We are subject to risks related to online payment methods.
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.
Any tax exposure in excess of $196 million would be our responsibility. 34 There are many transactions that occur during the ordinary course of business for which the ultimate tax determination is uncertain.
Any tax exposure in excess of $196 million would be our responsibility. There are many transactions that occur during the ordinary course of business for which the ultimate tax determination is uncertain.
In addition to the potential direct effects on us of any events beyond our control such as a public health crisis, 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. 20 In addition, continued and ongoing international conflict has led to disruption, instability and volatility in the global markets and industries that could negatively impact our operations.
In addition to the potential direct effects on us of any events beyond our control such as a public health crisis, 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. 18 In addition, continued and ongoing international conflict has led to disruption, instability and volatility in the global markets and industries that could negatively impact our operations.
Resistance from veterinarians to authorize prescriptions, or their efforts 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.
Resistance from veterinarians to authorize prescriptions, or their efforts to discourage pet owners from purchasing from us, could cause our sales to decrease and could adversely affect our business, financial condition and results of operations.
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 inherent in expanding our operations internationally also 24 include, among others, the costs and difficulties of managing international operations, adverse tax consequences, domestic and international tariffs and other barriers to trade.
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 the Company, changes in financial estimates or ratings by any securities analysts who follow the 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, including as a result of uncertainties in economic conditions, industry trends, and market conditions; • 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, industry trends, and market 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 and may again experience extreme price and volume fluctuations.
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 the Company, changes in financial estimates or ratings by any securities analysts who follow the Company or our failure to meet these estimates or the expectations of investors; • repurchases of our common stock pursuant to our Repurchase Program and any announcement of a termination of the program; • 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, including as a result of uncertainties in economic conditions, industry trends, and market conditions; • 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, industry trends, and market 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.” 27 The stock market has recently experienced and may again experience extreme price and volume fluctuations.
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.
Our business, financial condition and results of operations could be materially and adversely affected if a judgment, penalty or fine is not fully covered by insurance. 30 Our ability to raise capital in the future may be limited and our failure to raise capital when needed could prevent us from growing.
If we fail to compete successfully, our business, financial condition, and results of operations could be materially and adversely affected. 28 Government regulation of the Internet and e-commerce is evolving, and unfavorable changes or failure by us to comply with these regulations could harm our business, financial condition, and results of operations.
If we fail to compete successfully, our business, financial condition and results of operations may 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 harm our business, financial condition and results of operations.
Although some of our executive officers have experience in international business from prior positions, we have minimal 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 our operations.
Although some of our executive officers have experience in international business from prior positions, we have minimal experience with operations outside the U.S. and Canada. Our ability to successfully execute this strategy is affected by many of the same operational risks we face in expanding our operations.
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.
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 may be materially and adversely affected.
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 challenges to our future growth. • Business disruptions and responsive actions may adversely affect our business operations, 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 maintain profitability. • If we fail to manage our growth effectively, our business, financial condition, and results of operations could be materially and adversely affected. • Our continued success is largely dependent on positive perceptions of the Company. • We have a history of losses and may generate operating losses as we continue to expand our business. • 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 markets may prove to be inaccurate. • We may be unable to source additional suppliers or strengthen our existing relationships with suppliers.
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 challenges to our future growth. • Business disruptions and responsive actions may adversely affect our business operations, 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 maintain profitability. • If we fail to manage our growth effectively, our business, financial condition and results of operations could be materially and adversely affected. • Our continued success is largely dependent on positive perceptions of the Company. • Our operating expenses may increase over the next few years, and we may generate operating losses as we continue to expand our business. • 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 markets may prove to be inaccurate. • We may be unable to source additional suppliers or strengthen our existing relationships with suppliers.
Further, the California Privacy Rights Act (the “CPRA”) became effective on January 1, 2023 and significantly amends the CCPA by imposing additional data protection obligations on companies doing business in California, including additional consumer rights processes and opt outs for certain uses of sensitive data.
Further, the California Privacy Rights Act (the “CPRA”) became effective on January 1, 2023 and significantly amended the CCPA by imposing additional data protection obligations on companies doing business in California, including additional consumer rights processes and opt outs for certain uses of sensitive data.
Further, the extent and impact of any sanctions imposed in connection with the escalation of hostilities between Russia and Ukraine, or other geopolitical events, may cause additional financial market volatility and impact the global economy and also impact our strategy of expansion into international markets.
Further, the extent and impact of any sanctions imposed in connection with the escalation of hostilities between Russia and Ukraine and in the Middle East, or other geopolitical events, may cause additional financial market volatility and impact the global economy and also impact our strategy of expansion into international markets.
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.
We may sell shares of 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.
We may inadvertently not comply with various state or federal laws and regulations covering our pet health business, which may subject us to reprimands, sanctions, probations, fines, suspensions, or the loss of one or more of our licenses.
We may inadvertently not comply with various laws and regulations covering our pet health business, which may subject us to reprimands, sanctions, probations, fines, suspensions, or the loss of one or more of our licenses.
We believe that our continued growth in net sales will depend upon, among other factors, our ability to: • acquire new customers and retain existing customers; • increase sales from our new and existing customers; • increase the number of customers and the amount of sales in 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; • provide our customers and vendors with a superior and differentiated experience; • expand our private brand product offering, including, through the launch of new brands and expansion into new offerings; • increase the scale of existing private brands; • expand into new territories; • increase the awareness of our brand; • protect our reputation and maintain our positive brand perception; • develop new features to enhance the consumer experience on our websites and our mobile and tablet applications; • compete effectively and respond 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; • anticipate and respond timely to macroeconomic trends and changes to consumer preferences; • hire, integrate and retain talented personnel; • leverage our technological and operational efficiencies; • invest in the infrastructure underlying our websites and other operational systems; and • expand into new offerings or new lines of business in which we do not have prior, or sufficient, operating experience.
We believe that our continued growth in net sales will depend upon, among other factors, our ability to: • acquire new customers and retain existing customers; • increase sales from our new and existing customers; • increase the number of customers and the amount of sales in 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; • provide our customers and vendors with a superior and differentiated experience; • expand our private brand product offerings, including through the launch of new brands and expansion into new offerings; • increase the scale of existing private brands; • expand into new territories; • increase the awareness of our brand; • protect our reputation and maintain our positive brand perception; • develop new features to enhance the consumer experience on our websites and our mobile applications; • compete effectively and respond 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; • anticipate and respond timely to macroeconomic trends and changes to consumer preferences; • hire, integrate and retain talented personnel; • leverage our technological and operational efficiencies; • invest in the infrastructure underlying our websites and other operational systems; and • expand into new offerings or new lines of business in which we do not have prior, or sufficient, operating experience. 10 Our ability to improve margins and maintain profitability will also depend on the factors described above.
Regulation of the sale of insurance for pets is subject to change and future regulations could harm our business, operating results, and financial condition. The laws and regulations governing the offer, sale and purchase of insurance for pets are subject to change and future changes may be adverse to our business.
Regulation of the sale of insurance for pets is subject to change and future regulations could harm our business, financial condition and results of operations. The laws and regulations governing the offer, sale and purchase of insurance for pets are subject to change and future changes may be adverse to our business.
If we are unable to successfully optimize our fulfillment centers, it could increase costs and adversely affect our business. We have designed and built our own fulfillment center infrastructure which is tailored to meet the specific needs of our business, including customizing third-party inventory and package handling software systems and automated fulfillment capabilities.
If we are unable to successfully optimize our fulfillment centers or manage inventory effectively, it could increase costs and adversely affect our business. We have designed and built our own fulfillment center infrastructure which is tailored to meet the specific needs of our business, including customizing third-party inventory and package handling software systems and automated fulfillment capabilities.
It also creates a new California data protection agency specifically tasked to enforce the law, which could result in increased regulatory scrutiny of businesses conducting activities in California in the areas of data protection and security.
It also created a new California data protection agency specifically tasked to enforce the law, which could result in increased regulatory scrutiny of businesses conducting activities in California in the areas of data protection and security.
Further, due to conditions beyond our control, we have experienced and may continue to experience disruptions and delays in national, regional and local shipping, which may negatively impact our customers’ experience and our results or operations.
Further, due to conditions beyond our control, we have experienced, and may continue to experience, disruptions and delays in national, regional and local shipping, which may negatively impact our customers’ experience and our results of operations.
If any of our fulfillment centers were to shut down, suffer substantial labor shortages, or lose significant capacity for any reason, our operations would likely be significantly disrupted. Our business relies on an efficient and effective supply chain, including the transportation of our products, as well as the effective functioning of our fulfillment centers.
If any of our fulfillment centers were to shut down, suffer substantial labor shortages, or lose significant capacity for any reason, our operations could be significantly disrupted. Our business relies on an efficient and effective supply chain, including the transportation of our products, as well as the effective functioning of our fulfillment centers.
As we grow our business outside of the U.S., we may be exposed to different and more comprehensive regulations and laws that apply to our business. 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.
As we grow our business outside of the U.S. and Canada, we may be exposed to different and more comprehensive regulations and laws that apply to our business. These regulations and laws may involve taxes, tariffs, privacy and data security, anti-spam, content protection, AI, electronic contracts and communications, 25 consumer protection and Internet neutrality.
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.
Environmental Protection Agency, federal, state, local and foreign environmental, health and safety legislative and regulatory authorities, including the Department of Labor 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 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 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 such as AI and changes in consumer preferences or habits.
We have experienced unavailability of our websites and mobile applications, primarily due to DDoS events, and increased unavailability of our websites 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.
We have experienced, and may again experience, unavailability of our websites and mobile applications, primarily due to DDoS events, and increased unavailability of our websites 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.
Our operations 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 other federal, state, local and foreign authorities regarding the processing, packaging, storage, distribution, advertising, labeling and export of our products, including food safety standards.
Our operations are subject to regulation by the Occupational Safety and Health Administration, the Food and Drug Administration, the Department of Agriculture, and other federal, state, local and foreign authorities regarding the processing, packaging, storage, distribution, advertising, labeling and export of our products, including food safety standards.
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 federal, U.S. state income taxes, Canadian federal and provincial income tax, Chinese income taxes, and may be subject to additional income tax depending on our operations.
We may experience fluctuations in our tax obligations and effective tax rate, which could materially and adversely affect our business, financial condition and results of operations. We are subject to U.S. federal and state income taxes, Canadian federal and provincial income taxes, Chinese income taxes, and may be subject to additional income tax depending on our operations.
If we are unable to successfully recruit and retain personnel to staff our fulfillment centers, we may face labor shortages or be forced to increase wages and enhance benefits for such personnel, which may have an adverse effect on our results of operations.
If we are unable to successfully recruit and retain personnel, we may face labor shortages or be forced to increase wages and enhance benefits for such personnel, which may have an adverse effect on our results of operations.
Our revolving credit facility limits our ability to, among other things: • incur or guarantee additional debt; • make certain investments and acquisitions; • pay dividends; • 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 limits our ability to, among other things: • incur or guarantee additional debt; • make certain investments and acquisitions; • pay dividends or make distributions; • repurchase or redeem stock; • 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.
In addition, we have and may continue to experience down periods where our third-party credit card processors are unable to process the online payments of our customers and our ability to receive customer orders is disrupted.
In addition, we have and may continue to experience down periods where our third-party payment processors are unable to process the online payments of our customers and our ability to receive customer orders is disrupted.
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.
We also use and rely on services from other third parties, such as our telecommunications services and payment processors, and those services may be subject to outages and interruptions that are not within our control.
We are a “controlled company” within the meaning of the rules of NYSE and rely on exemptions from certain corporate governance requirements. As of March 13, 2024, the BCP Stockholder Parties control a majority of the voting power of our outstanding common stock.
We are a “controlled company” within the meaning of the rules of NYSE and rely on exemptions from certain corporate governance requirements. As of March 19, 2025, the BCP Stockholder Parties control a majority of the voting power of our outstanding common stock.
Our brand could be adversely affected if our public image or reputation were to be tarnished by negative publicity. Failure to comply or accusations of failure to comply with ethical, social, product, labor, data privacy, and environmental standards could also jeopardize our reputation and potentially lead to various adverse consumer actions. Any of these events could adversely affect our business.
Our brand could be adversely affected if our public image or reputation were to be tarnished by negative publicity. Failure to comply or accusations of failure to comply with ethical, social, product, labor, data privacy, and environmental standards could also 12 jeopardize our reputation and potentially lead to various adverse consumer actions.
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 difficult to replace.
Other than our Chief Executive Officer, Chief Financial Officer 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 difficult to replace.
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.
We currently intend to retain any future earnings to finance the operation and expansion of our business, as well as fund our Repurchase Program, and we do not expect to declare or pay any dividends in the foreseeable future.
As of March 13, 2024, the BCP Stockholder Parties 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.
As of March 19, 2025, the BCP Stockholder Parties beneficially owned more than 50% of our outstanding shares of common stock and, together with its affiliates, exercised control over more than 90% of the voting power of our outstanding common stock.
The occurrence of a natural disaster, power loss, telecommunications failure, data loss, computer virus, ransomware attack, 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 websites and mobile applications.
Any slowdown or failure of our websites, mobile applications or the underlying technology infrastructure could harm our business, reputation and our ability to acquire, retain and serve our customers. 16 The occurrence of a natural disaster, power loss, telecommunications failure, data loss, computer virus, ransomware attack, 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 websites and mobile applications.
We are required to manage relationships with a growing number of suppliers, customers and other third parties. Our information technology systems, supply chain operations, and our internal controls and procedures may not be adequate to support future growth of our customer or supplier base.
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, supply chain operations, and our internal controls and procedures may not be adequate to support future growth of our customer or supplier base.
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 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 stores and independent pet stores, catalog retailers and other specialty e-tailers.
We use 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.
Disruptions to SaaS technologies from third parties may adversely affect our business, financial condition and results of operations. We use 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.
Risks Related to Our Controlling Stockholders • Substantial future sales by affiliates of BC Partners (the “BCP Stockholder Parties”) or others of our common stock, or the perception that such sales may occur, could depress the price of our Class A common stock. • There could be potential conflicts of interests between us and affiliates of the BCP Stockholder Parties.
Risks Related to Our Controlling Stockholders • Substantial future sales by affiliates of BC Partners (the “BCP Stockholder Parties”) or others of our Class A common stock and/or Class B common stock, par value $0.01 per share (the “Class B common stock” and together with the Class A common stock, the “common stock”), or the perception that such sales may occur, could depress the price of our Class A common stock. • There could be potential conflicts of interests between us and affiliates of the BCP Stockholder Parties.
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 we operate. The protection of our intellectual property rights may require the expenditure of significant financial, managerial and operational resources.
We rely on trademark, copyright and patent law, trade secret protection, confidentiality 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 we operate.
We have incurred and may again incur increased capital expenditures for our fulfillment center operations as our business continues to grow. We would typically 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.
We have incurred, and may again incur, increased capital expenditures for our fulfillment center operations as our business continues to grow. We would typically incur such expenses and make such investments in advance of expected sales, and such expected sales may not occur.
The versions of our websites and mobile applications developed for these devices may not be compelling to consumers. 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.
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.
In addition, we have granted certain registration rights to the BCP Stockholder Parties, pursuant to which they have the right to demand that we register shares of Class A common stock beneficially owned by them under the Securities Act of 1933, as amended (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.
In addition, we have granted certain registration rights to the BCP Stockholder Parties, pursuant to which they have the right to demand that we register shares of Class A common stock beneficially owned by them under the Securities Act of 1933, as amended (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. 26 We are unable to predict with certainty whether or when the BCP Stockholder Parties will exercise their registration rights and/or sell a substantial number of shares of our common stock.
Further, we continually consider whether to 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 may require significant investments.
We continually consider whether to upgrade existing technologies and business applications and we may be required to implement new technologies such as those related to artificial intelligence (“AI”) in the future. The implementation of upgrades and changes may require significant investments.
(the “Supreme Court”) 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.
On June 21, 2018, the Supreme Court of the United States (the “Supreme Court”) 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.
Changes in tax treatment of companies engaged in e-commerce may adversely affect the commercial use of our websites and mobile applications and our financial results. On June 21, 2018, the Supreme Court of the U.S.
Changes in tax treatment of companies engaged in e-commerce may adversely affect the commercial use of our websites and mobile applications and our financial results.
While we believe that we market our products in compliance with the policy articulated in the 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.
While we believe that we market our products in compliance with the FDA’s guidance and regulations related to food and drugs, the FDA may disagree with our practices or classify some of our products differently than we do, and may impose additional regulatory requirements which could lead to alleged violations, enforcement actions, and product market withdrawals or recalls.
As a result, we may face interruptions to our systems, reputational damage, claims under privacy, cybersecurity 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 regarding our products could affect our business.
As a result, we may face interruptions to our systems, reputational damage, claims under privacy, cybersecurity 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. For more information on the management of our cybersecurity programs, see “Item 1C.
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.
If we are not able to comply with the requirements of Section 404 of the Sarbanes-Oxley Act 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. 31 The requirements of being a public company require significant resources and management attention and result in significant legal and financial compliance costs, and changing laws, regulations and standards are creating uncertainty for public companies .
One or more of our suppliers, including manufacturers of our private 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.
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.
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 or fees on e-commerce.
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 or fees on e-commerce. Any of these events could have a material adverse effect on our business, financial condition and results of operations.

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Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

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Biggest changeItem 1C. Cybersecurity We have an enterprise-wide information security program designed to assess, identify, and manage the Company’s information security risks and identify, evaluate, respond to and resolve information security incidents. To protect our information systems from information security incidents, we use various processes and tools to identify, prevent, detect, escalate, investigate, resolve and recover from identified vulnerabilities and threats.
Biggest changeItem 1C. Cybersecurity We have an enterprise-wide information security program designed to assess, identify, and manage the Company’s information security risks and identify, protect, evaluate, respond to and resolve information security incidents.
We conduct regular reviews of our information security program and also validate our information security program by conducting tabletop exercises, penetration and vulnerability testing, red team campaigns to identify potential vulnerabilities, simulations, and other exercises to evaluate the effectiveness of our information security program and improve our IRP.
We conduct regular reviews of our information security program and also validate our IRP by conducting tabletop exercises, penetration and vulnerability testing, red team campaigns to identify potential vulnerabilities, simulations, and other exercises to evaluate the effectiveness of our information security program and improve our IRP.
Our CISO provides quarterly updates to the Audit Committee of the Board, which oversees our cybersecurity risks and regularly reviews and discusses with management various cybersecurity matters, including risk assessments, mitigation strategies, areas of emerging risks, incidents and industry trends, and other areas of importance; discussion on policies, guidelines, and processes used by management to assess and manage such matters; and the steps management has taken to monitor and control such matters. 36
Our CISO provides quarterly updates to the Audit Committee of the Board, which oversees our cybersecurity risks and regularly reviews and discusses with management various cybersecurity matters, including risk assessments, mitigation strategies, areas of emerging risks, incidents and industry trends, and other areas of importance; discussion on policies, guidelines, and processes used by management to assess and manage such matters; and the steps management has taken to monitor and control such matters.
Our information security team provides regular reports to senior management and other relevant teams on various cybersecurity threats, assessments and findings. Our enterprise risk assessment includes our key cybersecurity risks. The Board oversees our annual enterprise risk assessment, where we assess key risks within the company, including technology risks and cybersecurity threats.
Our information security team provides regular reports to senior management and other relevant teams on various cybersecurity threats, assessments and findings. 32 Our enterprise risk assessment includes our key cybersecurity risks. The Board oversees our annual enterprise risk assessment, where we assess key risks within the Company, including technology risks and cybersecurity threats.
The Vice President of Security and Data Systems (the “CISO”) leads our information security organization and is responsible for managing our information security program. Our CISO has over 30 years of industry experience, including serving in similar roles leading cybersecurity programs at other public companies. Team members who support our information security program have relevant educational, industry, and professional experience.
The Vice President of Corporate Systems (the “CISO”) leads our information security organization and is responsible for managing our information security program. Our CISO has over 30 years of industry experience, including serving in similar roles leading cybersecurity programs at other public companies. Team members who support our information security program have relevant educational, industry, and professional experience.
Our systems are periodically the target of directed attacks intended to lead to interruptions and delays in our service and operations. We also occasionally experience the misuse or unauthorized disclosure of personal information, other data, confidential information or intellectual property.
Our e-commerce systems are periodically the target of directed attacks intended to lead to interruptions and delays in our service and operations. We also occasionally experience the misuse or unauthorized disclosure of personal information, other data, confidential information or intellectual property.
We conduct assessments based on the National Institute of Standards and Technology cybersecurity framework (the “NIST CSF”) to measure our progress under the maturity framework of NIST CSF and continue to identify opportunities for improvement in our information security program. 35 We continuously assess technology risks and threats and monitor our information systems for potential vulnerabilities based on industry trends and evolving threats.
We conduct assessments based on the National Institute of Standards and Technology cybersecurity framework (the “NIST CSF”) to measure our progress under the maturity framework of NIST CSF and continue to identify opportunities for improvement in our information security program.
We occasionally experience account take overs by bad actors using the credentials of customers acquired from the dark web unrelated to any breaches in our systems. These incidents have not had a material impact on us to date, including our business strategy, financial condition, or results of operations.
We occasionally experience incidents unrelated to our system where bad actors attempt to take over customer accounts by using the credentials of customers. These incidents have not had a material impact on us to date, including our business strategy, financial condition, or results of operations.
These include, but are not limited to, reporting, monitoring and detection tools that are widely used in the industry, and internal solutions. We have an enterprise-wide Information Security Incident Response Plan (“IRP”), which describes the detailed processes and procedures that should be followed in the event of an information security incident.
We have an enterprise-wide Information Security Incident Response Plan (“IRP”), which describes the detailed processes and procedures that should be followed in the event of an information security incident.
We use our IRP to identify, evaluate, respond to and resolve information security incidents.
We continuously assess technology risks and threats and monitor our information systems for potential vulnerabilities based on industry trends and evolving threats. We use our IRP to identify, protect, evaluate, respond to and resolve information security incidents.
Added
To protect our information systems from information security incidents, we use various processes and tools to identify, prevent, detect, escalate, investigate, resolve and recover from identified vulnerabilities and threats. These include, but are not limited to, reporting, monitoring and detection tools and services that are widely used in the industry, and internal solutions.

Item 2. Properties

Properties — owned and leased real estate

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Biggest changeItem 2. Properties We lease and operate our corporate offices in five locations, including our co-headquarters in Florida and Massachusetts. In addition, we lease and operate fulfillment centers in sixteen 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 three locations.
Biggest changeItem 2. Properties We lease properties across North America to support our operations. Our corporate offices include our co-headquarters in Plantation, Florida and Boston, Massachusetts. Our fulfillment centers receive products from vendors, ship products to customers, and receive and process returns from customers, while our customer service centers respond to customer inquiries.
Removed
The following table sets forth the location, use, and size of certain of our properties as of March 13, 2024: Use Location Square Footage Corporate office 7700 W.
Added
Our veterinary clinics provide pet health services including routine appointments, urgent care, and surgery. We believe that our properties have been adequately maintained, are in good condition, and are generally suitable and adequate to support our operations.
Removed
Sunrise Boulevard, Plantation, FL 33322 221,597 Corporate office 343 Congress Street, Boston, MA 02210 75,009 Corporate office 1110 112th Ave NE, Bellevue, WA 98004 43,509 Corporate office 150 South 5th Street, Suite 800, Minneapolis, MN 55402 39,678 Corporate office 1624 Normac Road, Woburn, MA 01801 30,000 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 15999 South Outer Road, Belton, MO 64012 796,013 Fulfillment center 8001 N Virginia Street, Reno, NV 89506 795,926 Fulfillment center 100 Goodman Drive, Etters, PA 17319 732,000 Fulfillment center 1281 Couchville Pike, Mt.
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The following table sets forth the category, number of locations, and size of our material properties as of March 19, 2025: Category Number of Locations 1 Square Footage (in thousands) Fulfillment centers 16 9,643 Corporate offices 5 434 Customer service centers 3 183 Veterinary clinics 12 44 1 Includes locations for which the Company has the right to control the use of the property but operations have not yet commenced
Removed
Juliet, TN 37122 691,920 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 13250 Crosby Fwy, Houston, TX 77049 687,902 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 1974 Innovation Boulevard, Clayton, IN 46118 597,844 Fulfillment center 12333 Airport Road, Kleinburg, Ontario, Canada L7C 2X3 190,000 Fulfillment center 360 Research Drive, Pittston, PA 18640 155,000 Fulfillment center 11403 Bluegrass Parkway, Suite 650, Louisville, KY 40299 40,668 Customer service center 3251 Hollywood Boulevard, Hollywood, FL 33021 100,928 Customer service center 930 E.
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Campbell Road, Suite 200, Richardson, TX 75081 57,120 Customer service center 3621 Fern Valley Road, Louisville, KY 40219 25,274 We believe that all of our properties have been adequately maintained, are in good condition, and are generally suitable and adequate for our current needs.

Item 4. Mine Safety Disclosures

Mine Safety Disclosures — required of mining issuers

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Biggest changeSingh holds a Bachelor of Technology degree from Punjab Technical University and a Master of Science degree in Engineering from the University of Texas at Austin, where, in 2019, he was inducted into the Academy of Distinguished Alumni for outstanding achievement and currently serves on the University of Texas Engineering Advisory Board.
Biggest changeSingh has served on the board of directors of Booking Holdings Inc. since April 2022. Mr. Singh holds a Bachelor of Technology degree from Punjab Technical University and a Master of Science degree in Engineering from the University of Texas at Austin, where, in 2019, he was inducted into the Academy of Distinguished Alumni for outstanding achievement.
Prior to that, Mr. Mehta served in various capacities at Staples Inc., including serving as Vice President, Price—Data & Analytics, Omni-Channel and Innovation Labs from January 2014 to July 2017. Mr. Mehta also served at Yahoo Inc. from November 2005 to January 2014, in various positions including as Senior Director, Global Data and Ad Tech. Mr.
Prior to that, Mr. Mehta served in various capacities at Staples Inc., including serving as Vice President, Price—Data & Analytics, Omni-Channel, and Innovation Labs from January 2014 to July 2017. From November 2005 to January 2014, Mr. Mehta served in various positions at Yahoo Inc., including as Senior Director, Global Data and Ad Tech. Mr.
He also holds a Master of Business Administration degree from the University of Chicago, Booth School of Business. David Reeder Mr. Reeder has served as our Chief Financial Officer since February 2024. From 2020 to 2024, he served as Chief Financial Officer of GlobalFoundries Inc. (“GFI”) and oversaw GFI’s initial public offering in 2021. Mr.
He also holds a Master of Business Administration degree from the University of Chicago, Booth School of Business. David Reeder Mr. Reeder has served as our Chief Financial Officer since February 2024. From 2020 to 2024, he served as Chief Financial Officer of GlobalFoundries Inc. (“GFS”), where he oversaw GFS’s initial public offering in 2021. Mr.
Reeder has served as a director on the board of directors of Entegris, Inc. since March 2024 and on the board of directors of Alphawave IP Group plc since September 2023. He was previously a member of the board of directors of Milacron Holdings Corp from 2017 until November 2019. Mr.
Reeder has been a member of the board of directors of Entegris, Inc. since March 2024 and of Alphawave IP Group plc since September 2023. He also served on the board of directors of Milacron Holdings Corp. from 2017 until November 2019. Mr.
Mehta has served on the board of directors of Express, Inc. since December 2022. Mr. Mehta holds a Bachelor of Science degree in Physics and Math from Jawaharlal Nehru University, and a Master of Business Administration degree from California Miramar University. 38 PART II
Mehta served on the board of directors of Express, Inc. from December 2022 until December 2024. Mr. Mehta holds a Bachelor of Science degree in Physics and Math from Jawaharlal Nehru University and a Master of Business Administration degree from California Miramar University. 34 PART II
Item 4. Mine Safety Disclosures Not applicable. 37 Information About Our Executive Officers The following information relates to our executive officers: Name Age Position Sumit Singh 44 Chief Executive Officer and Director David Reeder 49 Chief Financial Officer Satish Mehta 59 Chief Technology Officer Sumit Singh Mr.
Item 4. Mine Safety Disclosures Not applicable. 33 Information About Our Executive Officers The following information relates to our executive officers: Name Age Position Sumit Singh 45 Chief Executive Officer and Director David Reeder 50 Chief Financial Officer Satish Mehta 60 Chief Technology Officer Sumit Singh Mr.
Removed
Singh has served on the board of directors of Booking Holdings Inc. since April 2022. Mr.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeAn 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 28, 2024.
Biggest changeAn investment of $100 is assumed to have been made in our Class A common stock and in the indices on February 2, 2020 and their relative performance is tracked through February 2, 2025. 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.
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 28, 2024.
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 fourteen weeks ended February 2, 2025.
Holders of Common Stock As of the close of business on March 13, 2024, there were 150 stockholders of record of our Class A common stock and 2 stockholders of our Class B common stock.
Holders of Common Stock As of the close of business on March 19, 2025, there were 207 stockholders of record of our Class A common stock and 2 stockholders of our Class B common stock.
We expect to retain future earnings, if any, to fund the development and growth of our business.
Other than share repurchases pursuant to the Repurchase Program or otherwise, we expect to retain future earnings, if any, to fund the development and growth of our business.
Issuer Purchases of Equity Securities There were no repurchases of equity securities during the thirteen weeks ended January 28, 2024. 39 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.
(4) Approximate dollar value of shares that may yet be purchased under the Repurchase Program excludes the cost of commissions and excise taxes associated with the repurchases. 35 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.
Removed
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. [Reserved] 40
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Issuer Purchases of Equity Securities The following table presents information with respect to shares of Class A common stock repurchased by Chewy, Inc. during the fourteen weeks ended February 2, 2025.
Added
Period Total Number of Shares Purchased (1) Average Price Paid Per Share (2) Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (3) Approximate Dollar Value of Shares That May Yet Be Purchased Under The Plans or Programs (in millions) (3)(4) October 28, 2024 - November 24, 2024 — $ — — $ 424.8 November 25, 2024 - December 29, 2024 1,785,550 $ 31.58 189,126 $ 418.4 December 30, 2024 - February 2, 2025 320,475 $ 36.64 320,475 $ 406.7 Total 2,106,025 509,601 (1) The purchased shares consisted of 509,601 shares of Class A common stock repurchased pursuant to the Repurchase Program and 1,596,424 shares of Class A common stock repurchased pursuant to the December 2024 Concurrent Stock Repurchase (as defined below).
Added
(2) Average price paid per share under the Repurchase Program excludes the cost of commissions and excise taxes associated with the repurchases. For the period of November 25, 2024 through December 29, 2024, the average price paid per share pursuant to the Repurchase Program and December 2024 Concurrent Stock Repurchase was $33.75 and $31.32, respectively.
Added
(3) On May 24, 2024, the Company’s Board of Directors authorized the Company to repurchase up to $500 million of the Company’s common stock pursuant to the Repurchase Program. The Repurchase Program has no expiration date and may be modified, suspended or terminated at any time.
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Refer to Note 10 - Stockholders’ Equity (Deficit) in the “Notes to Consolidated Financial Statements” included in Part II, Item 8, Financial Statements and Supplementary Data, of this Annual Report on Form 10-K for additional information.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest change(in thousands, except per share data) Fiscal Year Reconciliation of Net Income (Loss) to Adjusted Net Income 2023 2022 2021 Net income (loss) $ 39,580 $ 49,899 $ (75,207) Add (deduct): Share-based compensation expense and related taxes 248,543 163,211 85,308 Change in fair value of equity warrants (13,079) 13,340 — Severance costs 14,348 — — Exit costs 6,839 — — Adjusted net income $ 296,231 $ 226,450 $ 10,101 Weighted-average common shares used in computing adjusted earnings (loss) per share: Basic 429,457 422,331 417,218 Effect of dilutive share-based awards (1) 2,583 5,439 10,068 Diluted (1) 432,040 427,770 427,286 Earnings (loss) per share attributable to common Class A and Class B stockholders Basic $ 0.09 $ 0.12 $ (0.18) Diluted (1) $ 0.09 $ 0.12 $ (0.18) Adjusted basic $ 0.69 $ 0.54 $ 0.02 Adjusted diluted (1) $ 0.69 $ 0.53 $ 0.02 (1) For Fiscal Year 2021, our calculation of adjusted diluted earnings per share attributable to common Class A and Class B stockholders requires an adjustment to the weighted-average common shares used in the calculation to include the weighted-average dilutive effect of share-based awards. 44 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, capitalization of labor related to our websites, mobile applications, software development, and leasehold improvements).
Biggest changeThe following table presents a reconciliation of net income to adjusted net income, as well as the calculation of adjusted basic and diluted earnings per share, for each of the periods indicated: (in thousands, except per share data) Fiscal Year Reconciliation of Net Income to Adjusted Net Income 2024 2023 2022 Net income $ 392,738 $ 39,580 $ 49,899 Add (deduct): Share-based compensation expense and related taxes 332,085 248,543 163,211 Change in fair value of unvested equity warrants (2,369) (13,079) 13,340 Deferred tax asset valuation allowance release (275,669) — — Severance costs — 14,348 — Exit costs — 6,839 — Adjusted net income $ 446,785 $ 296,231 $ 226,450 Weighted-average common shares used in computing adjusted earnings per share: Basic 421,351 429,457 422,331 Effect of dilutive share-based awards 9,639 2,583 5,439 Diluted 430,990 432,040 427,770 Earnings per share attributable to common Class A and Class B stockholders Basic $ 0.93 $ 0.09 $ 0.12 Diluted $ 0.91 $ 0.09 $ 0.12 Adjusted basic $ 1.06 $ 0.69 $ 0.54 Adjusted diluted $ 1.04 $ 0.69 $ 0.53 40 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 operating activities less capital expenditures (which consist of purchases of property and equipment, capitalization of labor related to our websites, mobile applications, software development, and leasehold improvements).
We believe it is useful to exclude severance and exit costs because these expenses represent temporary initiatives to realign resources and enhance operational efficiency, which are not components of our core business operations.
We believe it is useful to exclude severance and exit costs because these expenses represent temporary initiatives to realign resources and enhance operational efficiency, which are not components of our core business operations.
We have included adjusted net income (loss) and adjusted basic and diluted earnings (loss) per share in this 10-K Report because each 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.
We have included adjusted net income and adjusted basic and diluted earnings per share in this 10-K Report because each 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 net income and adjusted basic and diluted earnings (loss) per share facilitates operating performance comparability across reporting periods by removing the effect of non-cash expenses and certain variable gains and losses that do not represent a component of our core business operations.
In particular, the exclusion of certain expenses in calculating adjusted net income and adjusted basic and diluted earnings per share facilitates operating performance comparability across reporting periods by removing the effect of non-cash expenses and certain variable gains and losses that do not represent a component of our core business operations.
We believe it is useful to exclude income tax provision; interest income (expense), net; transaction related costs; changes in the fair value of equity warrants; and litigation matters and other items which are not components of our core business operations.
We believe it is useful to exclude income tax provision (benefit); interest income (expense), net; transaction related costs; changes in the fair value of equity warrants; and litigation matters and other items which are not components of our core business operations.
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 income (loss) excluding depreciation and amortization; share-based compensation expense and related taxes; income tax provision; interest income (expense), net; transaction related costs; changes in the fair value of equity warrants; severance and exit costs; and litigation matters and other items that we do not consider representative of our underlying operations.
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 income excluding depreciation and amortization; share-based compensation expense and related taxes; income tax provision (benefit); interest income (expense), net; transaction related costs; changes in the fair value of equity warrants; severance and exit costs; and litigation matters and other items that we do not consider representative of our underlying operations.
For additional information related to this restatement, see section titled Basis of Presentation in Note 2 – Basis of Presentation and 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. 41 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.
For additional information related to this restatement, see section titled Basis of Presentation in Note 2 – Basis of Presentation and 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. 37 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.
(2) Adjusted EBITDA, adjusted EBITDA margin, adjusted net income, adjusted basic and diluted earnings per share, and free cash flow are non-GAAP financial measures. See “Non-GAAP Financial Measures” below. We define net margin as net income (loss) divided by net sales and adjusted EBITDA margin as adjusted EBITDA divided by net sales.
(2) Adjusted EBITDA, adjusted EBITDA margin, adjusted net income, adjusted basic and diluted earnings per share, and free cash flow are non-GAAP financial measures. See “Non-GAAP Financial Measures” below. We define net margin as net income divided by net sales and adjusted EBITDA margin as adjusted EBITDA divided by net sales.
Because of these limitations, you should consider adjusted net income (loss) and adjusted basic and diluted earnings (loss) alongside other financial performance measures, including various cash flow metrics, net income (loss), basic and diluted earnings (loss) per share, and our other GAAP results.
Because of these limitations, you should consider adjusted net income and adjusted basic and diluted earnings alongside other financial performance measures, including various cash flow metrics, net income, basic and diluted earnings per share, and our other GAAP results.
Accordingly, we believe that adjusted EBITDA and adjusted EBITDA margin provide useful information to investors and others in understanding and evaluating our operating results in the same manner as our management and board of directors. 42 We believe it is useful to exclude non-cash charges, such as depreciation and amortization and share-based compensation 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.
Accordingly, we believe that adjusted EBITDA and adjusted EBITDA margin provide useful information to investors and others in understanding and evaluating our operating results in the same manner as our management and board of directors. 38 We believe it is useful to exclude non-cash charges, such as depreciation and amortization and share-based compensation 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.
Because of these limitations, you should consider adjusted EBITDA and adjusted EBITDA margin alongside other financial performance measures, including various cash flow metrics, net income (loss), net margin, and our other GAAP results.
Because of these limitations, you should consider adjusted EBITDA and adjusted EBITDA margin alongside other financial performance measures, including various cash flow metrics, net income, net margin, and our other GAAP results.
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. Overview We are the largest pure-play pet e-tailer in the United States, offering virtually every product a pet needs.
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. Overview We are the largest pet e-tailer in the United States, offering virtually every product a pet needs.
We view net sales per active customer as a key indicator of our customers’ purchasing patterns, including their initial and repeat purchase behavior. 45 Autoship and Autoship Customer Sales We define Autoship customers as customers in a given fiscal quarter that had an order shipped through our Autoship subscription program during the preceding 364-day period.
We view net sales per active customer as a key indicator of our customers’ purchasing patterns, including their initial and repeat purchase behavior. 41 Autoship and Autoship Customer Sales We define Autoship customers as customers in a given fiscal quarter that had an order shipped through our Autoship subscription program during the preceding 364-day period.
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.
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, share repurchases, or other strategic investments. Our opinions concerning liquidity are based on currently available information.
Investing Activities Net cash used in investing activities was $287.4 million for Fiscal Year 2023, primarily consisting of $143.7 million for the purchase of marketable securities, net of maturities and $143.3 million for capital expenditures related to the launch of new and future fulfillment centers and additional investments in technology hardware and software.
Net cash used in investing activities was $287.4 million for Fiscal Year 2023, primarily consisting of $143.7 million for the purchase of marketable securities, net of maturities and $143.3 million for capital expenditures related to the launch of new and future fulfillment centers and additional investments in IT hardware and software.
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 2023 (“10-K Report”).
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 2024 (“10-K Report”).
We have provided a reconciliation below of adjusted EBITDA to net income (loss), the most directly comparable GAAP financial measure.
We have provided a reconciliation below of adjusted EBITDA to net income, the most directly comparable GAAP financial measure.
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 2038. Real estate obligations include legally binding minimum lease payments for operating lease arrangements which have not yet commenced.
Operating and real estate lease obligations relate to fulfillment and customer service centers, veterinary clinics, corporate offices and certain equipment under non-cancelable operating leases, which expire at various dates through 2038. Real estate obligations include legally binding minimum lease payments for operating lease arrangements which have not yet commenced.
We are the trusted source for pet parents and partners and continually develop innovative ways for our customers to engage with us. We partner with approximately 3,500 of the best and most trusted brands in the pet industry, and we create and offer our own outstanding private brands.
We are the trusted source for pet parents and partners and continually develop innovative ways for our customers to engage with us. We partner with approximately 3,200 of the best and most trusted brands in the pet industry, and we create and offer our own outstanding private brands.
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 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 refunds, and net of any promotional offers (such as percentage discounts off current purchases and other similar offers) for that quarter.
Sales of third-party brand and private 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.
Sales of third-party brand and private brand pet food, pet products and shipping revenues are recorded when products are shipped, net of promotional discounts and refunds and allowances. Taxes collected from customers are excluded from net sales.
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 provided a reconciliation below of free cash flow to net cash provided by operating activities, the most directly comparable GAAP financial measure.
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 2023 to Fiscal Year 2022.
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 2024 to Fiscal Year 2023.
A similar discussion and analysis which compares Fiscal Year 2022 to Fiscal Year 2021 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 SEC on March 22, 2023, and is incorporated herein by reference.
A similar discussion and analysis which compares Fiscal Year 2023 to Fiscal Year 2022 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 SEC on March 20, 2024, and is incorporated herein by reference.
Other Income (Expense), net Our other income (expense), net consists of changes in the fair value of equity warrants and investments, foreign currency transaction gains and losses, and allowances for credit losses.
Other Income (Expense), net Our other income (expense), net consists of changes in the fair value of equity warrants, equity investments, tax indemnification receivables, foreign currency transaction gains and losses, and allowances for credit losses.
Through our websites and mobile applications, we offer our customers approximately 115,000 products, compelling merchandising, an easy and enjoyable shopping experience, and exceptional customer service. Macroeconomic Considerations Evolving macroeconomic conditions, including rising inflation and interest rates, have affected, and continue to affect, our business and consumer shopping behavior.
Through our websites and mobile applications, we offer our customers approximately 130,000 products, compelling merchandising, an easy and enjoyable shopping experience, and exceptional customer service. Macroeconomic Considerations Evolving macroeconomic conditions, including current inflation levels and high interest rates, have affected, and continue to affect, our business and consumer shopping behavior.
Our 2021 fiscal year ended January 30, 2022 and included 52 weeks (“Fiscal Year 2021”). We have provided restated financial and operating data for the historical comparative periods in Management’s Discussion and Analysis of Financial Condition and Results of Operations of this 10-K Report.
Our 2022 fiscal year ended January 29, 2023 and included 52 weeks (“Fiscal Year 2022”). We have provided restated financial and operating data for the historical comparative periods in Management’s Discussion and Analysis of Financial Condition and Results of Operations of this 10-K Report.
Fiscal Year End We have a 52- or 53-week fiscal year ending each year on the Sunday that is closest to January 31 of that year. Our 2023 fiscal year ended January 28, 2024 and included 52 weeks (“Fiscal Year 2023”). Our 2022 fiscal year ended January 29, 2023 and included 52 weeks (“Fiscal Year 2022”).
Fiscal Year End We have a 52- or 53-week fiscal year ending each year on the Sunday that is closest to January 31 of that year. Our 2024 fiscal year ended February 2, 2025 and included 53 weeks (“Fiscal Year 2024”). Our 2023 fiscal year ended January 28, 2024 and included 52 weeks (“Fiscal Year 2023”).
The increase in cost of goods sold was lower than the increase in net sales on a percentage basis, reflecting supply chain efficiency gains across our fulfillment network. Gross profit for Fiscal Year 2023 increased by $327.0 million, or 11.5%, to $3.2 billion compared to $2.8 billion in Fiscal Year 2022.
The increase in cost of goods sold was lower than the increase in net sales on a percentage basis, reflecting supply chain efficiency gains across our fulfillment network. Gross profit for Fiscal Year 2024 increased by $306.2 million, or 9.7%, to $3.5 billion compared to $3.2 billion in Fiscal Year 2023.
As of January 28, 2024, operating and real estate lease obligations included legally binding minimum lease payments of $900.4 million. For additional information related to real estate and operating leases, see Note 9 – Leases, in the “Notes to Consolidated Financial Statements” included in Part II, Item 8, Financial Statements and Supplementary Data, of this 10-K Report.
As of February 2, 2025, operating and real estate lease obligations included legally binding minimum lease payments of $850.8 million. For additional information related to real estate and operating leases, see Note 9 – Leases, in the “Notes to Consolidated Financial Statements” included in Part II, Item 8, Financial Statements and Supplementary Data, of this 10-K Report.
Our marketing expenses increased due to additional investment in our upper funnel marketing channels as well as expansion into new channels, contributing to new customer acquisition and an increase in wallet share from our large and stable customer base during Fiscal Year 2023.
Our marketing expenses increased due to additional investment in our lower and upper funnel marketing channels as well as expansion into Canada, contributing to new customer acquisition, customer retention, and an increase in wallet share from our large and stable customer base.
Advertising and Marketing Advertising and marketing expenses consist of advertising and payroll related expenses for personnel engaged in marketing, business development and selling activities. 46 Interest Income (Expense), net We generate interest income from our cash and cash equivalents and marketable securities. We incur interest expense from our credit facilities and finance leases.
Advertising and Marketing Advertising and marketing expenses consist of advertising and payroll related expenses for personnel engaged in marketing, business development and selling activities. 42 Interest Income (Expense), net We generate interest income from our cash and cash equivalents and marketable securities. We incur interest expense in relation to our borrowing facilities, finance leases, and uncertain tax positions.
Cost of Goods Sold and Gross Profit Cost of goods sold for Fiscal Year 2023 increased by $701.7 million, or 9.6%, to $8.0 billion compared to $7.3 billion in Fiscal Year 2022. This increase was primarily due to an increase in associated product, outbound freight, and shipping supply costs.
Cost of Goods Sold and Gross Profit Cost of goods sold for Fiscal Year 2024 increased by $407.4 million, or 5.1%, to $8.4 billion compared to $8.0 billion in Fiscal Year 2023. This increase was primarily due to an increase in associated product, outbound freight, and shipping supply costs.
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.
Selling, General and Administrative Selling, general and administrative expenses consist of fulfillment costs incurred in operating and staffing fulfillment centers, customer service centers, and veterinary clinics; payroll and related expenses for employees involved in general corporate functions, including accounting, finance, tax, legal and human resources; costs associated with the use of facilities and equipment, such as depreciation expense and rent; share-based compensation, professional fees and other general corporate costs.
This increase was primarily driven by growth in customer spending from both new and existing customers, and the frequency with which customers purchase and subscribe to our Autoship subscription program. Net sales per active customer increased $59, or 11.9%, to $555 in Fiscal Year 2023 compared to Fiscal Year 2022, driven by growth across our consumables and healthcare businesses.
This increase was primarily driven by growth in customer spending from new and existing customers, and the frequency with which customers purchase and subscribe to our Autoship subscription program. Net sales per active customer increased $23, or 4.1%, to $578 in Fiscal Year 2024 compared to Fiscal Year 2023, driven by growth across our healthcare and specialty businesses.
(in thousands) Fiscal Year Reconciliation of Net Cash Provided by Operating Activities to Free Cash Flow 2023 2022 2021 Net cash provided by operating activities $ 486,211 $ 349,777 $ 191,743 Deduct: Capital expenditures (143,282) (230,310) (183,186) Free Cash Flow $ 342,929 $ 119,467 $ 8,557 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.
The following table presents a reconciliation of net cash provided by operating activities to free cash flow for each of the periods indicated: (in thousands) Fiscal Year Reconciliation of Net Cash Provided by Operating Activities to Free Cash Flow 2024 2023 2022 Net cash provided by operating activities $ 596,325 $ 486,211 $ 349,777 Deduct: Capital expenditures (143,831) (143,282) (230,310) Free Cash Flow $ 452,494 $ 342,929 $ 119,467 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, pharmacy facilities, veterinary clinics, customer service infrastructure, 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.
Capital expenditures were related to the launch of new fulfillment centers, the launch and expansion of corporate offices, and the capitalization of labor and license costs associated with software development for internal use. 49 Financing Activities Net cash provided by financing activities was $71.6 million for Fiscal Year 2023, and consisted of $60.6 million of proceeds from the parent reorganization transaction and $22.0 million of capital contributions from the parent reorganization transaction, partially offset by $10.3 million of payments made pursuant to the tax sharing agreement with related parties, principal repayments of finance lease obligations, and payment of debt modification costs.
Net cash provided by financing activities was $71.6 million for Fiscal Year 2023, and consisted of $60.6 million of proceeds from the parent reorganization transaction and $22.0 million of capital contributions from the parent reorganization transaction, partially offset by $10.3 million of payments made pursuant to the tax sharing agreement with related parties, principal repayments of finance lease obligations, and payment of debt modification costs.
Adjusted net income (loss) and adjusted basic and diluted earnings (loss) per share have limitations as financial measures and you should not consider them in isolation or as substitutes for analysis of our results as reported under GAAP.
Adjusted net income and adjusted basic and diluted earnings per share have limitations as financial measures and you should not consider them in isolation or as substitutes for analysis of our results as reported under GAAP. Other companies may calculate adjusted net income and adjusted basic and diluted earnings per share differently, which reduces their usefulness as comparative measures.
For additional information on derivative financial instruments, see Note 4 – Financial Instruments, in the “Notes to Consolidated Financial Statements” included in Part II, Item 8, Financial Statements and Supplementary Data, of this 10-K Report.
For additional information on deferred tax assets and liabilities, see Note 13 – Income Taxes, in the “Notes to Consolidated Financial Statements” included in Part II, Item 8, Financial Statements and Supplementary Data, of this 10-K Report.
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 2023 increased by approximately 40 basis points compared to Fiscal Year 2022, primarily due to margin expansion across our healthcare, hardgoods, and private brands businesses.
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 2024 increased by approximately 80 basis points compared to Fiscal Year 2023, primarily due to supply chain efficiency gains across our network as well as margin expansion across our consumables and healthcare businesses.
Based on our borrowing base as of January 28, 2024, which is reduced by standby letters of credit, we had $759.0 million of borrowing capacity under the ABL Credit Facility. As of January 28, 2024, we had no outstanding borrowings under the ABL Credit Facility.
Based on our borrowing base as of February 2, 2025, which is reduced by standby letters of credit, we had $782.6 million of borrowing capacity under the ABL Credit Facility. As of February 2, 2025, we had no outstanding borrowings under the ABL Credit Facility.
We believe it is useful to exclude non-cash share-based compensation expense 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 non-cash share-based compensation expense 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 releases of valuation allowances associated with deferred tax assets as this is not a component of our core business operations.
(in thousands, except percentages) Fiscal Year Reconciliation of Net Income (Loss) to Adjusted EBITDA 2023 2022 2021 Net income (loss) $ 39,580 $ 49,899 $ (75,207) Add (deduct): Depreciation and amortization 109,693 83,440 55,319 Share-based compensation expense and related taxes 248,543 163,211 85,308 Interest (income) expense, net (58,501) (9,290) 1,641 Change in fair value of equity warrants (13,079) 13,340 — Income tax provision 8,650 2,646 — Severance costs 14,348 — — Exit costs 6,839 — — Transaction related costs 7,827 3,953 2,423 Other 4,168 (460) 7,990 Adjusted EBITDA $ 368,068 $ 306,739 $ 77,474 Net sales $ 11,147,720 $ 10,119,000 $ 8,967,407 Net margin 0.4 % 0.5 % (0.8) % Adjusted EBITDA margin 3.3 % 3.0 % 0.9 % 43 Adjusted Net Income (Loss) and Adjusted Basic and Diluted Earnings (Loss) per Share To provide investors with additional information regarding our financial results, we have disclosed here and elsewhere in this 10-K Report adjusted net income (loss) and adjusted basic and diluted earnings (loss) per share, which represent non-GAAP financial measures.
The following table presents a reconciliation of net income to adjusted EBITDA, as well as the calculation of net margin and adjusted EBITDA margin, for each of the periods indicated: (in thousands, except percentages) Fiscal Year Reconciliation of Net Income to Adjusted EBITDA 2024 2023 2022 Net income $ 392,738 $ 39,580 $ 49,899 Add (deduct): Depreciation and amortization 114,557 109,693 83,440 Share-based compensation expense and related taxes 332,085 248,543 163,211 Interest income, net (35,068) (58,501) (9,290) Change in fair value of unvested equity warrants (2,369) (13,079) 13,340 Income tax (benefit) provision (241,045) 8,650 2,646 Severance costs — 14,348 — Exit costs — 6,839 — Transaction related costs 1,607 7,827 3,953 Other 8,032 4,168 (460) Adjusted EBITDA $ 570,537 $ 368,068 $ 306,739 Net sales $ 11,861,335 $ 11,147,720 $ 10,119,000 Net margin 3.3 % 0.4 % 0.5 % Adjusted EBITDA margin 4.8 % 3.3 % 3.0 % 39 Adjusted Net Income and Adjusted Basic and Diluted Earnings per Share To provide investors with additional information regarding our financial results, we have disclosed here and elsewhere in this 10-K Report adjusted net income and adjusted basic and diluted earnings per share, which represent non-GAAP financial measures.
Fiscal Year % change (in thousands, except net sales per active customer, per share data, and percentages) 2023 2022 2021 2023 vs. 2022 2022 vs. 2021 Financial and Operating Data Net sales $ 11,147,720 $ 10,119,000 $ 8,967,407 10.2 % 12.8 % Net income (loss) (1) $ 39,580 $ 49,899 $ (75,207) (20.7) % 166.3 % Net margin (1) 0.4 % 0.5 % (0.8) % Adjusted EBITDA (2) $ 368,068 $ 306,739 $ 77,474 20.0 % 295.9 % Adjusted EBITDA margin (2) 3.3 % 3.0 % 0.9 % Adjusted net income (2) $ 296,231 $ 226,450 $ 10,101 30.8 % n/m Earnings (loss) per share, basic (1) $ 0.09 $ 0.12 $ (0.18) (25.0) % 166.7 % Earnings (loss) per share, diluted (1) $ 0.09 $ 0.12 $ (0.18) (25.0) % 166.7 % Adjusted earnings per share, basic (2) $ 0.69 $ 0.54 $ 0.02 27.8 % n/m Adjusted earnings per share, diluted (2) $ 0.69 $ 0.53 $ 0.02 30.2 % n/m Net cash provided by operating activities $ 486,211 $ 349,777 $ 191,743 39.0 % 82.4 % Free cash flow (2) $ 342,929 $ 119,467 $ 8,557 187.0 % n/m Active customers 20,083 20,405 20,663 (1.6) % (1.2) % Net sales per active customer $ 555 $ 496 $ 434 11.9 % 14.3 % Autoship customer sales $ 8,493,199 $ 7,407,930 $ 6,324,145 14.7 % 17.1 % Autoship customer sales as a percentage of net sales 76.2 % 73.2 % 70.5 % n/m - not meaningful (1) Includes share-based compensation expense, including related taxes, of $248.5 million, $163.2 million, and $85.3 million, for Fiscal Year 2023, Fiscal Year 2022, and Fiscal Year 2021, respectively.
Fiscal Year % change (in thousands, except net sales per active customer, per share data, and percentages) 2024 2023 2022 2024 vs. 2023 2023 vs. 2022 Financial and Operating Data Net sales $ 11,861,335 $ 11,147,720 $ 10,119,000 6.4 % 10.2 % Net income (1) $ 392,738 $ 39,580 $ 49,899 n/m (20.7) % Net margin (1) 3.3 % 0.4 % 0.5 % Adjusted EBITDA (2) $ 570,537 $ 368,068 $ 306,739 55.0 % 20.0 % Adjusted EBITDA margin (2) 4.8 % 3.3 % 3.0 % Adjusted net income (2) $ 446,785 $ 296,231 $ 226,450 50.8 % 30.8 % Earnings per share, basic (1) $ 0.93 $ 0.09 $ 0.12 n/m (25.0) % Earnings per share, diluted (1) $ 0.91 $ 0.09 $ 0.12 n/m (25.0) % Adjusted earnings per share, basic (2) $ 1.06 $ 0.69 $ 0.54 53.6 % 27.8 % Adjusted earnings per share, diluted (2) $ 1.04 $ 0.69 $ 0.53 50.7 % 30.2 % Net cash provided by operating activities $ 596,325 $ 486,211 $ 349,777 22.6 % 39.0 % Free cash flow (2) $ 452,494 $ 342,929 $ 119,467 31.9 % 187.0 % Active customers 20,514 20,083 20,405 2.1 % (1.6) % Net sales per active customer $ 578 $ 555 $ 496 4.1 % 11.9 % Autoship customer sales $ 9,393,326 $ 8,493,199 $ 7,407,930 10.6 % 14.7 % Autoship customer sales as a percentage of net sales 79.2 % 76.2 % 73.2 % n/m - not meaningful (1) Includes share-based compensation expense, including related taxes, of $332.1 million, $248.5 million, and $163.2 million, for Fiscal Year 2024, Fiscal Year 2023, and Fiscal Year 2022, respectively.
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 operating activities to free cash flow for each of the periods indicated.
Because of these limitations, you should consider free cash flow alongside other financial performance measures, including net cash provided by operating activities, capital expenditures and our other GAAP results.
Cash increases from working capital were primarily driven by an increase in other current liabilities and payables, partially offset by an increase in other current assets, inventories, and receivables.
This increase was primarily driven by an increase in other current liabilities and payables, partially offset by an increase in inventories, receivables, and other current assets.
Selling, General and Administrative Selling, general and administrative expenses for Fiscal Year 2023 increased by $314.0 million, or 14.8%, to $2.4 billion compared to $2.1 billion in Fiscal Year 2022.
Selling, General and Administrative Selling, general and administrative expenses for Fiscal Year 2024 increased by $108.3 million, or 4.4%, to $2.6 billion compared to $2.4 billion in Fiscal Year 2023.
Fiscal Year % change % of net sales (in thousands, except percentages) 2023 2022 2021 2023 vs. 2022 2022 vs. 2021 2023 2022 2021 Consolidated Statements of Operations Net sales $ 11,147,720 $ 10,119,000 $ 8,967,407 10.2 % 12.8 % 100.0 % 100.0 % 100.0 % Cost of goods sold 7,986,202 7,284,505 6,581,936 9.6 % 10.7 % 71.6 % 72.0 % 73.4 % Gross profit 3,161,518 2,834,495 2,385,471 11.5 % 18.8 % 28.4 % 28.0 % 26.6 % Operating expenses: Selling, general and administrative 2,442,683 2,128,688 1,840,135 14.8 % 15.7 % 21.9 % 21.0 % 20.5 % Advertising and marketing 742,460 649,386 618,902 14.3 % 4.9 % 6.7 % 6.4 % 6.9 % Total operating expenses 3,185,143 2,778,074 2,459,037 14.7 % 13.0 % 28.6 % 27.4 % 27.4 % (Loss) income from operations (23,625) 56,421 (73,566) (141.9) % 176.7 % (0.2) % 0.6 % (0.8) % Interest income (expense), net 58,501 9,290 (1,641) n/m n/m 0.5 % 0.1 % — % Other income (expense), net 13,354 (13,166) — 201.4 % n/m 0.1 % (0.1) % — % Income (loss) before income tax provision 48,230 52,545 (75,207) (8.2) % 169.9 % 0.4 % 0.5 % (0.8) % Income tax provision 8,650 2,646 — 226.9 % n/m 0.1 % — % — % Net income (loss) $ 39,580 $ 49,899 $ (75,207) (20.7) % 166.3 % 0.4 % 0.5 % (0.8) % n/m - not meaningful Net Sales Fiscal Year 2023 vs. 2022 2022 vs. 2021 (in thousands, except percentages) 2023 2022 2021 $ Change % Change $ Change % Change Consumables $ 8,014,645 $ 7,145,414 $ 6,102,367 $ 869,231 12.2 % $ 1,043,047 17.1 % Hardgoods 1,209,161 1,215,689 1,305,937 (6,528) (0.5) % (90,248) (6.9) % Other 1,923,914 1,757,897 1,559,103 166,017 9.4 % 198,794 12.8 % Net sales $ 11,147,720 $ 10,119,000 $ 8,967,407 $ 1,028,720 10.2 % $ 1,151,593 12.8 % 47 Net sales for Fiscal Year 2023 increased by $1.0 billion, or 10.2%, to $11.1 billion compared to $10.1 billion for Fiscal Year 2022.
Fiscal Year % change % of net sales (in thousands, except percentages) 2024 2023 2022 2024 vs. 2023 2023 vs. 2022 2024 2023 2022 Consolidated Statements of Operations Net sales $ 11,861,335 $ 11,147,720 $ 10,119,000 6.4 % 10.2 % 100.0 % 100.0 % 100.0 % Cost of goods sold 8,393,631 7,986,202 7,284,505 5.1 % 9.6 % 70.8 % 71.6 % 72.0 % Gross profit 3,467,704 3,161,518 2,834,495 9.7 % 11.5 % 29.2 % 28.4 % 28.0 % Operating expenses: Selling, general and administrative 2,551,004 2,442,683 2,128,688 4.4 % 14.8 % 21.5 % 21.9 % 21.0 % Advertising and marketing 804,113 742,460 649,386 8.3 % 14.3 % 6.8 % 6.7 % 6.4 % Total operating expenses 3,355,117 3,185,143 2,778,074 5.3 % 14.7 % 28.3 % 28.6 % 27.4 % Income (loss) from operations 112,587 (23,625) 56,421 n/m (141.9) % 0.9 % (0.2) % 0.6 % Interest income, net 35,068 58,501 9,290 (40.1) % n/m 0.3 % 0.5 % 0.1 % Other income (expense), net 4,038 13,354 (13,166) (69.8) % 201.4 % 0.0 % 0.1 % (0.1) % Income before income tax (benefit) provision 151,693 48,230 52,545 214.5 % (8.2) % 1.3 % 0.4 % 0.5 % Income tax (benefit) provision (241,045) 8,650 2,646 n/m 226.9 % (2.0) % 0.1 % 0.0 % Net income $ 392,738 $ 39,580 $ 49,899 n/m (20.7) % 3.3 % 0.4 % 0.5 % n/m - not meaningful Net Sales Fiscal Year 2024 vs. 2023 2023 vs. 2022 (in thousands, except percentages) 2024 2023 2022 $ Change % Change $ Change % Change Consumables $ 8,396,144 $ 8,014,645 $ 7,145,414 $ 381,499 4.8 % $ 869,231 12.2 % Hardgoods 1,267,053 1,209,161 1,215,689 57,892 4.8 % (6,528) (0.5) % Other 2,198,138 1,923,914 1,757,897 274,224 14.3 % 166,017 9.4 % Net sales $ 11,861,335 $ 11,147,720 $ 10,119,000 $ 713,615 6.4 % $ 1,028,720 10.2 % 43 Net sales for Fiscal Year 2024 increased by $713.6 million, or 6.4%, to $11.9 billion compared to $11.1 billion for Fiscal Year 2023.
Interest Income (Expense), net Interest income for Fiscal Year 2023 increased by $49.2 million, to $58.5 million compared to interest income of $9.3 million in Fiscal Year 2022. This increase was due in large part to interest income generated by investment of proceeds from the parent reorganization transaction, cash and cash equivalents, and marketable securities exceeding interest expenses incurred.
While interest income generated by cash and cash equivalents, and marketable securities exceeded interest expenses incurred in Fiscal Year 2024, this decrease was due in large part to additional interest income generated by investment of proceeds from the parent reorganization transaction in Fiscal Year 2023.
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.
As of February 2, 2025, the total unpaid cost of share repurchases was $5.6 million, which included $5.1 million for excise taxes. 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.
Marketable securities consist primarily of U.S. treasury securities, certificates of deposit, and commercial paper and totaled $531.8 million as of January 28, 2024, an increase of $184.8 million from January 29, 2023. 48 We believe that our cash and cash equivalents, marketable securities, 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.
We believe that our cash and cash equivalents, marketable securities, 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.
Cash Flows Fiscal Year (in thousands) 2023 2022 2021 Net cash provided by operating activities $ 486,211 $ 349,777 $ 191,743 Net cash used in investing activities $ (287,363) $ (615,504) $ (193,272) Net cash provided by (used in) financing activities $ 71,598 $ (6,734) $ 41,261 Operating Activities Net cash provided by operating activities was $486.2 million for Fiscal Year 2023, which primarily consisted of $39.6 million of net income, non-cash adjustments such as depreciation and amortization expense of $109.7 million and share-based compensation expense of $239.1 million, and a cash increase of $105.7 million from the management of working capital.
Cash Flows Fiscal Year (in thousands) 2024 2023 2022 Net cash provided by operating activities $ 596,325 $ 486,211 $ 349,777 Net cash provided by (used in) investing activities $ 394,571 $ (287,363) $ (615,504) Net cash (used in) provided by financing activities $ (996,742) $ 71,598 $ (6,734) Operating Activities Net cash provided by operating activities was $596.3 million for Fiscal Year 2024, which primarily consisted of i) $392.7 million of net income, ii) non-cash adjustments of $197.2 million, including share-based compensation expense of $306.4 million, and depreciation and amortization expense of $114.6 million, partially offset by a deferred income tax benefit of $257.5 million, as well as iii) an increase of $33.8 million from working capital changes.
Net cash provided by operating activities was $349.8 million for Fiscal Year 2022, which primarily consisted of $49.9 million of net income, non-cash adjustments such as depreciation and amortization expense of $83.4 million and share-based compensation expense of $158.1 million, and a cash increase of $26.6 million from the management of working capital.
Net cash provided by operating activities was $486.2 million for Fiscal Year 2023, which primarily consisted of i) $39.6 million of net income, ii) non-cash adjustments of $377.1 million including share-based compensation expense of $239.1 million and depreciation and amortization expense of $109.7 million, as well as iii) an increase of $105.7 million from working capital changes.
Advertising and Marketing Advertising and marketing expenses for Fiscal Year 2023 increased by $93.1 million, or 14.3%, to $742.5 million compared to $649.4 million in Fiscal Year 2022.
The project will not require meaningful capital investment. Advertising and Marketing Advertising and marketing expenses for Fiscal Year 2024 increased by $61.6 million, or 8.3%, to $804.1 million compared to $742.5 million in Fiscal Year 2023.
We calculate adjusted net income (loss) as net income (loss) excluding share-based compensation expense and related taxes, changes in the fair value of equity warrants, and severance and exit costs. We calculate adjusted basic and diluted earnings (loss) per share by dividing adjusted net income (loss) attributable to common stockholders by the weighted-average shares outstanding during the period.
We calculate adjusted net income as net income excluding share-based compensation expense and related taxes, releases of valuation allowances associated with deferred tax assets, changes in the fair value of equity warrants, and severance and exit costs.
We have provided a reconciliation below of adjusted net income (loss) to net income (loss), the most directly comparable GAAP financial measure.
We calculate adjusted basic and diluted earnings per share by dividing adjusted net income attributable to common stockholders by the weighted-average shares outstanding during the period. We have provided a reconciliation below of adjusted net income to net income, the most directly comparable GAAP financial measure.
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.
Fulfillment costs include costs attributable to buying, receiving, inspecting and warehousing inventories, picking, packaging and preparing customer orders for shipment, payment processing, providing pet health services, 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.
Liquidity and Capital Resources We finance our operations and capital expenditures primarily through cash flows generated by operations. Our principal sources of liquidity are expected to be our cash and cash equivalents, marketable securities, and our revolving credit facility. Cash and cash equivalents consist primarily of cash on deposit with banks and investments in money market funds, U.S.
Our principal sources of liquidity are expected to be our cash and cash equivalents, marketable securities, and our revolving credit facility. Cash and cash equivalents consisted primarily of cash on deposit with banks. Cash and cash equivalents totaled $595.8 million as of February 2, 2025, a decrease of $6.5 million from January 28, 2024.
Net cash used in financing activities was $6.7 million for Fiscal Year 2022, which primarily consisted of $2.8 million of payments made pursuant to the tax sharing agreement with related parties, $2.5 million for payments of tax withholdings related to vesting of share-based compensation awards, payment of debt modification costs, and principal repayments of finance lease obligations.
Financing Activities Net cash used in financing activities was $996.7 million for Fiscal Year 2024, primarily consisting of $942.8 million for repurchases of common stock, $51.9 million for income taxes paid for, net of proceeds from, the parent reorganization transaction, payments for secondary offering costs, and principal repayments of finance lease obligations.
Removed
The following table presents a reconciliation of net income (loss) to adjusted EBITDA, as well as the calculation of net margin and adjusted EBITDA margin, for each of the periods indicated.
Added
Excluding net sales of $226.6 million in the 53rd week, net sales for Fiscal Year 2024 increased by $487.0 million, or 4.4%, to $11.6 billion compared to $11.1 billion for Fiscal Year 2023.
Removed
Other companies may calculate adjusted net income (loss) and adjusted basic and diluted earnings (loss) per share differently, which reduces their usefulness as comparative measures.
Added
This was primarily due to an increase of $83.5 million in non-cash share-based compensation expense and related taxes and an increase of $23.2 million in fulfillment costs attributable to the continued expansion of our pharmacy fulfillment network and launch of veterinary clinics. We have recently undertaken a project that will modernize our finance information technology architecture.
Removed
The following table presents a reconciliation of net income (loss) to adjusted net income, as well as the calculation of adjusted basic and diluted earnings (loss) per share, for each of the periods indicated.
Added
At the conclusion of this project, which we believe will occur towards the end of our 2025 fiscal year, we aim to have, among other things, (i) the ability to produce financial information across different segments of the Company, which supports scalability for future growth, (ii) expanded visibility and analytical capabilities with respect to our data, and (iii) an infrastructure that enables the use of artificial intelligence and other system advancements that will create further efficiencies for our team members.
Removed
Included within fulfillment costs are merchant processing fees charged by third parties that provide merchant processing services for credit cards.
Added
Interest Income (Expense), net Interest income for Fiscal Year 2024 decreased by $23.4 million, to $35.1 million compared to interest income of $58.5 million in Fiscal Year 2023.
Removed
This was primarily due to an increase of $151.7 million in facilities expenses and other general and administrative expenses, principally due to business growth and new initiatives as well as the expansion of operations at corporate offices in Plantation, Florida, and Seattle, Washington.
Added
Other Income (Expense), net Other income for Fiscal Year 2024 decreased by $9.4 million, to $4.0 million compared to other income of $13.4 million.
Removed
This also included an increase of $77.0 million in fulfillment costs largely attributable to investments to support the overall growth of our business, including the costs associated with the launch of operations in Canada and the opening and operating of fulfillment centers in Reno, Nevada and Nashville, Tennessee, as well as an increase of $85.3 million in non-cash share-based compensation expense and related taxes.
Added
This decrease was primarily due to smaller increases in the fair value of equity warrants as well as foreign currency transaction losses, partially offset by increases in the fair value of tax indemnification receivables and equity investments. 44 Liquidity and Capital Resources We finance our operations and capital expenditures primarily through cash flows generated by operations.
Removed
Other Income (Expense), net Other income for Fiscal Year 2023 increased by $26.5 million, to $13.4 million compared to other expense of $13.2 million. This increase consisted of changes in the fair value of equity warrants and investments as well as foreign currency transaction gains.
Added
Marketable securities consisted primarily of equity investments and U.S. Treasury securities and totaled $0.9 million as of February 2, 2025, a decrease of $530.9 million from January 28, 2024 due to the maturities and sales that occurred during Fiscal Year 2024.
Removed
Treasury securities, certificates of deposit, and commercial paper. Cash and cash equivalents totaled $602.2 million as of January 28, 2024, an increase of $270.6 million from January 29, 2023.
Added
This increase was primarily driven by an increase in other current liabilities and payables, partially offset by an increase in other current assets, inventories, and receivables. 45 Investing Activities Net cash provided by investing activities was $394.6 million for Fiscal Year 2024, primarily consisting of $538.4 million for the maturities and sales of marketable securities, partially offset by $143.8 million for capital expenditures related to the launch of new and future pharmacy facilities, veterinary clinics, and fulfillment centers as well as additional investments in IT hardware and software.
Removed
Cash increases from working capital were primarily driven by an increase in payables, partially offset by an increase in inventories and other current assets.
Added
Share Repurchase Activity On May 24, 2024, our Board of Directors authorized the Company to repurchase up to $500 million of its Class A common stock and/or Class B common stock, pursuant to a share repurchase program (the “Repurchase Program”).
Removed
Net cash used in investing activities was $615.5 million for Fiscal Year 2022, which primarily consisted of $343.8 million for the purchase of marketable securities, net of proceeds from maturities, $230.3 million of capital expenditures, and $40.0 million for cash paid for acquisitions of businesses, net of cash acquired.
Added
The actual timing and amount of any share repurchases remains subject to a variety of factors, including stock price, trading volume, market conditions, compliance with applicable legal requirements, and other general business considerations. We are not required to repurchase any specific dollar amount or to acquire any specific number of shares of common stock.
Removed
For additional information on deferred tax assets and liabilities, see Note 12 – Income Taxes, in the “Notes to Consolidated Financial Statements” included in Part II, Item 8, Financial Statements and Supplementary Data, of this 10-K Report. 50 Financial Instruments We hold derivative asset financial instruments in the form of equity warrants in other companies.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

1 edited+0 added−0 removed4 unchanged
Biggest changeAny 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. 51
Biggest changeAny 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. 47

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