Striped kitten sitting next to a hound dog with a white background.

Chewy to Cut 522 Jobs When Fulfillment Center Closes

The company’s automation efforts have paid off and they will close their two oldest fulfillment centers.

Yesterday, online pet retailer Chewy announced that it plans to close its fulfillment Center in Silver Spring Township located in Cumberland County, Pennsylvania. As a result of this closure, 522 Chewy employees will lose their jobs effective June 3, 2023, reports WBAL. All employees will be given the opportunity to transfer to another fulfillment center. Chewy didn’t not say what support departing employees will receive.

Chewy released this statement to the media:

“Given the success of our automation initiatives, and the productivity benefits, we have made the decision to close one of our oldest fulfillment centers located in Mechanicsburg, PA and will move operations to an adjacent facility. All team members employed at our Mechanicsburg facility have been given the opportunity to transfer to another Fulfillment Center,” Diane Pelkey, Chewy communications/PR said.

Fourth-quarter and full-year financials for FY 2022

The news comes five days after Chewy reported its fourth-quarter and full-year financial results for the fiscal year ended January 29, 2023. Highlights from the shareholder letter include the following:

  • Q4 2022 net sales were $2.71 billion, a 13.4% increase year-over-year.
  • FY 2022 net sales were $10.1 billion, a 13.6% increase year-over-year.
  • The company finished the year with 20.4 million active customers, representing a slight decline.
  • Autoship customer sales grew 17.5% and generated 73.3% of fourth-quarter net sales.
  • Net sales per active customer was $495, a 15.1% increase year-over-year, deepening customer relationships.
  • Gross margin for Q4 was 28.1%, and the full year gross margin was 28.0%.
  • Net income for the quarter was $6.1 million, and net income for the full year was $49.2 million.

“Chewy’s fourth-quarter results cap an incredible year and looking ahead, we continue to be excited about the growth opportunities for our business. The pet category has a U.S. total addressable market that is over $130 billion, which has grown consistently through the ups and downs of economic cycles,” Chewy said in their shareholder letter.

“Importantly, we continue to see significant whitespace for expansion, and we remain committed towards innovating at a high pace across both new product and service offerings as well as technological and operational advancements,” the company added.

In the shareholder letter, Chewy said they planned to close their two oldest fulfillment centers though they did not provide details. They added that they are on track to open their fourth automated facility in Nashville in the first half of 2023. Chewy also plans to expand internationally in the next few quarters.

“In 2023 we expect to continue benefiting from the strategic investments we made just a few years ago in warehouse automation. Moving forward, we remain committed to demonstrating strong operating discipline in running the business, and tightly managing expenses along the way,” said Chewy.

Insider Take

This year, we see new layoffs almost daily, but they are usually a result of the need to tighten financial belts. In this case, Chewy is pitching this story as one of success. Their automations and innovations have been successful, as evidenced by their strong financials, but at the cost of 522 employees. At the same time, the company plans to add fulfillment centers and expand internationally. That must be a bitter pill for those who will lose their jobs.

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