Although sales surged for retailer Chewy during the coronavirus pandemic, shares fell on Friday after the company reported its fourth quarter earnings. Chewy CEO Sumit Singh joins Yahoo Finance’s On The Move to discuss how the online pet retailer company is faring as the COVID-19 outbreak continues to escalate.

Video Transcript

ADAM SHAPIRO: A stock that we keep an eye on, which is also trading down a bit today, is Chewy. Look, if you've got a pet-- a dog or a cat-- you most likely know about chewy. And the CEO, Sumit Singh, joins us right now to talk about the previous quarter's earnings, but looking forward. And it's so good to have you here on Yahoo Finance, Mr. Singh. Just want to ask you-- you're expecting first quarter net sales between $1.5 to $1.52 billion. And that exceeds what analysts were expecting. I gotta imagine people are stocking up. Is that good or bad, because they're pulling sales forward, aren't they?

SUMIT SINGH: Good morning. Good to be here. Yeah, we're seeing-- we're seeing a dual effect at this point. We're seeing 13.5 million of our active customers engage with us in making sure that we're delivering their essentials and supplies, and at the same time, we're also seeing a meaningful lift in new customers who are migrating to our platform as social distancing gets practiced even more and more and as pet adoption goes up and those pet parents need to be served. So we're proud to be serving, you know, a lot of these customers and different use cases during this time.

JULIE HYMAN: Sumit, it's interesting that the stock is going down today, given this increase in sales. And I know there is some concern around the margin picture sort of as a result of the upsurge in sales. And also, I know you all did not offer a forecast. What can you tell us about margins and what clarity, if any, you have on the business going forward?

SUMIT SINGH: Sure. You know, first of all, our record speaks for itself. Our performance speaks for itself, which is we have shown an ability to get big fast and also get fit fast in the process. You know, our gross margins were up 340 basis points for 2019 year, and our EBITDA margins were also significantly improved on a year-over-year basis. Now, in the current situation, first of all, we don't provide quarterly guidance. We're thoughtful about that. We only provide quarterly revenue guidances, which we did for Q1.

And you know, but if you would dive deep there, the situation's still evolving. We're seeing a lot of tailwind. We're seeing a lot of new customers migrate. We're seeing active customers engage with us. Basket-building remains strong. But at the same time, you know, we're unsure of how volatile the situation will be and how will it evolve. So it's prudent for us to continue to take care right now of our team members investing in health and sanitization and cleaning and added benefits, and at the same time, you know, being prudent about our marketing spending and all that stuff. These are all tailwinds. But since the-- and some of them are headwinds. So the situation evolves, we'll come out and talk to you a little bit more about that.

AKIKO FUJITA: Sumit, you've talked about hiring up at your fulfillment centers anywhere from 6,000 to 10,000 additional employees to meet the kind of demand you're seeing right now. When you look at the jobless claims, there are certainly a lot of people who are looking for jobs right now. But you've also got the counter side to that, which is these essential workers who are saying they don't really feel comfortable coming into work right now because the conditions in some of these centers. What kind of demand are you seeing for those openings you've now created?

SUMIT SINGH: Sure. Sure. So you're right. It is our obligation as leaders and companies to be able to provide people and put their safety and well-being first. We're doing a couple things. So to answer your question directly, we're seeing good demand. And we're seeing good fail rates against the forecasts that we're putting out there. I think there's a couple of things that we're doing that are also helping.

One, we've been very proactive and transparent in communicating. And communication during this time is paramount. People want to know what they're doing-- what we're doing. And internally, we're making sure that we're taking care of team members that way. Secondly, we've invested materially in up-taking on cleaning sanitization procedures. We've updated our benefits and health policies. We've invested in incentivization tactics across our customer service and fulfillment centers.

And for the most part, we have to acknowledge that people are stressed. But morale is continuing to hold, and we have a mutual obligation to each other. And we're proud to be serving so many pet parents during this time.

DAN ROBERTS: Sumit, Dan Roberts here. Thanks for joining us. Let me just ask you a twofold question-- you know, locally near my house in Connecticut, we have a pet store that we usually prefer to go to-- a brick and mortar store. So traditionally, we're not Chewy customers. But I believe that store just closed. So I wonder if, ironically-- you know, you hope that all these small businesses are going to be OK-- but if ironically you might gain new customers during this time because of local stores closing.

And then second, I'd ask how you're doing in terms of shipping times. Because with Amazon, obviously, it's become a big story right now a lot of regular items that we order from Amazon suddenly it says, oh, shipping, you know, in four weeks-- I've noticed that-- so a lot of delays coming from Amazon. Are you seeing the same delays? Because, obviously, with pet food-- dog food-- we need it when we need it.

SUMIT SINGH: Sure-- so two-part question there. In terms of new customers migrating to our platform, you know, we're not really measuring where they're coming from right now. I think customers largely are just-- are migrating to our platform because of the reliable service that we provide. So we're seeing that from every direction. In terms of the shipping delays, yes, we are experiencing, you know, a lengthened delivery time.

We're actually acknowledging that on our website, and we believe that being transparent with customers during this time is an important thing to do-- again, going back to communication. And we're also finding that customer sentiment towards our brand remains positive, and customers are understanding and forgiving during this time of duress and stress.

ADAM SHAPIRO: Sumit, as we wrap up-- I'm curious, what are you hearing-- because you have such a personal relationship with the customers when you send the baskets for a pet's birthday-- what are you hearing directly back from them? And as you close out, what are you most concerned about to get through the next three months?

SUMIT SINGH: Yeah, sure. What we're hearing from customers-- I alluded to this a bit earlier-- customers are empathetic towards our brand, our teammates, and you're right-- you know, we have an ability to personalize messages and communicate with customers and continue to build on these relationships. And these are tested during this time. And during these times, it is when you find out what your customers truly think and feel about you.

And we're very grateful to have their support. And you know, they're pouring out for positivity out in social media and in the way that they talk to our customer service agents. So all of that is good. Of course, you know, some of them are disappointed, and that's where we come in. And we're good about understanding that and responding in kind. In terms of looking forward, look, you know, we're obviously living in a bit of an evolving situation.

It's going to be important for us to continue to take care of well-being and caring for our team members internally while serving customers during this time. So there is a little bit of unknown, but whatever we can control, we're maniacally behind it and executing towards.

JULIE HYMAN: Sumit, I just want to pick up a little bit on what Dan was saying about people who are turning to you right now whose local pet supply store might be closed. What kind of stickiness is there in customers typically in a non-pandemic time? And what do you expect now? In other words, what percentage of your customers are recurring, for example?

SUMIT SINGH: Yeah, very good question. So we-- you know, your-- obviously, the infusion here is correct on we don't really know the quality of the cohort of this type of customer that we're acquiring in duress times. We know that when traditionally customers have engaged with our brand, our platform, our service, they tend to remain loyal customers for a long period of time due to the personalized memorable nature of our interaction with them.

During this time, you know, while we are not yet sure because data is still-- we're still in an early part of this crisis-- we will make sure we're not taking this for granted. And we're going to make sure that we engage with them in a positive manner throughout the crisis and beyond to turn them into loyal long term Chewy customers. That's kind of what we're focused on right now.

ADAM SHAPIRO: All right. Sumit Singh is the CEO of Chewy. And so many Americans right now are sheltered at home along with their pets. We saw the stories about the surge in pet adoptions as people were sheltering. So we appreciate your being here, and we wish everybody, the Chewy team, the best, as you keep supplying people with the necessities they need for their pets.