XML 32 R15.htm IDEA: XBRL DOCUMENT
v3.21.1

Income Taxes | 12 Months Ended
--- | ---
Jan. 31, 2021
Income Tax Disclosure [Abstract] |
Income Taxes | Income Taxes Chewy is subject to taxation in the U.S. and various state and local jurisdictions. The Company’s losses and tax attributes were previously included in PetSmart’s consolidated tax return activity at the U.S. federal level and any applicable state and local level. Income taxes as presented in the Company’s consolidated financial statements have been prepared based on the separate return method. As of January 31, 2021, Chewy is no longer a member of PetSmart’s affiliated group for U.S. federal income tax purposes. For presentation purposes, the Company has reduced the deferred tax attributes previously utilized by PetSmart, along with the associated valuation allowances, from the financial statements in order to properly reflect the deferred tax attributes available to the Company; this had no net impact on the Company’s income tax expense. The Company did not have a current or deferred provision for income taxes for any taxing jurisdiction during Fiscal Year 2020, Fiscal Year 2019, and Fiscal Year 2018. The Company’s effective income tax rate reconciliation is as follows for the periods presented:
| Fiscal Year
| 2020 |  | 2019 |  | 2018
Federal statutory rate | 21.0 | % |  | 21.0 | % |  | 21.0 | %
State income taxes, net of federal tax benefit | 20.6 | % |  | 4.4 | % |  | 1.5 | %
Change in tax rate | 1.7 | % |  | 0.6 | % |  | — | %
Share-based compensation | 73.0 | % |  | 4.0 | % |  | — | %
Research and development tax credit | 7.8 | % |  | 1.3 | % |  | — | %
Other | 0.9 | % |  | (3.4) | % |  | (1.1) | %
Change in valuation allowance | (125.0) | % |  | (27.9) | % |  | (21.4) | %
Effective rate | — | % |  | — | % |  | — | %
The temporary differences which comprise the Company’s deferred taxes are as follows for the periods presented (in thousands):
| As of
| January 31, 2021 |  | February 2, 2020
Deferred tax assets: |  |  |
Operating lease liabilities | $ | 89,117 |  |  | $ | 53,578 |
Inventories | 3,883 |  |  | 7,485 |
Share-based compensation | 31,372 |  |  | 29,639 |
Accrued expenses and reserves | 22,865 |  |  | 10,814 |
Other | 4,044 |  |  | 12,882 |
Net operating loss carryforwards | 87,881 |  |  | 190,307 |
Total deferred tax assets | 239,162 |  |  | 304,705 |
Less: valuation allowance | 124,012 |  |  | 242,974 |
Deferred tax assets, net of valuation allowance | 115,150 |  |  | 61,731 |
Deferred tax liabilities: |  |  |
Operating lease right-of-use assets | 76,249 |  |  | 44,428 |
Depreciation | 37,821 |  |  | 15,681 |
Prepaids | 1,080 |  |  | 1,622 |
Total deferred tax liabilities | 115,150 |  |  | 61,731 |
Net deferred tax assets | $ | — |  |  | $ | — |
Valuation Allowance The valuation allowance decreased by $119.0 million during Fiscal Year 2020. The decrease in the valuation allowance primarily relates to: (i) a decrease of $233.8 million relating to write-offs of attributes utilized by PetSmart, (ii) an increase of $1.5 million relating to changes to the Company’s state blended rate, (iii) an increase of $106.8 million relating to current year activity, and (iv) an increase of $6.5 million relating to miscellaneous adjustments to the Company’s deferred tax assets and liabilities. The ultimate realization of deferred tax assets depends on the generation of future taxable income during the periods in which those temporary differences are deductible. The Company considers the scheduled reversal of deferred tax liabilities (including the effect of available carryback and carryforward periods) in making this assessment. To fully utilize the net operating loss (“NOL”) and tax credits carryforwards the Company will need to generate sufficient future taxable income in each respective jurisdiction. Due to the Company’s history of losses, it is more likely than not that its deferred tax assets will not be realized as of January 31, 2021. Accordingly, the Company has established a full valuation allowance on its net deferred tax assets. A valuation allowance is recorded when it is more likely than not that some portion of the deferred tax assets will not be realized. To the extent that a valuation allowance has been established and it is subsequently determined that it is more likely than not that the deferred tax assets will be recovered, the valuation allowance will be released. The following summarizes the activity related to valuation allowances on deferred tax assets (in thousands):
| Fiscal Year
| 2020 |  | 2019 |  | 2018
Valuation allowance, as of beginning of period | $ | 242,974 |  |  | $ | 172,481 |  |  | $ | 115,143 |
Valuation allowances established | 113,286 |  |  | 69,009 |  |  | 57,232 |
Changes to existing valuation allowances | 1,528 |  |  | 1,484 |  |  | 106 |
Reduction of valuation allowance as a result of deconsolidation | (233,776) |  |  | — |  |  | — |
Valuation allowance, as of end of period | $ | 124,012 |  |  | $ | 242,974 |  |  | $ | 172,481 |
Net Operating Loss and Tax Credit Carryforwards As of January 31, 2021, the Company had federal and state NOL carryforwards of $295.8 million and $522.1 million, respectively, of which $25.1 million expire by 2032. The remaining $792.8 million expire after 2032, with $226.6 million having definitive expiration dates and the remaining $566.2 million with no expiration but can only be used to offset 80% of the Company’s future taxable income. The state NOLs are presented as an apportioned amount. NOLs generated in jurisdictions that were previously filed on a combined basis with PetSmart were reduced by $890.4 million in Fiscal Year 2020 as separate return accounting under ASC 740, Income Taxes, was no longer being applied. Therefore, all NOLs reported as of January 31, 2021 consist of amounts generated in previously consolidated jurisdictions post-tax deconsolidation, and in jurisdictions with separate entity filing since Chewy’s nexus inception date. As of January 31, 2021, the Company recorded a deferred tax asset of $87.9 million, before any valuation allowance, with respect to federal and state NOL carryforwards. These deferred tax assets expire as follows (in thousands):
2021 | $ | 36 |
2025 | 75 |
2028 | 10 |
2030 | 444 |
2032 | 881 |
Thereafter | 11,605 |
Indefinite | 74,830 |
Total loss carryforwards | $ | 87,881 |
The Company participates in various federal and state credit programs which provide credits against current and future tax liabilities. Credits not used in the current year are carried forward to future years. As of January 31, 2021, the Company had the following tax credit carryforwards (in thousands):
Year of Expiration | Research and Development |  | Work Opportunity |  |  |  | Total
2022 | $ | 62 |  |  | $ | — |  |  |  |  | $ | 62 |
2023 | 82 |  |  | — |  |  |  |  | 82 |
2039 | 1,536 |  |  | — |  |  |  |  | 1,536 |
2040 | 2,909 |  |  | 339 |  |  |  |  | 3,248 |
| $ | 4,589 |  |  | $ | 339 |  |  |  |  | $ | 4,928 |
Accounting for Uncertain Tax Positions The benefits of uncertain tax positions (“UTP”) are recorded in the Company’s consolidated financial statements only after establishing a more likely than not probability that the UTP will withstand challenge, if any, from tax authorities. As of January 31, 2021 and February 2, 2020, the Company did not have any uncertain tax positions. The Company is currently not involved in any income tax audits. During Fiscal Year 2020, the Company closed a federal income tax examination with the Internal Revenue Service (“IRS”) for the period from March 17, 2016 through December 31, 2016, which represents the stub period after the Company’s conversion to a corporation. The Company may be subject to examination by the IRS and various states for the year ended May 30, 2017 and thereafter. Tax Sharing Agreement Concurrent with the IPO in Fiscal Year 2019, the Company and PetSmart entered into a tax sharing agreement which governs the respective rights, responsibilities, and obligations of the Company and PetSmart with respect to tax matters, including taxes attributable to PetSmart, entitlement to refunds, allocation of tax attributes, preparation of tax returns, certain tax elections, control of tax contests and other tax matters regarding U.S. federal, state, and local income taxes. During Fiscal Years 2020 and 2019, the Company collected $23.2 million and $17.3 million, respectively, pursuant to the tax sharing agreement, which covers the periods prior to the tax deconsolidation. Though the tax sharing agreement was effectively terminated upon tax deconsolidation, future settlements will occur upon the filing of final tax returns. As of January 31, 2021, the Company had a $30.5 million receivable related to the tax sharing agreement which is expected to be collected during the next fiscal year.

X
- References No definition available. + Details
Name: | us-gaap_IncomeTaxDisclosureAbstract
Namespace Prefix: | us-gaap_
Data Type: | xbrli:stringItemType
Balance Type: | na
Period Type: | duration

X
- Definition The entire disclosure for income taxes. Disclosures may include net deferred tax liability or asset recognized in an enterprise's statement of financial position, net change during the year in the total valuation allowance, approximate tax effect of each type of temporary difference and carryforward that gives rise to a significant portion of deferred tax liabilities and deferred tax assets, utilization of a tax carryback, and tax uncertainties information. + References Reference 1: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 21 -URI http://asc.fasb.org/extlink&oid=84230637&loc=d3e32857-109319 Reference 2: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section S99 -Paragraph 2 -Subparagraph (SAB Topic 11.C) -URI http://asc.fasb.org/extlink&oid=116825942&loc=d3e330215-122817 Reference 3: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 17 -Subparagraph (b) -URI http://asc.fasb.org/extlink&oid=84230637&loc=d3e32809-109319 Reference 4: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section S99 -Paragraph 1 -Subparagraph (SAB TOPIC 6.I.5.Q1) -URI http://asc.fasb.org/extlink&oid=116825942&loc=d3e330036-122817 Reference 5: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 14 -URI http://asc.fasb.org/extlink&oid=84230637&loc=d3e32705-109319 Reference 6: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 270 -Section 50 -Paragraph 1 -URI http://asc.fasb.org/extlink&oid=6424409&loc=d3e44925-109338 Reference 7: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -URI http://asc.fasb.org/topic&trid=2144680 Reference 8: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 30 -Section 50 -Paragraph 2 -Subparagraph (a) -URI http://asc.fasb.org/extlink&oid=6424122&loc=d3e41874-109331 + Details
Name: | us-gaap_IncomeTaxDisclosureTextBlock
Namespace Prefix: | us-gaap_
Data Type: | nonnum:textBlockItemType
Balance Type: | na
Period Type: | duration