Pet Valu Reports First Quarter 2025 Results

Pet Valu Reports First Quarter 2025 Results

Delivers 1.4% Same-Store Sales Growth⁽¹⁾, Grows Revenue 7%, and Reaffirms 2025 Outlook

MARKHAM, ON, May 6, 2025 /CNW/ - Pet Valu Holdings Ltd. ("Pet Valu" or the "Company") (TSX: PET), the leading Canadian specialty retailer of pet food and pet-related supplies, today announced its financial results for the first quarter ended March 29, 2025.

First Quarter Highlights

• System-wide sales⁽¹⁾ were $366.1 million, an increase of 3.8% versus Q1 2024. Same-store sales growth was 1.4%.
• Revenue was $279.1 million, up 7.0% versus Q1 2024.
• Adjusted EBITDA⁽²⁾ was $58.7 million, up 3.8% versus Q1 2024, representing 21.0% of revenue. Operating income was $37.4 million, up 12.2% versus Q1 2024.
• Net income was $21.8 million, up from $17.5 million in Q1 2024.
• Adjusted Net Income⁽²⁾ was $25.4 million or $0.36 per diluted share⁽³⁾, compared to $25.3 million or $0.35 per diluted share, respectively, in Q1 2024.
• Opened 7 new stores and ended the quarter with 830 stores across the network.
• The Board of Directors of the Company declared a dividend of $0.12 per common share.

2025 Outlook

• The Company expects revenue between $1.17 and $1.20 billion, Adjusted EBITDA between $254 and $260 million, Adjusted Net Income per Diluted Share between $1.60 and $1.66 and Net Capital Expenditures⁽²⁾ of approximately $35 million.

"We are off to a solid start to 2025, with our business delivering the results we expected in the first quarter," said Richard Maltsbarger, Chief Executive Officer of Pet Valu. "Our effective commercial plan, together with strong in-store execution by our ACEs and franchisees, helped deliver a return to positive same-store sales growth and acceleration in revenue growth to 7%.

"We look to build on this momentum as we move through the year, leveraging our differentiated merchandising strategy and agile operating structure to succeed in today's evolving environment," continued Mr. Maltsbarger. "All the while, we continue to advance the strategic investments to fuel long-term growth and profitability, such as the approaching completion of our supply chain transformation."

Financial Results for the First Quarter Fiscal 2025

All comparative figures below are for the 13-week period ended March 29, 2025, compared to the 13-week period ended March 30, 2024.

Revenue was $279.1 million in Q1 2025, an increase of $18.3 million, or 7.0%, compared to $260.8 million in Q1 2024. The increase in revenue was mostly driven by growth in franchise and other revenues and partially offset by a decline in retail sales.

Same-store sales growth was 1.4% in Q1 2025, primarily driven by a 2.6% increase in same-store average spend per transaction growth⁽¹⁾ partially offset by a 1.1% same-store transaction decline⁽¹⁾. This is compared to same-store sales growth of 0.8% in Q1 2024, which primarily consisted of a 3.2% increase in same-store average spend per transaction growth partially offset by a 2.3% same-store transaction decline.

Gross profit increased by $4.7 million, or 5.4%, to $92.1 million in Q1 2025, compared to $87.4 million in Q1 2024. Gross profit margin was 33.0% in Q1 2025, compared to 33.5% in Q1 2024. Excluding costs related to the supply chain transformation of  0.1% in Q1 2025 and 0.9% in Q1 2024, the gross profit margin was 33.1% in Q1 2025 and 34.4% in Q1 2024, respectively, and decreased by 1.3%. The decrease was primarily driven by: (i) wholesale merchandise sales; (ii) unfavorable product mix; and (iii) higher distribution and occupancy costs.

Selling, general and administrative ("SG&A") expenses were $54.7 million in Q1 2025, an increase of $0.6 million, or 1.2%, compared to $54.1 million in Q1 2024. SG&A expenses represented 19.6% and 20.7% of total revenue for Q1 2025 and Q1 2024, respectively. The increase of $0.6 million in SG&A expenses was primarily due to: (i) increased compensation costs; (ii) lower gain on sale of assets for re-franchised stores and other leasing costs; (iii) higher depreciation and amortization from store growth and investments in other assets; and (iv) higher marketing and advertising expenses; partially offset by (v) lower technology expenditures.

Adjusted EBITDA increased by $2.2 million, or 3.8%, to $58.7 million in Q1 2025, compared to $56.6 million in Q1 2024. The increase is explained by higher EBITDA⁽²⁾ of $5.4 million and $3.2 million of net lower adjustments from EBITDA for Q1 2025 compared to Q1 2024 from lower transformation costs, other professional fees, share-based compensation, and lower loss on foreign exchange. Adjusted EBITDA as a percentage of revenue⁽³⁾ was 21.0% and 21.7% in Q1 2025 and Q1 2024, respectively.

Net interest expense was $7.1 million in Q1 2025, a decrease of $1.4 million, or 16.6%, compared to $8.6 million in Q1 2024. The decrease was primarily driven by lower interest expense on the term facility resulting from lower interest rates and debt outstanding compared to Q1 2024.

Income taxes were $8.2 million in Q1 2025 compared to $6.8 million in Q1 2024, an increase of $1.4 million year over year. The increase in income taxes was primarily the result of higher taxable earnings in Q1 2025. The effective income tax rate was 27.5% in Q1 2025 compared to 28.0% in Q1 2024. The Q1 2025 and Q1 2024 effective tax rates were higher than the blended statutory rate of 26.5% due to non-deductible expenses.

Net income increased by $4.2 million to $21.8 million in Q1 2025, compared to $17.5 million in Q1 2024. The increase in net income is primarily explained by higher operating income, lower net interest expense, and lower loss on foreign exchange, partially offset by higher income taxes, as described above.

Adjusted Net Income increased by $0.1 million to $25.4 million in Q1 2025, compared to $25.3 million in Q1 2024. Adjusted Net Income as a percentage of revenue⁽³⁾ was 9.1% in Q1 2025 and 9.7% in Q1 2024, respectively. The increase is explained by the changes in net income described above, and net lower adjustments for Q1 2025 compared to Q1 2024 from lower transformation costs, which includes the adjustment for duplicative depreciation expense on property and equipment, and right-of-use assets  and interest expense on lease liabilities related to the supply chain transformation initiatives, lower other professional fees, lower share-based compensation, and lower loss on foreign exchange.

Adjusted Net Income per Diluted Share increased by $0.01 to $0.36 in Q1 2025, compared to $0.35 in Q1 2024. The 2.9% year over year increase results primarily from the changes in Adjusted Net Income and the factors described above.

Cash at the end of the first quarter totaled $36.9 million.

Net Capital Expenditures were $10.2 million in Q1 2025 compared to $11.2 million in Q1 2024, a decrease of $1.0 million primarily due to lower expenditures on store network expansion and construction in progress for the new distribution centres partially offset by lower proceeds on disposal of property and equipment from the sale of corporate-owned stores to franchisees.

Free Cash Flow⁽²⁾ amounted to $15.3 million in Q1 2025 compared to $23.1 million in Q1 2024, a decrease of $7.8 million primarily driven by a decrease in cash from operating activities and an increase in payments of principal and interest on lease liabilities due to the store network expansion; partially offset by an increase in cash provided by investing activities.

Inventory at the end of Q1 2025 was $133.7 million compared to $124.6 million at the end of Q4 2024, an increase of $9.1 million primarily to due to replenishment following the holiday season and to support the growth of our store network and wholesale penetration.

Dividends

On May 5, 2025, the Board of Directors of the Company declared a dividend of $0.12 per common share payable on June 16, 2025 to holders of common shares of record as at the close of business on May 30, 2025.

Outlook

Fiscal 2025 will be a 53-week fiscal year for Pet Valu, compared to a 52-week fiscal year in Fiscal 2024. Including the impact of the 53^rd week of operation in Fiscal 2025, the Company expects:

• Revenue between $1.17 and $1.20 billion, supported by approximately 40 new store openings, same-store sales growth between 1% and 4% and higher wholesale merchandise sales penetration;
• Adjusted EBITDA between $254 and $260 million, which incorporates continued price investments and normalization of operating expenses;
• Adjusted Net Income per Diluted Share between $1.60 and $1.66, which incorporates approximately $12 million pre-tax, or $0.12 per diluted share, of incremental depreciation and lease liability interest expense associated with the new distribution centres;
• Transformation costs of approximately $13 million pre-tax, and share-based compensation of approximately $11 million pre-tax, both of which are excluded from Adjusted EBITDA and Adjusted Net Income per Diluted Share; and
• Net Capital Expenditures of approximately $35 million.

The Company is closely monitoring the evolving governmental foreign trade environment and believes it has the appropriate mechanisms in place to adapt, as necessary. The above Outlook is based on several assumptions, including, but not limited to, governmental foreign trade policies currently in place as of this release.

Conference Call Details

A conference call to discuss the Company's first quarter results is scheduled for May 6, 2025, at 8:30 a.m. ET. To access Pet Valu's conference call, please dial 1-833-950-0062 (ID: 078561). A live webcast of the call will also be available through the Events & Presentations section of the Company's website at https://investors.petvalu.com/.

For those unable to participate, a playback will be available shortly after the conclusion of the call by dialing 1-866-813-9403 (ID: 284292) and will be accessible until May 13, 2025. The webcast will also be archived and available through the Events & Presentations section of the Company's website at https://investors.petvalu.com/.

About Pet Valu

Pet Valu is Canada's leading retailer of pet food and pet-related supplies with over 800 corporate-owned or franchised locations across the country. For more than 45 years, Pet Valu has earned the trust and loyalty of pet parents by offering knowledgeable customer service, a premium product offering and engaging in-store services. Through its neighbourhood stores and digital platform, Pet Valu offers more than 10,000 competitively-priced products, including a broad assortment of premium, super premium, holistic and award-winning proprietary brands. The Company is headquartered in Markham, Ontario and its shares trade on the Toronto Stock Exchange (TSX: PET). To learn more, please visit: www.petvalu.ca.

Non-IFRS and Other Financial Measures

This press release makes reference to certain non-IFRS measures and non-IFRS ratios. These measures and ratios are not recognized measures under IFRS and do not have a standardized meaning prescribed by IFRS. They are therefore unlikely to be comparable to similar measures presented by other companies. Rather, these measures are provided as additional information to complement IFRS measures by providing further understanding of the Company's results of operations from management's perspective. Accordingly, they should not be considered in isolation nor as a substitute for analysis of the Company's financial information reported under IFRS. Pet Valu uses non-IFRS measures, including "EBITDA", "Adjusted EBITDA", "Adjusted Net Income", "Free Cash Flow" and "Net Capital Expenditures", and non-IFRS ratios, including "Adjusted EBITDA as a percentage of revenue", "Adjusted Net Income as a percentage of revenue", and "Adjusted Net Income per Diluted Share". This press release also makes reference to certain supplementary financial measures that are commonly used in the retail industry, including "System-wide sales", "Same-store sales growth (decline)", "Same-store transaction growth (decline)" and "Same-store average spend per transaction growth (decline)". These non-IFRS measures, non-IFRS ratios and supplementary financial measures are used to provide investors with supplemental measures of Pet Valu's operating performance and thus highlight trends in its core business that may not otherwise be apparent when relying solely on IFRS financial measures. The Company also believes that securities analysts, investors and other interested parties frequently use non-IFRS measures, non-IFRS ratios and these supplementary financial measures in the evaluation of issuers. Management uses non-IFRS measures, non-IFRS ratios and supplementary financial measures in order to facilitate operating performance comparisons from period to period, to prepare annual operating budgets and to determine components of management compensation. Refer to the MD&A for the first quarter ended March 29, 2025 for further information on non-IFRS measures, non-IFRS ratios (including each non-IFRS measure that is used as a component of such non-IFRS ratios) and supplementary measures, including for their definition and, for non-IFRS measures, a reconciliation to the most comparable IFRS measure.

Forward-Looking Information

Some of the information contained in this press release is forward-looking information. Forward-looking information is provided as at the date of this press release and is based on management's opinions, estimates and assumptions in light of its experience and perception of historical trends, current trends, current conditions and expected future developments, as well as other factors that management believes appropriate and reasonable in the circumstances. Such forward-looking information is intended to provide information about management's current expectations and plans, and may not be appropriate for other purposes. Pet Valu does not undertake to update any such forward-looking information whether as a result of new information, future events or otherwise, except as required under applicable Canadian securities laws. Actual results and the timing of events may differ materially from those anticipated in the forward-looking information as a result of various factors. Particularly, information regarding our expectations of future results, targets, performance achievements, prospects or opportunities, including the information under the headings "2025 Outlook" and "Outlook" in this press release, is "future-oriented financial information" or a "financial outlook" within the meaning of applicable securities legislation, which is based on the factors and assumptions, and subject to the risks, as set out herein and in the Company's annual information form dated March 3, 2025 ("AIF"). In some cases, forward-looking information can be identified by the use of forward-looking terminology such as "plans", "targets", "expects" or "does not expect", "is expected", "an opportunity exists", "budget", "scheduled", "estimates", "outlook", "forecasts", "projection", "prospects", "strategy", "intends", "anticipates", "does not anticipate", "believes", "continue", or variations of such words and phrases or statements that certain actions, events or results "may", "could", "would", "should", "might", "will", "will be taken", "occur" or "be achieved". In addition, any statements that refer to expectations, intentions, projections or other characterizations of future events or circumstances contain forward-looking information.

Many factors could cause our actual results, level of activity, performance or achievements, future events or developments, or outlook to differ materially from those expressed or implied by the forward-looking information, including, without limitation, the factors discussed in the "Risk Factors" section of the AIF. A copy of the AIF and the Company's other publicly filed documents can be accessed under the Company's profile on SEDAR+ at www.sedarplus.ca.

The Company cautions that the list of risk factors and uncertainties described in the AIF is not exhaustive and other factors could also adversely affect its results. Readers are urged to consider the risks, uncertainties and assumptions carefully in evaluating forward-looking information and are cautioned not to place undue reliance on such information.

SELECTED CONSOLIDATED FINANCIAL INFORMATION

Condensed Interim Consolidated Statements of Income
(Unaudited, expressed in thousands of Canadian dollars, except per share amounts)

Reconciliation of Net Income to EBITDA and Adjusted EBITDA
(Unaudited, in thousands of Canadian dollars unless otherwise noted)

Reconciliation of Net Income to Adjusted Net Income
(Unaudited, in thousands of Canadian dollars unless otherwise noted)

Condensed Interim Consolidated Statements of Cash Flows
(Unaudited, in thousands of Canadian dollars)

Free Cash Flows
(Unaudited, expressed in thousands of Canadian dollars)

Condensed Interim Consolidated Statements of Financial Position
(Unaudited, expressed in thousands of Canadian dollars)

SOURCE Pet Valu Canada Inc.