CIBCCurrently have a $48.00 target. GLTA
EQUITY RESEARCH
November 8, 2022 Flash Research
PET VALU HOLDINGS LTD.
Q3 First Look: Another Beat And Raise
Pet Valu reported better-than-expected Q3 results, with adjusted EPS of
$0.43 ahead of CIBCe and consensus, both at $0.37, driven by better-than- expected GM%, strong same store sales (SSS) and SG&A leverage. SSS of 14.7% came in better than our estimate of 11.0% and was driven by traffic of 7.6% and basket of 6.6%. What stands out to us most though about the SSS result is that comps accelerated 550bps sequentially on a three-year compounded basis to 55.1% in Q3 from 49.6% from Q2. Though we suspect inflation is a factor, we believe this also underscores the strength of the various initiatives management has in place aimed at growing market share. Gross margins of 38.2% contracted less than expected as lower product margins and unfavourable FX were partially offset by duty recovery (COVID
relief) and the Chico acquisition.
Given the strong performance YTD, Pet Valu raised its full-year guidance
and now expects revenue between $938MM and $947MM (previously
$912MM to $928MM) based on SSS of 15.5% to 16.5% (from 13% to 15%). In terms of profitability, PET now expects adjusted EBITDA in the range of $212MM to $214MM (from $203MM to $207MM) and adjusted EPS between $1.56 and $1.58 (previously $1.47 to $1.51). Capex guidance ($35MM- $40MM) remains unchanged and the company narrowed its store opening guidance for F22 to the top end of the previous range (now 40-45 stores).
PET's updated F22 guide implies no upward revisions to Q4 EPS estimates: implied Q4 EPS between $0.40 and $0.42 vs. CIBCe/consensus of $0.42/$0.41, with FX and higher rates as headwinds. Despite this, we believe momentum remains excellent and margin forecasts embed, as in previous outlooks, an element of conservatism.
Management will host a conference call at 8:30am ET; dial-in number is 1- 888-350-3870 (ID: 5518274).