CIBCCurrently have a $48.00 target. GLTA
EQUITY RESEARCH
March 7, 2023 Flash Research
PET VALU HOLDINGS LTD.
Q4 First Look: Modest Q4 Beat with a Mixed F23 Outlook
Pet Valu reported Q4 results modestly ahead of consensus, driven by better
same-store sales and revenues, partially offset by GM% pressure. Adjusted
EPS of $0.43 came in a touch ahead of consensus at $0.42.
Same-store sales (SSS) of 11.8% were driven by basket of 6.9% and traffic
of 4.6%, and on a three-year compounded basis SSS decelerated 110bps
sequentially. Furthermore, PET gained 300bps of market share in 2022 and
now has an 18% share per Fusion Analytics. Active loyalty program
members now sit at ~2.4 million (vs. ~2 million last year) and include 0.1
million Chico Privilege Card members. GM% came in below expectations,
driven by unfavourable FX, higher wholesale shipments and sales mix while
SG&A deleveraged 106bps due to investments in headcount and wages.
PET introduced mixed F23 guidance which came in ahead of expectations
on the top line but below on EPS. F23 revenues are expected to be
$1,050MM to $1,075MM (consensus $1,025MM) based on SSS in the range
of 7% to 10% and 40 to 50 new store openings. With respect to profitability,
PET is expecting adjusted EBITDA of $230MM to $237MM (consensus
$231MM) with GM% expected to be below PET’s historical range of 35% to
36% due to unfavourable FX rates (recall 30% of PET’s products are
purchased in USD and the company does not hedge) and an 80bps
headwind from supply chain transformation costs, while higher interest
expense caps EPS guidance at $1.60 to $1.66 (street $1.71). Capex is
expected to be $60MM with half attributable to investments in supply chain.
Overall, we believe management’s guidance is prudent given the uncertain
outlook for consumer spending (particularly in H2), and believe that any
revisions as the year progresses will largely be driven by better-than-
expected top-line as cost headwinds will likely remain pronounced in F23.
Management will host a conference call at 8:30am EST; dial-in number is 1-
833-950-0062 (ID: 056004). The table in Exhibit 1 summarizes Q4 results,
our estimates and consensus.