Raymond James’ Michael Glen to $38 from $39 with an “outperform” rating.
“As we parse through the details of Pet Valu’s 2Q results and outlook, we have made some downward adjustments to our model to reflect commentary surrounding a softer consumer trend, higher levels of promotions, and the associated impact on margins in 3Q,” he said. “That said, these adjustments are relatively modest in comparison to the stock price being down over 10 per cent with the earnings report (vs. TSX down 0.15 per cent). It would appear the biggest focal point for investors is the deceleration in SSSG to 6 per cent (1.2-per-cent traffic/4.8-per-cent basket), which we would also note was up against a very challenging 21.2 per cent comparable in 2Q22. From that perspective, while SSSG comparables will progressively ease through 2H, management is definitely emphasizing that the consumer environment is changing, and they will need to be more aggressive with near-term marketing efforts (i.e. Tuesday Flash Sales). As we look farther forward with the business, and think about the industry growth (i.e. mid single digit over the long-term), store growth (+40-50 new stores in 2023 and 1,200 long-term store target), and benefits to stem from the company’s supply chain initiatives, we believe an investor with a reasonable investment timeframe will make money with the stock.”
* Barclays’ Adrienne Yih to $35 from $41 with an “overweight” rating.
“Earnings came in above expectations driven by higher gross margin and SG&A leverage, and although the full year guidance was reiterated, the 3Q23 guidance came in lower driven by promotional and currency headwinds. With demand normalizing, the company is investing for long-term efficiencies as an omnichannel retailer,” said Ms. Yih.