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Bullboard - Stock Discussion Forum Pet Valu Holdings Ltd T.PET

Alternate Symbol(s):  PTVLF

Pet Valu Holdings Ltd. is a Canadian specialty retailer of pet food and pet-related supplies. The Company has over 800 corporate-owned or franchised locations across the country. Through its neighborhood stores and digital platform, the Company offers more than 9,000 competitively priced products, including an assortment of premium, super premium and holistic brands. Its family of stores... see more

TSX:PET - Post Discussion

View:
Post by retiredcf on Feb 28, 2024 8:33am

TD

Currently have a $38.00 target. GLTA

 

Pet Valu Holdings Ltd.

(PET-T) C$31.46

Expect PET to Hit Bottom of Guidance Despite Hardlines Softness

 

Event

PET will report Q4/23 results at 6:30 a.m. ET on March 5. Discretionary spending

appears to have remained weak, which reduces our Q4/23 SSS forecast to 3.0%

(from 4.5% previously) and our adjusted EPS to $0.53. Consensus is $0.51 (range:

$0.44-$0.54). Off this lower base, we now see SSS ramping back up to our long-

term 5% SSS assumption by Q4/24.
 

Impact: NEUTRAL
 

The 2% forecast EPS reduction is not overly meaningful, although it pushes us

to the bottom of the $1.60-1.63 guidance range for 2023. We still expect adjusted

EPS to increase 23% in Q4/23, supported by lower opex spend, ex-depreciation,

and 4%/17% in 2024/2025, held back initially by the higher depreciation and

interest tied to PET's substantial supply-chain investments.
 

We believe demand for discretionary hardlines (~20% of PET's sales) remained

under pressure through Q4/23 — declining LDD%; U.S. scanner data suggests

that the rate of decline moderated in January. Consumables and services

(~78%/2% of sales) are expected to grow ~6.5% (vs. HSD% in Q3/23 as inflation

moderated), with premium-tier products still outpacing. Overall, we now look for

SSSG of 3.0% in Q4/23 — the bottom end of management's implied guidance

for Q4/23 — led by inflation pass-through and minimal SS transaction growth

(loyalty program initiatives, offset by a shift to larger value-pack sizes). We assume

hardline sales will stabilize by mid-2024 and gradually improve to 5% by Q4/24

(averaging 3.9% in 2024).
 

We forecast 7.3% revenue growth (including 37 net new stores in LTM), and an

18% jump in adjusted EBITDA to $70.2mm as the benefits from the new GTA

DC surface (reduced labour hours, ramp-up in Chico distribution, and fewer 3PL

contracts), partly offset by unfavourable forex (30% of goods purchased in U.S.

dollars) and unfavourable mix (higher percentage of consumables vs. hardlines).
 

TD Investment Conclusion

PET has rebounded 30% over the past five months; at 18.8x our NTM EPS, it remains

among the lowest multiples within our peer group of high-growth retailers (23x-63x)

and franchisors (18x-26x). Although the stock could take a breather until SSS growth

re-accelerates, we still view PET as an attractive long-term growth story.

 
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