PET VALU HOLDINGS LTD. FQ1 First Look: Solid Start, Outlook Unchanged
Pet Valu reported solid FQ1 results with same-store sales (SSS) just ahead
of our modest expectations and adjusted earnings better than expected
driven by better GM%. Management will host a conference call at 8:30 a.m.
ET; dial-in number is 1-833-950-0062 (ID: 440652).
SSS growth of 0.8% was just better than our estimate of 0.5% but further
ahead of consensus, which called for a decline of 0.1%. As expected, basket
size was the key driver (up 3.2%), offset by weakness in transaction count
(down 2.3%). Revenue of $261MM was right in line with our forecasts and
grew faster than systemwide-sales, driven by growth in wholesale shipments
(likely the early benefits of the ramp-up in shipments to Chico).
Adjusted EBITDA was 5% ahead of consensus on much better adjusted
GM% than feared, and down only 43 bps from the same quarter last year.
Higher occupancy costs from the new Toronto DC were the key drag, though
we will look for more colour on the net impact of pricing and promotional
activity, which has been expected to ramp in 2024. SG&A was in line with our
expectations and down 3% (135 bps) Y/Y. Adjusted EPS of $0.35 were 12%
ahead of consensus. Free cash flow of $23MM was modestly better than
expected. Net leverage of 2.1x is down from 2.3x last quarter but up from
1.8x at Q1/23, driven by the elevated 2023 capex spend.
Management left the full-year outlook unchanged. Key milestones in the
balance of FQ2 include the activation of the final phase of the Toronto DC,
the launch of the upgraded web platform and the introduction of a new
private-label brand in the freeze-dried and raw category