Pet Valu Reports Fourth Quarter and Fiscal Year 2023 Results
Grows Q4 Revenue by 8% and Adjusted EBITDA(1) by 20%
Raises Quarterly Dividend and Issues 2024 Outlook
Fourth Quarter Highlights
- System-wide sales(2) were
$379.0 million , an increase of 5.1% versus the prior year. Same-store sales growth(2) was 1.9%, driven by same-store average spend per transaction growth(2). - Revenue was
$286.9 million , up 7.8% versus the prior year, similar to system-wide sales growth. - Adjusted EBITDA was
$71.3 million , up 20.2% versus the prior year, representing 24.8% of revenue. Operating income was$48.3 million , up 13.8% versus the prior year. - Net income was
$28.8 million , up from$25.9 million in the prior year. - Adjusted Net Income(1) was
$39.1 million or$0.54 per diluted share, both up 25.6% versus the prior year. - Opened 17 new stores and ended the quarter with 783 stores across the network.
- The Board of Directors of the Company declared a dividend of
$0.11 per common share.
Fiscal Year Highlights
- System-wide sales were
$1,419.7 million , an increase of 10.0% versus the prior year. Same-store sales growth was 5.2%, primarily driven by same-store average spend per transaction growth. - Revenue was
$1,055.9 million , up 10.9% versus last year, similar to system-wide sales growth. - Adjusted EBITDA was
$231.0 million , up 7.5% versus the prior year, representing 21.9% of revenue. Operating income was$160.7 million , up 0.3% versus the prior year. - Net income was
$89.5 million , down from$100.8 million in the prior year. - Adjusted Net Income was
$116.5 million or$1.61 per diluted share, up 1.7% and 1.3%, respectively, versus the prior year.
2024 Outlook
- The Company expects revenue between
$1.11 and$1.14 billion , supported by same-store sales growth between 2% and 5% and 40-50 new store openings, Adjusted EBITDA between$248 and$254 million , and Adjusted Net Income per Diluted Share(3) between$1.57 and$1.63 .
"Our merchandising, marketing and in-store teams successfully navigated shifting consumer demand, to deliver revenue and profit growth in-line with our expectations for the fourth quarter and full year 2023," said
"Looking into 2024, we plan to deliver another year of growth, further strengthening our leadership in the Canadian pet industry," continued
Financial Results for the Fourth Quarter Fiscal 2023
All comparative figures below are for the 13-week period ended
Revenue was
Same-store sales growth was 1.9% in Q4 2023 primarily driven by a 3.0% increase in same-store average spend per transaction and partially offset by a 1.1% decrease in same-store transactions. This is compared to same-store sales growth of 11.8% in Q4 2022, which primarily consisted of a 4.6% increase in same-store transactions and a 6.9% increase in same-store average spend per transaction.
Gross profit increased by
Selling, general and administrative ("SG&A") expenses were
Adjusted EBITDA increased by
Net interest expense was
Income taxes were
Net income increased by
Adjusted Net Income increased by
Adjusted Net Income per Diluted Share increased by
Cash at the end of the fourth quarter totaled
Free Cash Flow(1) amounted to
Inventory at the end of Q4 2023 was
Financial Results for Fiscal 2023
All comparative figures below are for the 52-week period ended
Revenue was
Same-store sales growth was 5.2% in Fiscal 2023 primarily driven by a 4.4% increase in same-store average spend per transaction and a 0.7% increase in same-store transactions. Same-store sales growth in Fiscal 2023 included a negative impact of approximately 0.3%, due to the timing of
Gross profit increased by
Selling, general and administrative expenses were
Adjusted EBITDA increased by
Net interest expense was
Income taxes were
Net income decreased by
Adjusted Net Income increased by
Adjusted Net Income per Diluted Share increased by
Free Cash Flow amounted to
(1) This is a non-IFRS financial measure. Non-IFRS financial measures are not recognized measures under IFRS and do not have standardized meanings prescribed by IFRS. They are therefore unlikely to be comparable to similar measures presented by other companies. Refer to "Non-IFRS and Other Financial Measures" and "Selected Consolidated Financial Information" below, including for a reconciliation of the non-IFRS measures used in this release to the most comparable IFRS measures. Also refer to the sections entitled "How We Assess the Performance of our Business", "Non-IFRS and Other Financial Measures" and "Selected Consolidated Financial Information and Industry Metrics" in the MD&A for the fiscal year ended |
(2) This is a supplementary financial measure. Refer to "Non-IFRS and Other Financial Measures" below and to the section entitled "How We Assess the Performance of our Business" in the MD&A for the fiscal year ended |
(3) This is a non-IFRS ratio. Non-IFRS ratios are not recognized measures under IFRS and do not have standardized meanings prescribed by IFRS. They are therefore unlikely to be comparable to similar measures presented by other companies. Refer to "Non-IFRS and Other Financial Measures" below and to the section entitled "How We Assess the Performance of our Business" in the MD&A for the fiscal year ended |
Dividends
On
Outlook
For the full year 2024, the Company expects:
- Revenue between
$1.11 and$1.14 billion , supported by same-store sales growth of between 2% and 5%, 40 to 50 new store openings and higher wholesale merchandise sales penetration with Chico franchisees; - Adjusted EBITDA between
$248 and$254 million , supported by operating expense leverage, partially offset by pricing investment; - Adjusted Net Income per Diluted Share between
$1.57 and$1.63 , which incorporates approximately$20 million pre-tax, or$0.20 per diluted share, of incremental depreciation and lease liability interest expense associated with the new GTA and MVR distribution centres; - Business transformation costs of approximately
$17 million pre-tax, information technology costs of approximately$7 million pre-tax, and share-based compensation of approximately$8 million pre-tax, all of which are excluded from Adjusted EBITDA and Adjusted Net Income per Diluted Share; and - Net Capital Expenditures of approximately
$55 million , roughly half of which is attributable to investments in the Company's supply chain transformation.
Conference Call Details
A conference call to discuss the Company's fourth quarter results is scheduled for
For those unable to participate, a playback will be available shortly after the conclusion of the call by dialing 1-866-813-9403 (ID: 319248) and will be accessible until
About
Non-IFRS and Other Financial Measures
This press release makes reference to certain non-IFRS measures and non-IFRS ratios. These measures and ratios are not recognized measures under IFRS and do not have a standardized meaning prescribed by IFRS. They are therefore unlikely to be comparable to similar measures presented by other companies. Rather, these measures are provided as additional information to complement IFRS measures by providing further understanding of the Company's results of operations from management's perspective. Accordingly, they should not be considered in isolation nor as a substitute for analysis of the Company's financial information reported under IFRS.
Forward-Looking Information
Some of the information contained in this press release is forward-looking information. Forward-looking information is provided as at the date of this press release and is based on management's opinions, estimates and assumptions in light of its experience and perception of historical trends, current trends, current conditions and expected future developments, as well as other factors that management believes appropriate and reasonable in the circumstances. Such forward-looking information is intended to provide information about management's current expectations and plans, and may not be appropriate for other purposes.
Many factors could cause our actual results, level of activity, performance or achievements, future events or developments, or outlook to differ materially from those expressed or implied by the forward-looking information, including, without limitation, the factors discussed in the "Risk Factors" section of the AIF. A copy of the AIF and the Company's other publicly filed documents can be accessed under the Company's profile on SEDAR+ at www.sedarplus.ca.
The Company cautions that the list of risk factors and uncertainties described in the AIF is not exhaustive and other factors could also adversely affect its results. Readers are urged to consider the risks, uncertainties and assumptions carefully in evaluating forward-looking information and are cautioned not to place undue reliance on such information.
SELECTED CONSOLIDATED FINANCIAL INFORMATION
Consolidated Statements of Income and Comprehensive Income
(Unaudited, expressed in thousands of Canadian dollars, except per share amounts)
|
Quarters Ended |
Fiscal Years Ended |
||
|
|
|
|
|
|
13 weeks |
13 weeks |
52 weeks |
52 weeks |
|
|
|
|
|
Revenue: |
|
|
|
|
Retail sales |
$ 110,089 |
$ 109,289 |
$ 421,828 |
$ 402,586 |
Franchise and other revenues |
176,819 |
156,755 |
634,039 |
549,111 |
Total revenue |
286,908 |
266,044 |
1,055,867 |
951,697 |
|
|
|
|
|
Cost of sales |
188,407 |
169,740 |
690,730 |
599,400 |
Gross profit |
98,501 |
96,304 |
365,137 |
352,297 |
|
|
|
|
|
Selling, general and administrative expenses |
50,236 |
53,893 |
204,411 |
192,105 |
Total operating income |
48,265 |
42,411 |
160,726 |
160,192 |
|
|
|
|
|
Interest expenses, net |
8,456 |
6,429 |
30,646 |
20,478 |
(Gain) Loss on foreign exchange |
(256) |
180 |
188 |
1,111 |
Other loss (income) |
— |
139 |
4,718 |
(68) |
Income before income taxes |
40,065 |
35,663 |
125,174 |
138,671 |
|
|
|
|
|
Income tax expense |
11,300 |
9,782 |
35,626 |
37,905 |
Net income |
28,765 |
25,881 |
89,548 |
100,766 |
|
|
|
|
|
Other comprehensive income, net of tax: |
|
|
|
|
Currency translation adjustments that may be reclassified to net income, net of tax |
— |
(5) |
18 |
20 |
Comprehensive income for the period
attributable to the shareholders of the |
$ 28,765 |
$ 25,876 |
$ 89,566 |
$ 100,786 |
|
|
|
|
|
Basic net income per share attributable to the common shareholders |
$ 0.40 |
$ 0.37 |
$ 1.26 |
$ 1.43 |
Diluted net income per share attributable to the common shareholders |
$ 0.40 |
$ 0.36 |
$ 1.24 |
$ 1.40 |
|
|
|
|
|
|
|
|
|
|
Reconciliation of Net Income to EBITDA and Adjusted EBITDA
(Unaudited, in thousands of Canadian dollars unless otherwise noted)
|
Quarters Ended |
Fiscal Years Ended |
||
|
|
|
|
|
|
13 weeks |
13 weeks |
52 weeks |
52 weeks |
Reconciliation of net income to Adjusted EBITDA: |
|
|
|
|
Net income |
$ 28,765 |
$ 25,881 |
$ 89,548 |
$ 100,766 |
Depreciation and amortization |
14,999 |
10,332 |
50,718 |
38,073 |
Interest expenses, net |
8,456 |
6,429 |
30,646 |
20,478 |
Income tax expense |
11,300 |
9,782 |
35,626 |
37,905 |
EBITDA |
63,520 |
52,424 |
206,538 |
197,222 |
Adjustments to EBITDA: |
|
|
|
|
Information technology transformation costs(1) |
864 |
1,984 |
3,309 |
5,313 |
Business transformation costs(2) |
4,037 |
1,482 |
9,689 |
2,697 |
Other professional fees(3) |
225 |
714 |
741 |
1,873 |
Share-based compensation(4) |
2,866 |
1,930 |
5,855 |
6,248 |
Asset impairments(5) |
— |
448 |
— |
448 |
(Gain) loss on foreign exchange(6) |
(256) |
180 |
188 |
1,111 |
Investment in associate(7) |
— |
139 |
4,718 |
(68) |
Adjusted EBITDA |
$ 71,256 |
$ 59,301 |
$ 231,038 |
$ 214,844 |
Adjusted EBITDA as a percentage of revenue |
24.8 % |
22.3 % |
21.9 % |
22.6 % |
Notes: |
|
(1) |
Represents discrete, project-based implementation costs associated with new information technology systems and discrete Software-as-a-Service ("SaaS") arrangements for transformational initiatives supporting merchandise planning, inventory and order management, e-commerce and omni-channel capabilities, customer relationship management and other key processes. |
(2) |
Represents expenses associated with supply chain transformation initiatives such as duplicative warehousing and distribution costs, implementation costs associated with new information technology systems and other transition costs incurred during the transition to a new distribution centre. The expenses included in cost of sales in Q4 2023 and Fiscal 2023 were |
(3) |
Professional fees primarily incurred with respect to: (i) the |
(4) |
Represents share-based compensation in respect of our amended and restated share option plan, long-term incentive plan, and deferred share unit plan. |
(5) |
Non-cash impairment charge taken against certain right-of-use assets for closed or relocated corporate-owned stores. |
(6) |
Represents foreign exchange gains and losses. |
(7) |
Represents the Company's share of loss from associate of $nil and |
Reconciliation of Net Income to Adjusted Net Income
(Unaudited, in thousands of Canadian dollars unless otherwise noted)
|
Quarters Ended |
Fiscal Years Ended |
||
|
|
|
|
|
|
13 weeks |
13 weeks |
52 weeks |
52 weeks |
Reconciliation of net income to Adjusted Net Income: |
|
|
|
|
Net income |
$ 28,765 |
$ 25,881 |
$ 89,548 |
$ 100,766 |
Adjustments to net income: |
|
|
|
|
Information technology transformation costs(1) |
864 |
1,984 |
3,309 |
5,313 |
Business transformation costs(2) |
9,558 |
1,482 |
18,790 |
2,697 |
Other professional fees(3) |
225 |
714 |
741 |
1,873 |
Share-based compensation(4) |
2,866 |
1,930 |
5,855 |
6,248 |
Asset impairments(5) |
— |
448 |
— |
448 |
(Gain) loss on foreign exchange(6) |
(256) |
180 |
188 |
1,111 |
Investment in associate(7) |
— |
139 |
4,718 |
(68) |
Tax effect of adjustments to net income |
(2,926) |
(1,631) |
(6,611) |
(3,817) |
Adjusted Net Income |
$ 39,096 |
$ 31,127 |
$ 116,538 |
$ 114,571 |
Adjusted Net Income as a percentage of revenue |
13.6 % |
11.7 % |
11.0 % |
12.0 % |
Adjusted Net Income per Diluted Share |
$ 0.54 |
$ 0.43 |
$ 1.61 |
$ 1.59 |
Notes: |
|
(1) |
Represents discrete, project-based implementation costs associated with new information technology systems and discrete SaaS arrangements for transformational initiatives supporting merchandise planning, inventory and order management, e-commerce and omni-channel capabilities, customer relationship management and other key processes. |
(2) |
Represents expenses associated with supply chain transformation initiatives such as duplicative warehousing and distribution costs, implementation costs associated with new information technology systems, and other transition costs incurred during the transition to a new distribution centre. This also includes duplicative depreciation expense on property and equipment and right-of-use assets, and interest expense on lease liabilities. The expenses included in cost of sales in Q4 2023 and Fiscal 2023 were |
(3) |
Professional fees primarily incurred with respect to: (i) the CRA's examination of the Company's Canadian tax filings for the 2016 fiscal year and in Fiscal 2023 for the 2018 fiscal year; (ii) acquisition and integration costs incurred in relation to Chico in Fiscal 2022; and (iii) professional fees incurred with respect to the 2022 Secondary Offering and 2023 Secondary Offering. |
(4) |
Represents share-based compensation in respect of our amended and restated share option plan, long-term incentive plan, and deferred share unit plan. |
(5) |
Non-cash impairment charge taken against certain right-of-use assets for closed or relocated corporate-owned stores. |
(6) |
Represents foreign exchange gains and losses. |
(7) |
Represents the Company's share of loss from associate of $nil and |
Consolidated Statements of Cash Flows
(Unaudited, in thousands of Canadian dollars)
|
Quarters Ended |
Fiscal Years Ended |
||
|
|
|
|
|
|
13 weeks |
13 weeks |
52 weeks |
52 weeks |
Cash provided by (used in): |
|
|
|
|
Operating activities: |
|
|
|
|
Net income for the period |
$ 28,765 |
$ 25,881 |
$ 89,548 |
$ 100,766 |
Adjustments for items not affecting cash: |
|
|
|
|
Depreciation and amortization |
14,999 |
10,332 |
50,718 |
38,073 |
Impairment of right-of-use assets |
— |
448 |
— |
448 |
Deferred franchise fees |
196 |
354 |
333 |
420 |
Gain on disposal of property and equipment |
(1,837) |
(1,242) |
(3,158) |
(1,561) |
Loss on sale of right-of-use assets |
417 |
333 |
1,106 |
793 |
(Gain) loss on foreign exchange |
(256) |
180 |
188 |
1,111 |
(Gain) loss on financial instruments |
— |
(52) |
1,302 |
(551) |
Share-based compensation expense |
2,866 |
1,930 |
5,855 |
6,248 |
Share of loss from associate |
— |
191 |
3,416 |
483 |
Interest expenses, net |
8,456 |
6,429 |
30,646 |
20,478 |
Income tax expense |
11,300 |
9,782 |
35,626 |
37,905 |
Income taxes paid |
(13,321) |
(5,550) |
(56,451) |
(36,673) |
Security deposits paid |
— |
— |
— |
(5,073) |
Changes in non-cash operating working capital: |
|
|
|
|
Accounts receivable |
(3,209) |
(1,228) |
(4,949) |
(6,834) |
Inventories |
12,978 |
17,614 |
(3,563) |
(26,133) |
Prepaid expenses |
1,637 |
(4,979) |
(2,952) |
(8,194) |
Accounts payable and accrued liabilities |
(7,777) |
(13,483) |
(12,321) |
1,818 |
Net cash provided by operating activities |
55,214 |
46,940 |
135,344 |
123,524 |
Financing activities: |
|
|
|
|
Proceeds from exercise of share options |
— |
3,368 |
4,349 |
8,062 |
Dividends paid on common shares |
(7,146) |
(4,251) |
(28,536) |
(16,927) |
Repayment of 2021 Term Facility |
(4,438) |
(2,219) |
(45,750) |
(8,875) |
Interest paid on long-term debt |
(5,862) |
(5,987) |
(13,526) |
(18,626) |
Repayment of principal on lease liabilities |
(13,876) |
(7,371) |
(52,944) |
(43,212) |
Interest paid on lease liabilities |
(5,347) |
(3,065) |
(16,498) |
(11,853) |
Standby letter of credit commitment fees |
— |
(745) |
(872) |
(1,373) |
Net cash used in financing activities |
(36,669) |
(20,270) |
(153,777) |
(92,804) |
Investing activities: |
|
|
|
|
Business acquisition, net of cash acquired |
— |
— |
(3,000) |
(12,538) |
Purchases of property and equipment |
(15,029) |
(22,140) |
(57,291) |
(38,833) |
Purchase of intangible assets |
(568) |
(738) |
(3,257) |
(3,424) |
Proceeds on disposal of property and equipment |
3,709 |
2,261 |
6,579 |
3,643 |
Right-of-use asset initial direct costs |
(1,173) |
(939) |
(2,627) |
(2,157) |
Tenant allowances |
450 |
787 |
1,635 |
1,459 |
Notes receivable |
38 |
55 |
1,088 |
950 |
Lease receivables |
8,075 |
7,033 |
30,344 |
27,050 |
Interest received on lease receivables and other |
2,822 |
2,651 |
10,887 |
8,703 |
Investment in associate |
— |
(399) |
— |
(2,178) |
Repurchase of franchises |
— |
— |
(512) |
— |
Net cash used in investing activities |
(1,676) |
(11,429) |
(16,154) |
(17,325) |
Effect of exchange rate on cash |
234 |
11 |
(3) |
(429) |
Net increase (decrease) in cash |
17,103 |
15,252 |
(34,590) |
12,966 |
Cash, beginning of period |
11,341 |
47,782 |
63,034 |
50,068 |
Cash, end of period |
$ 28,444 |
$ 63,034 |
$ 28,444 |
$ 63,034 |
Free Cash Flows
(Unaudited, expressed in thousands of Canadian dollars)
|
Quarters Ended |
Fiscal Years Ended |
||
|
|
|
|
|
|
13 weeks |
13 weeks |
52 weeks |
52 weeks |
|
|
|
|
|
Cash provided by operating activities |
$ 55,214 |
$ 46,940 |
$ 135,344 |
$ 123,524 |
Cash used in investing activities |
(1,676) |
(11,429) |
(16,154) |
(17,325) |
Repayment of principal on lease liabilities |
(13,876) |
(7,371) |
(52,944) |
(43,212) |
Interest paid on lease liabilities |
(5,347) |
(3,065) |
(16,498) |
(11,853) |
Notes receivable |
(38) |
(55) |
(1,088) |
(950) |
Free Cash Flow |
$ 34,277 |
$ 25,020 |
$ 48,660 |
$ 50,184 |
Consolidated Statements of Financial Position
(Audited, expressed in thousands of Canadian dollars)
|
As at |
As at |
|
|
|
Assets |
|
|
|
|
|
Current assets: |
|
|
Cash |
$ 28,444 |
$ 63,034 |
Accounts and other receivables |
27,875 |
22,965 |
Inventories, net |
122,069 |
118,410 |
Income taxes recoverable |
6,012 |
— |
Prepaid expenses and other assets |
19,403 |
22,262 |
Current portion of lease receivables |
34,332 |
29,827 |
Total current assets |
238,135 |
256,498 |
|
|
|
Non-current assets: |
|
|
Long-term lease receivables |
159,101 |
141,187 |
Right-of-use assets, net |
237,941 |
82,242 |
Property and equipment, net |
120,493 |
91,774 |
Intangible assets, net |
52,205 |
52,280 |
|
97,562 |
97,574 |
Deferred tax assets |
7,230 |
6,652 |
Investment in associate |
— |
4,708 |
Other assets |
4,240 |
7,261 |
Total non-current assets |
678,772 |
483,678 |
|
|
|
Total assets |
$ 916,907 |
$ 740,176 |
|
|
|
Liabilities and shareholders' equity |
|
|
|
|
|
Current liabilities: |
|
|
Accounts payable and accrued liabilities |
$ 88,416 |
$ 103,782 |
Provisions |
669 |
— |
Income taxes payable |
— |
15,141 |
Current portion of deferred franchise fees |
1,344 |
1,197 |
Current portion of lease liabilities |
64,068 |
51,335 |
Current portion of long-term debt |
17,750 |
17,750 |
Total current liabilities |
172,247 |
189,205 |
|
|
|
Non-current liabilities: |
|
|
Long-term deferred franchise fees |
4,166 |
4,017 |
Long-term lease liabilities |
379,833 |
215,966 |
Long-term debt |
275,474 |
320,063 |
Deferred tax liabilities |
8,864 |
8,250 |
Other liabilities |
3,977 |
2,299 |
Provisions |
2,626 |
— |
Total non-current liabilities |
674,940 |
550,595 |
|
|
|
Total liabilities |
847,187 |
739,800 |
|
|
|
Shareholders' equity: |
|
|
Common shares |
321,752 |
316,208 |
Contributed surplus |
6,877 |
4,107 |
Deficit |
(258,768) |
(319,780) |
Currency translation reserve |
(141) |
(159) |
Total shareholders' equity |
69,720 |
376 |
|
|
|
Total liabilities and shareholders' equity |
$ 916,907 |
$ 740,176 |
|
|
|
SOURCE