Pet Valu posts lower profit as same-store sales growth declines

·2 min read

MARKHAM, Ont. — Pet Valu Holdings Ltd. reported its first-quarter profit fell compared with a year ago as it faced higher costs and a weaker Canadian dollar.

The pet food and supplies retailer's profit attributable to shareholders totalled $18.7 million or 26 cents per diluted share for the quarter that ended April 1.

The result was down from a profit of $22.6 million or 32 cents per diluted share a year earlier.

Revenue totalled $250.3 million, up from $213.2 in the first quarter of 2022.

The increase in revenue came as the company saw same-store sales growth of 9.4 per cent, down from a gain of 22.8 per cent in the first quarter of 2022. The company noted the results last year were elevated as they were compared with the first quarter of 2021 which was affected by COVID-19 restrictions.

The increase in same-store sales growth for the most recent quarter was driven by a three per cent bump in transactions and a 6.3 per cent rise in average spend per transaction.

On an adjusted basis, the company's profit was 32 cents per diluted share, compared with 35 cents per diluted share last year.

That fell below analysts' expectations of 35 cents per share on an adjusted basis due to the company's higher selling, general and administrative expenses and slightly higher interest expenses, Stifel GMP analyst Martin Landry said in a note.

"The pet industry remains resilient despite an economic slowdown," the research note stated.

"However, investors will need to be patient before revenue growth flows through the bottom line in a meaningful way as the company copes with inflationary pressures and currency headwinds."

Pet Valu said its profits were partially driven down by the impact of a weaker Canadian dollar on foreign-sourced products primarily priced in U.S. dollars. Meanwhile, expenses grew due to higher compensation costs as the company's employee head count grew, along with higher technology costs to modernize systems and an increase in advertising spending.

After opening 91 net new stores since 2020 and acquiring 66 additional franchised stores last year through Pet Valu's takeover of Quebec's Chico, it said it plans to open 40 to 50 new stores this financial year.

Pet Valu added it plans to expand, renovate or relocate 20 to 30 stores in its 2023 financial year.

This report by The Canadian Press was first published May 9, 2023.

Companies in this story: (TSX:PET)

The Canadian Press