Pet Valu Experiences Fourth Quarter and Fiscal Year 2022 Results

Provides Strong 2023 Outlook and Raises Quarterly Dividend by 67%

MARKHAM, ON, March 7, 2023 /CNW/ – Pet Valu Holdings Ltd. (“Pet Valu” or the “Company”) (TSX: PET),  the main Canadian specialty retailer of pet meals and pet-related provides, at present introduced its monetary outcomes for the fourth quarter and financial yr ended December 31, 2022.

Fourth Quarter Highlights

• System-wide gross sales⁽¹⁾ had been $360.6 million, a rise of 25.0% versus the prior yr. Excluding Chico⁽²⁾, system-wide gross sales grew 14.8%, primarily pushed  by same-store gross sales progress⁽¹⁾ of 11.8%.
• Revenue was $266.0 million, up 19.3% versus final yr. Excluding Chico, income grew 17.9%.
• Adjusted EBITDA⁽³⁾ was $59.3 million, up 11.2% versus the prior yr, representing 22.3% of income. Operating earnings was $42.4 million, up 2.8% versus the prior yr.
• Net earnings was $25.9 million, down from $26.7 million within the prior yr.
• Adjusted Net Income⁽³⁾ was $31.1 million or $0.43 per diluted share, up 6.3% and 4.9%, respectively, versus the prior yr.
• Opened 16 new shops and ended the quarter with 744 shops throughout the community.
• The Board of Directors of the Company declared a dividend of $0.10 per frequent share.

Fiscal Year Highlights

• System-wide gross sales had been $1,290.7 million, a rise of 29.3% versus the prior yr. Excluding Chico, system-wide gross sales grew 20.2%, primarily pushed  by same-store gross sales progress of 17.1%.
• Revenue was $951.7 million, up 22.6% versus final yr. Excluding Chico, income grew 21.4%.
• Adjusted EBITDA was $214.8 million, up 17.8% versus the prior yr, representing 22.6% of income. Operating earnings was $160.2 million, up 23.8% versus the prior yr.
• Net earnings was $100.8 million, up from $98.8 million within the prior yr.
• Adjusted Net Income was $114.6 million or $1.59 per diluted share, up 57.0% and 55.9%, respectively, versus the prior yr.

2023 Outlook

• The Company expects 2023 income between $1,050 and $1,075 million, pushed by same-store gross sales progress between 7% and 10% and 40-50 new retailer openings, Adjusted EBITDA between $230 and $237 million and Adjusted Net Income per Diluted Share⁽³⁾ between $1.60 and $1.66.

“Solid execution by our groups and franchise house owners within the fourth quarter of 2022 helped ship a robust end to an distinctive yr for our business,” stated Richard Maltsbarger, President and Chief Executive Officer of Pet Valu. “We are persevering with to take market share by means of our retailer growth and compelling choices, reinforcing our main place within the very resilient Canadian pet business.

“2023 appears to be like to be one other promising yr, as we as soon as once more goal progress above the business’s long-term run-rate, whereas executing on a number of key initiatives together with our provide chain transformation,” continued Mr. Maltsbarger. “Given our conviction in our outlook and our sturdy liquidity place, we’re excited to announce a 67% improve to our quarterly dividend.”

Financial Results for the Fourth Quarter Fiscal 2022

All comparative figures under are for the 13-week interval ended December 31, 2022, in comparison with the 13-week interval ended January 1, 2022.

Revenue was $266.0 million in This fall 2022, a rise of $43.0 million, or 19.3%, in comparison with $223.1 million in This fall 2021. The present quarter contains $3.1 million of franchise and different revenues from the acquisition of Chico. The improve in income was pushed by progress in retail gross sales, in addition to franchise and different revenues.

Same-store gross sales progress was 11.8% in This fall 2022 primarily pushed by a 4.6% improve in same-store transactions and a 6.9% improve in same-store common spend per transaction. Same retailer gross sales progress in This fall 2022 included a profit, representing roughly 1.4%, because of the timing of New Year’s day. This is in comparison with same-store gross sales progress of 16.7% in This fall 2021, which primarily consisted of a ten.8% improve in same-store transactions and a 5.4% improve in same-store common spend per transaction.

Gross revenue elevated by $14.3 million, or 17.4%, to $96.3 million in This fall 2022, in comparison with $82.0 million in This fall 2021. Gross revenue margin was 36.2% in This fall 2022 in comparison with 36.8% in This fall 2021. The gross revenue margin lower was primarily pushed by: (i) the unfavourable influence of the weaker Canadian greenback on non-domestic sourced merchandise primarily denominated in U.S. {dollars}; (ii) greater wholesale merchandise gross sales attributable to elevated franchise penetration; (iii) gross sales combine attributable to elevated gross sales in nationwide manufacturers; partially offset by (iv) vendor recoveries related to provide chain disruptions;  and (v) the acquisition of Chico.

Selling, common and administrative (“SG&A”) bills had been $53.9 million in This fall 2022, a rise of $13.1 million, or 32.2%, in comparison with $40.8 million in This fall 2021. SG&A bills represented 20.3% and 18.3% of whole income for This fall 2022 and This fall 2021, respectively. The $13.1 million improve in SG&A bills was primarily attributable to: (i) elevated compensation prices because of headcount and wage investments; (ii) greater know-how prices to modernize our programs together with our warehousing and omni-channel capabilities; (iii) greater depreciation and amortization; partially offset by (iv) greater acquire on the sale of belongings attributable to extra re-franchised shops in This fall 2022.

Adjusted EBITDA elevated by $6.0 million, or 11.2%, to $59.3 million in This fall 2022, in comparison with $53.3 million in This fall 2021. The improve in Adjusted EBITDA was primarily attributable to greater EBITDA of $2.6 million as defined by the elements described above and excludes business transformation prices, share-based compensation, different skilled charges, data know-how transformation prices, asset impairments, funding in affiliate, and loss on overseas change. Adjusted EBITDA as a proportion of income was 22.3% and 23.9% in This fall 2022 and This fall 2021, respectively.

Net curiosity expense was $6.4 million in This fall 2022, a rise of $2.0 million, or 46.0%, in comparison with $4.4 million in This fall 2021. The improve was primarily pushed by greater curiosity expense on the 2021 Term Facility (as outlined within the Company’s administration’ dialogue and evaluation of economic situation and outcomes of operations (“MD&A”) for the fiscal yr ended December 31, 2022) ensuing from greater rates of interest on decrease whole debt excellent in comparison with This fall 2021.

Income taxes had been $9.8 million in This fall 2022 in comparison with $10.0 million in This fall 2021, a lower of $0.2 million yr over yr. The lower in earnings taxes was primarily the results of decrease taxable earnings in This fall 2022. The efficient earnings tax fee was 27.4% in This fall 2022 in comparison with 27.2% in This fall 2021. The This fall 2022 and This fall 2021 efficient tax fee is greater than the blended statutory fee of 26.5% primarily due to non-deductible bills.

Net earnings decreased by $0.9 million to $25.9 million in This fall 2022, in comparison with $26.7 million in This fall 2021. The change in web earnings is defined by the elements described above.

Adjusted Net Income elevated by $1.8 million to $31.1 million in This fall 2022, in comparison with $29.3 million in This fall 2021. Adjusted Net Income as a proportion of income was 11.7% in This fall 2022 and 13.1% in This fall 2021. The 1.4% yr over yr lower outcomes from the elements described above.

Adjusted Net Income per Diluted Share elevated by $0.02 to $0.43 in This fall 2022, in comparison with $0.41 in This fall 2021. The 4.9% yr over yr improve outcomes primarily from the elements described above.

Cash and money equivalents on the finish of the fourth quarter totaled $63.0 million.

Free Cash Flow⁽³⁾ amounted to $25.0 million in This fall 2022 in comparison with $35.3 million in This fall 2021, a lower of $10.3 million primarily pushed by a lower in money from working actions, a rise in money used for investing actions partially offset by a lower in reimbursement of principal on lease liabilities attributable to timing of lease funds.

Inventory at finish of This fall 2022 was $118.4 million in comparison with $91.7 million on the finish of This fall 2021, a rise of $26.7 million primarily attributable to greater demand, inflation in product cost, a heightened degree of security inventory and accelerated buy of seasonal items in mild of world provide chain challenges, and preliminary load-ins to help proprietary model launches at Chico.

Financial Results for Fiscal 2022

All comparative figures under are for the 52-week interval ended December 31, 2022, in comparison with the 52-week interval ended January 1, 2022.

Revenue was $951.7 million in Fiscal 2022, a rise of $175.7 million, or 22.6%, in comparison with $776.0 million in Fiscal 2021. The present yr contains $9.7 million of franchise and different revenues from the acquisition of Chico. The improve in income was pushed by progress in retail gross sales, in addition to franchise and different revenues.

Same-store gross sales progress was 17.1% in Fiscal 2022 primarily pushed by a 11.8% improve in same-store transactions and a 4.8% improve in same-store common spend per transaction. Same retailer gross sales progress in Fiscal 2022 included a profit, representing roughly 0.4%, because of the timing of New Year’s day. This is in comparison with same-store gross sales progress of 17.8% in Fiscal 2021 which primarily consisted of a ten.5% improve in same-store transactions and a 6.6% improve in same-store common spend per transaction. Same-store transactions and same-store common spend per transaction in Fiscal 2021 had been impacted by a shift in shopper behaviour related to COVID-19 restrictions.

Gross revenue elevated by $65.1 million, or 22.7%, to $352.3 million in Fiscal 2022, in comparison with $287.2 million in Fiscal 2021. Gross revenue margin was 37.0% of income in Fiscal 2022 and in Fiscal 2021. The gross revenue margin shifts between Fiscal 2022 and Fiscal 2021 are primarily defined by: (i) leverage gained on mounted prices attributable to greater income; (ii) obligation  and vendor recoveries related to COVID reduction measures and provide chain disruption; (iii) the acquisition of Chico; offset by (iv) greater wholesale merchandise gross sales and elevated franchise penetration; (v) decrease product margins as pricing changes had been greater than offset by greater prices together with incremental freight prices; and (vi) the unfavourable influence of the weaker Canadian greenback on non-domestic sourced merchandise primarily denominated in U.S. {dollars}.

Selling, common and administrative bills had been $192.1 million in Fiscal 2022, a rise of $34.3 million, or 21.8%, in comparison with $157.8 million in Fiscal 2021. SG&A bills represented 20.2% and 20.3% of whole gross sales and income for Fiscal 2022 and Fiscal 2021, respectively. The improve of $34.3 million in SG&A bills was primarily attributable to: (i) elevated compensation prices because of headcount and wage investments; (ii) greater know-how prices to modernize our programs together with our omni-channel and warehousing capabilities; (iii) greater promoting bills; (iv) depreciation and amortization; partially offset by (v) decrease skilled charges as Fiscal 2021 included charges to help the preparation of the Company’s preliminary public providing (the “Offering”) and separation actions.

Adjusted EBITDA elevated by $32.5 million, or 17.8%, to $214.8 million in Fiscal 2022, in comparison with $182.3 million in Fiscal 2021. The improve in Adjusted EBITDA was primarily attributable to greater EBITDA of $35.2 million, excluding the influence of overseas change positive aspects or losses, and as defined by the elements described above. Adjusted EBITDA additionally excludes readiness for the Offering and separation prices, share-based compensation, administration charges, asset impairments, business transformation prices, different skilled charges, funding in affiliate, and knowledge know-how transformation prices. Adjusted EBITDA as a proportion of income was 22.6% and 23.5% in Fiscal 2022 and Fiscal 2021, respectively.

Net curiosity expense was $20.5 million in Fiscal 2022, a lower of $26.4 million, or 56.3%, in comparison with $46.9 million in Fiscal 2021. The lower was primarily pushed by: (i) decrease curiosity expense on the 2021 Term Facility ensuing from decrease rates of interest and decrease whole debt excellent in comparison with the 2016 Term Loan (as outlined within the MD&A for the fiscal yr ended December 31, 2022) which was repaid following the closing of the Offering in Fiscal 2021; (ii) decrease charges on the dedication for the standby letter of credit score; and (iii) decrease amortization of deferred financing prices. The lower in web curiosity expense can be attributable to the prior yr write off of $5.7 million of unamortized deferred financing prices as debt extinguishment prices upon reimbursement of the 2016 Credit Agreement (as outlined within the MD&A for the fiscal yr ended December 31, 2022) following the closing of the Offering in Fiscal 2021.

Income taxes had been $37.9 million in Fiscal 2022 in comparison with $26.3 million in Fiscal 2021, a rise of $11.6 million yr over yr. The improve in earnings taxes was primarily the results of greater taxable earnings in Fiscal 2022. The efficient earnings tax fee was 27.3% in Fiscal 2022 in comparison with 21.0% within the prior yr. The Fiscal 2022 efficient tax fee is greater than the blended statutory fee of 26.5% primarily due to non-deductible bills. The Fiscal 2021 efficient tax fee is decrease than the blended statutory fee of 26.5% primarily due to the beneficial tax therapy on overseas change positive aspects associated to the reimbursement of the 2016 Term Loans and on the settlement of a overseas change ahead contract, partially offset by $1.4 million cumulative earnings tax expense associated to the enactment of Bill C-30 and curiosity earnings earned from advances made to our former U.S authorized entity subsidiaries for 2019 and 2020. The Company beforehand made protecting elections to impute taxable curiosity earnings from these advances beneath the Pertinent Loan or Indebtedness regime.

Net earnings elevated by $2.0 million to $100.8 million in Fiscal 2022, in comparison with $98.8 million in Fiscal 2021. In addition to the elements described above, the change in web earnings can be defined by a better acquire on overseas change of $43.2 million in Fiscal 2021 from the reimbursement of the 2016 Term Loans and from the settlement of a overseas change ahead contract.

Adjusted Net Income elevated by $41.6 million to $114.6 million in Fiscal 2022, in comparison with $73.0 million in Fiscal 2021. Adjusted Net Income as a proportion of income was 12.0% in Fiscal 2022 and 9.4% in Fiscal 2021. The 2.6% yr over yr improve outcomes from the elements described above.

Adjusted Net Income per Diluted Share elevated by $0.57 to $1.59 in Fiscal 2022, in comparison with $1.02 in Fiscal 2021. The 55.9% yr over yr improve outcomes primarily from the elements described above.

Free Cash Flow amounted to $50.2 million in Fiscal 2022 in comparison with $86.3 million in Fiscal 2021, a lower of $36.1 million primarily pushed by a lower in money from investing actions and working actions, partially offset by a lower in reimbursement of principal on lease liabilities attributable to timing of lease funds.

Dividends

On March 6, 2023, the Board of Directors of the Company declared a dividend of $0.10 per frequent share payable on April 17, 2023 to holders of frequent shares of report as on the shut of business on March 31, 2023.

Outlook

For the total yr 2023, the Company expects:

• Revenue between $1,050 and $1,075 million, supported by same-store gross sales progress of between 7% and 10%, and 40 to 50 new retailer openings;
• Gross revenue margin barely under the Company’s historic vary of 35% to 36%, because the Company faces unfavourable overseas change charges and incurs roughly 80 foundation factors of cost related to its provide chain transformation;
• Adjusted EBITDA between $230 and $237 million, which includes expense leverage on investments made in 2022, partially offset by the unfavourable overseas change charges;
• Adjusted Net Income per Diluted Share between $1.60 and $1.66;
• Business transformation prices of roughly $13 million, Information Technology prices of roughly $7 million, and share-based compensation of roughly $8 million, all of that are excluded from Adjusted EBITDA and Adjusted Net Income per Diluted Share; and
• Net Capital Expenditures⁽⁴⁾ of roughly $60 million, roughly half of which is attributable to investments within the Company’s provide chain transformation.

Conference Call Details

A convention name to debate the Company’s fourth quarter outcomes is scheduled for March 7, 2023, at 8:30 a.m. ET. To entry Pet Valu’s convention name, please dial 1-833-950-0062 (ID: 056004). A dwell webcast of the decision will even be out there by means of the Events & Presentations part of the Company’s web site at https://investors.petvalu.com/.

For these unable to take part, a playback will likely be out there shortly after the conclusion of the decision by dialing 1-226-828-7578 (ID: 493178) and will likely be accessible till March 21, 2023. The webcast will even be archived and out there by means of the Events & Presentations part of the Company’s web site at https://investors.petvalu.com/.

About Pet Valu

Pet Valu is Canada’s main retailer of pet meals and pet-related provides with over 700 corporate-owned or franchised places throughout the nation. For greater than 40 years, Pet Valu has earned the belief and loyalty of pet mother and father by providing educated customer support, a premium product providing and fascinating in-store companies. Pet Valu’s neighbourhood shops supply greater than 7,000 competitively-priced merchandise, together with a broad assortment of premium, tremendous premium, holistic and award-winning proprietary manufacturers. To be taught extra, please go to: www.petvalu.com.

Basis of Presentation — Carve-out Financial Information

Prior to the Offering, the Company was not working as a stand-alone entity and consequently, the monetary data for intervals previous to June 30, 2021 are offered on a carve-out foundation that features solely authorized entities representing the Canadian operations of Pet Valu Holdings Ltd. (known as the “Group”, previous to the distribution of its U.S. operations to its shareholder). For extra data, see the Company’s audited consolidated monetary statements and associated administration’s dialogue and evaluation of economic situation and outcomes of operations for the fiscal years ended December 31, 2022 and January 1, 2022.

Non-IFRS Measures and Supplementary Financial Measures

This press launch makes reference to sure non-IFRS measures. These measures aren’t acknowledged measures beneath IFRS and would not have a standardized which means prescribed by IFRS. They are due to this fact unlikely to be similar to comparable measures offered by different firms. Rather, these measures are offered as extra data to enrich IFRS measures by offering additional understanding of the Company’s outcomes of operations from administration’s perspective. Accordingly, they shouldn’t be thought-about in isolation nor as an alternative choice to evaluation of the Company’s monetary data reported beneath IFRS. Pet Valu makes use of non-IFRS measures, together with “EBITDA”, “Adjusted EBITDA”, “Adjusted Net Income”, Adjusted Net Income per Diluted Share”, “Free Cash Flow” and “Net Capital Expenditures”. This press launch additionally makes reference to sure supplementary monetary measures which are generally used within the retail business, together with “System-wide shops”, “System-wide gross sales”, “Same-store gross sales”, and “Same-store gross sales progress”. These non-IFRS measures and supplementary monetary measures are used to supply traders with supplemental measures of Pet Valu’s working efficiency and thus spotlight developments in its core business that won’t in any other case be obvious when relying solely on IFRS monetary measures. The Company additionally believes that securities analysts, traders and different events steadily use non-IFRS measures and these supplementary monetary measures within the analysis of issuers. Management makes use of non-IFRS measures so as to facilitate working efficiency comparisons from interval to interval, to organize annual working budgets and to find out parts of administration compensation. Refer to the MD&A for the fiscal yr ended December 31, 2022 for additional data on non-IFRS measures and business metrics, together with for his or her definition and, for non-IFRS measures, a reconciliation to essentially the most comparable IFRS measure.

Forward-Looking Information

Some of the knowledge contained on this press launch is forward-looking data. Forward-looking data is offered as of the date of this press launch and is predicated on administration’s opinions, estimates and assumptions in mild of its expertise and notion of historic developments, present developments, present circumstances and anticipated future developments, in addition to different elements that administration believes applicable and cheap within the circumstances. Such forward-looking data is meant to supply details about administration’s present expectations and plans, and might not be applicable for different functions. Pet Valu doesn’t undertake to update any such forward-looking data whether or not because of new data, future occasions or in any other case, besides as required beneath relevant Canadian securities legal guidelines. Actual outcomes and the timing of occasions might differ materially from these anticipated within the forward-looking data because of numerous elements. Particularly, data concerning our expectations of future outcomes, targets, efficiency achievements, prospects or alternatives, together with the knowledge beneath the headings “2023 Outlook” and “Outlook” on this press launch, is forward-looking data, which is predicated on the elements and assumptions, and topic to the dangers, as set out herein and within the Company’s annual data type dated March 6, 2023 (“AIF”). Often however not at all times, forward-looking data will be recognized by way of forward-looking terminology similar to “might”, “will”, “anticipate”, “consider”, “estimate”, “plan”, “might”, “ought to”, “would”, “outlook”, “forecast”, “anticipate”, “foresee”, “proceed” or the destructive of those phrases or variations of them or comparable terminology.

Many elements might trigger our precise outcomes, degree of exercise, efficiency or achievements, future occasions or developments, or outlook to vary materially from these expressed or implied by the forward-looking data, together with, with out limitation, the elements mentioned within the “Risk Factors” part of the AIF. A duplicate of the AIF and the Company’s different publicly filed paperwork will be accessed beneath the Company’s profile on the System for Electronic Document Analysis and Retrieval (“SEDAR”) at www.sedar.com.

The Company cautions that the checklist of danger elements and uncertainties described within the AIF isn’t exhaustive and different elements might additionally adversely have an effect on its outcomes. Readers are urged to think about the dangers, uncertainties and assumptions fastidiously in evaluating forward-looking data and are cautioned to not place undue reliance on such data.

SELECTED CONSOLIDATED FINANCIAL INFORMATION

Condensed Interim Consolidated Statements of Income and Comprehensive Income 
(Unaudited, expressed in 1000’s of Canadian {dollars}, besides per share quantities)

Reconciliation of Net Income to EBITDA and Adjusted EBITDA
(Unaudited, in 1000’s of Canadian {dollars} except in any other case famous)

Reconciliation of Net Income to Adjusted Net Income
(Unaudited, in 1000’s of Canadian {dollars} except in any other case famous)

Condensed Interim Consolidated Statements of Cash Flows 
(Unaudited, in 1000’s of Canadian {dollars})

Free Cash Flows 
(Unaudited, expressed in 1000’s of Canadian {dollars})

Consolidated Statements of Financial Position 
(Audited, expressed in 1000’s of Canadian {dollars})

SOURCE Pet Valu Canada Inc.