Savers Value Village Q2 2025 Earnings Report

Savers Value Village EPS Results

• Actual EPS: $0.14
• Consensus EPS: $0.12
• Beat/Miss: Beat by +$0.02
• One Year Ago EPS: $0.14

Savers Value Village Revenue Results

• Actual Revenue: $417.21 million
• Expected Revenue: $405.75 million
• Beat/Miss: Beat by +$11.46 million
• YoY Revenue Growth: +7.90%

Savers Value Village Announcement Details

• Quarter: Q2 2025
• Date: 7/31/2025
• Time: After Market Closes
• Conference Call Date: Thursday, July 31, 2025
• Conference Call Time: 4:30PM ET

Savers Value Village (NYSE:SVV) sells second-hand merchandise in retail stores in the United States, Canada, and Australia. It operates stores under the Savers, Value Village, Value Village Boutique, Village des Valeurs, Unique, and 2nd Avenue brands. The company purchases secondhand textiles, including clothing, bedding, and bath items; shoes; accessories; housewares; books; and other goods from non-profit partners and then processes, selects, prices, merchandises, and sells them in its stores. It serves retail and wholesale customers. The company was formerly known as S-Evergreen Holding LLC and changed its name to Savers Value Village, Inc. in January 2022. Savers Value Village, Inc. was founded in 1954 and is based in Bellevue, Washington.

Savers Value Village Q2 2025 Earnings Call Transcript

Key Takeaways

• Positive Sentiment: Sales in the U.S. rose 10.5% (comps +6.2%), Canada comps accelerated to 2.6%, and Q2 adjusted EBITDA of $69 million (16.5% of sales) supported the decision to raise full-year revenue and earnings guidance.
• Positive Sentiment: The customer base is becoming younger and more affluent, with consumers increasing spend driven by the company’s value proposition and gaining market share across income cohorts.
• Positive Sentiment: Savers opened 4 new stores in Q2 and plans 25 openings for 2025, with the new-store fleet meeting expectations and targeting a 20% store-level contribution margin.
• Neutral Sentiment: Tactical investments in Canada’s processing to improve assortment and accelerated Two Peaches conversions created near-term operational costs but are expected to normalize and fuel long-term growth.
• Negative Sentiment: Gross margin declined as cost of merchandise sold rose 270 bps to 44.8% due to higher Canada production levels and new-store costs, while salaries and wages increased on new store growth.

Presentation

[Operator]

Good afternoon, and welcome to Sabre's Value Village Conference Call to discuss Financial Results for the Second Quarter Ending 06/28/2025. Please note that this call is being recorded and a replay of this call and related materials will be available on the company's Investor Relations website. The comments made during this call and the Q and A that follows are copyright by the company and cannot be reproduced without written authorization from the company. Certain comments made during this call may constitute forward looking statements, which are subject to significant risks and uncertainties that could cause the company's actual results to differ materially from expectations or historical performance. Please review the following disclosures of the forward looking statements included in the company's earnings release and filings with the SEC for a discussion of these risks and uncertainties.

[Operator]

Please be advised that these statements are current only as of the date of this call. And while the companies may choose to update these statements in the future, it is under no obligation to do so unless required by applicable law or regulation. The company may also discuss certain non GAAP financial measures. A reconciliation of each of these non GAAP measures to the most direct comparable GAAP financial measures can be found in today's earnings release in the SEC filings. Joining from management on today's call are Mark Walsh, Chief Executive Officer to Brandt Tanez, President and Chief Operating Officer Michael Mayer, Chief Financial Officer and Ed Iruma, Vice President of Investor Relations and Treasury. Mr. Walls, you may go ahead, sir.

[Mark Walsh, CEO & Director at Savers Value Village]

Thank you, and good afternoon, everyone. We appreciate you joining us today. We are very excited about our second quarter results, which reflect our strong execution and serve as another proof point that our sharp value and compelling assortment resonate strongly with our consumers. Let me start with a few highlights from the quarter. Sales in our U.

[Mark Walsh, CEO & Director at Savers Value Village]

S. Business grew 10.5% with comp store sales up 6.2% driven by both transactions and average basket. These results underscore the long term growth opportunity in front of us. In Canada, our business continues to make progress in 2025, delivering 2.6% comp store sales growth, an acceleration of 200 basis points from the prior quarter, marking a third consecutive quarter of sequential improvement. Despite a prolonged choppy Canadian macroeconomic environment, our Canadian consumer is responding favorably to our fresh assortment and strong value proposition.

[Mark Walsh, CEO & Director at Savers Value Village]

We opened four new stores in the quarter and now expect to open 25 new stores in 2025. As a class, our new stores continue to perform in line with our expectations, delivering strong unit economics. We remain confident in our long term store growth opportunity and a targeted 20% store level contribution margin. Turning to our loyalty program, we reached a milestone with over 6,000,000 total active members. Financially, we generated nearly $69,000,000 of adjusted EBITDA in the quarter or approximately 16.5% of sales.

[Mark Walsh, CEO & Director at Savers Value Village]

Finally, based on our first half results, we are raising our revenue and earnings outlook for 2025. Michael will provide additional details on our outlook in his remarks. Parsing our results by geography, let's start in The U. S. Where our performance was especially strong.

[Mark Walsh, CEO & Director at Savers Value Village]

The team has been disciplined in execution, value selection, a really unique thrift environment. Consumers are responding as we continue to drive market share gains. The obvious question is which demographic is driving our growth? Is it trade down, secular tailwinds, or some combination? The dataset we have compiled from our Insight work tells us an interesting and compelling story.

[Mark Walsh, CEO & Director at Savers Value Village]

Based on our survey work, consumers are increasing their spend with us, driven by our value proposition and customer experience. In addition, over the last several quarters, our customer base has been getting younger and more affluent with a growing propensity to shop with us that is not driven by their economic circumstances. This speaks to the powerful and durable secular trends driving higher adoption of thrift. Helping to fuel this further, our competitive field research indicates price gaps to discount retail between 4070%. This is prior to any tariff impact.

[Mark Walsh, CEO & Director at Savers Value Village]

If upward pressure on new retail pricing intensifies, we believe that we have a unique opportunity to introduce new customers to the great value and shopping experience that Savers offers. We think value always wins. But value is even more important in an environment where consumers continue to stretch their dollars. In short, we believe near term economic pressures are accelerating a longer term secular tailwind that was already underway in The U. S, further highlighting the growth opportunity in front of us.

[Mark Walsh, CEO & Director at Savers Value Village]

We believe our exceptional treasure hunting experience punctuated by a compelling combination of value and selection serves all cohorts across the economic spectrum. In Canada, we led with a strong and compelling selection. The consumer responded well as our basket growth is indicative of our delivery of value and selection. Our team has worked tirelessly using a data driven approach to optimize our offering at the store level, and it is paying off with our third consecutive quarter of comp store sales improvement. All things considered, macroeconomic conditions were stable in Canada during the second quarter, and we have seen green shoots as election related turbulence has settled down.

[Mark Walsh, CEO & Director at Savers Value Village]

However, unemployment and inflation remain elevated and consumer confidence is volatile amid ongoing trade and tariff uncertainty. That said, we are encouraged by consumer behavior to date as basket size and transactions have been trending favorably. We've seen sequential improvement across all regions. As indicated after the first quarter, we are far from declaring victory and still have work to do navigating a challenging economic landscape, but are pleased with the progress we continue to see in the business. Moving on to new stores, we are very excited about our accelerating square footage growth, which will be more U.

[Mark Walsh, CEO & Director at Savers Value Village]

S.-centric going forward. We opened four additional new stores in the second quarter and are refining our guidance to 25 new stores in total for this year. New stores have been performing in line with our expectations and remain our first and best use of capital to drive growth and compelling returns. Given the ongoing momentum in our business, we are making near term tactical investments. These investments are focused on initiatives to enable sustainable long term growth.

[Mark Walsh, CEO & Director at Savers Value Village]

In Canada, higher production levels are improving assortment. More great finds drive more repeat visits. This investment in processing and selection has had a transitory impact to our Canadian profit margin, which we expect to normalize over the next few quarters. In The U. S, we accelerated our investment in the Southeast, pulling forward our planned Two Peaches rebranding and repositioning efforts, completing the conversion of all seven stores on an accelerated schedule.

[Mark Walsh, CEO & Director at Savers Value Village]

We continue to believe this modest investment will give us a beachhead for ongoing expansion into the region. Furthermore, we continue to embrace innovation and are exploring new technologies and processes to optimize our business performance. For example, after seeing strong financial returns in our rollout of automated book processing, or as we call it, ABP, we've now expanded ABP to supply nearly 50% of the fleet. I would like to conclude my remarks by thanking our more than 22,000 team members for their extraordinary performance thus far, which is reflected in our financial results. Without our people, we would not be in this position as we continue to pursue our mission of making second hand second nature.

[Mark Walsh, CEO & Director at Savers Value Village]

The 2025 has been a success as we have exceeded our expectations thus far. And while macroeconomic pressures persist, I believe that strong execution, fresh assortment and exceptional value positions us well. I'll now hand the call over to Michael to discuss our second quarter financial performance and the updated outlook for the remainder of 2025.

[Michael Maher, CFO at Savers Value Village]

Thank you, Mark, and good afternoon, everyone. As Mark indicated, we had a strong second quarter. Total net sales increased 7.9% to $417,000,000 On a constant currency basis, net sales increased 8.5% and comparable store sales increased 4.6%. We are especially pleased with our double digit growth in The U. S, where net sales increased 10.5% to $229,000,000 Comparable store sales increased 6.2%, driven by both transactions and average basket.

[Michael Maher, CFO at Savers Value Village]

Our U. S. Business continues to outperform our broader off price retail peer group as we benefit from Thrift adoption with a growing customer base that is trending younger and with higher household income. We are also encouraged by our continued sequential improvement in Canada, where net sales increased 3.4%. On a constant currency basis, Canadian net sales increased 4.7 to $157,000,000 and comparable store sales increased 2.6%, fueled by an increase in average basket and transactions.

[Michael Maher, CFO at Savers Value Village]

This reflects the initial benefits of our execution in Canada as consumers react favorably to our increased selection. Cost of merchandise sold as a percentage of net sales increased two seventy basis points to 44.8%. The increase primarily reflects higher processing levels in Canada and the impact of new stores. Our rebalanced Canadian production levels are driving sales by providing a better selection to our customers while creating some short term pressure on our gross margins. We anticipate improved flow through to the bottom line as demand continues to build and production levels are optimized.

[Michael Maher, CFO at Savers Value Village]

These cost increases were partially offset by the favorable impact of year over year growth in on-site donations. OSDs plus GreenDrop accounted for 79% of supply versus 78% last year. Salaries, wages and benefits expense was $87,000,000 Excluding IPO related stock based compensation, salaries, wages and benefits as a percentage of net sales increased 30 basis points to 18.7%. The increase was driven primarily by new store growth and an increase in incentive compensation expenses. Selling, general and administrative expenses increased 6% to $88,000,000 primarily due to growth in our store base.

[Michael Maher, CFO at Savers Value Village]

As a percentage of net sales, SG and A decreased 40 basis points to 21.2, primarily due to continued expense discipline. Depreciation and amortization increased 20% to $21,000,000 reflecting accelerated amortization of certain acquisition related intangible assets, investments in new stores, off-site processing and information technology. Net interest expense increased 1% to $16,000,000 primarily due to the impact of unwinding our interest rate swaps last year, partially offset by reduced debt and lower average interest rates. GAAP net income for the quarter was $19,000,000 or $0.12 per diluted share. Adjusted net income was $23,000,000 or $0.14 per diluted share.

[Michael Maher, CFO at Savers Value Village]

Second quarter adjusted EBITDA was $69,000,000 and adjusted EBITDA margin was 16.5%. US segment profit was $49,000,000 up $05,000,000 versus the prior year, primarily due to increased profit from our comparable stores, partially offset by the impact of new stores and the Two Peaches conversions. Canada segment profit was $39,000,000 down $5,000,000 versus the prior year period due to deleveraging of expenses as a percentage of sales, primarily associated with our efforts with Canadian production to build demand as well as a weaker Canadian dollar. Our balance sheet remains strong with $71,000,000 in cash and cash equivalents and a net leverage ratio of 2.5 times at the end of the quarter. We repurchased approximately 2,700,000.0 shares of our common stock during the quarter.

[Michael Maher, CFO at Savers Value Village]

Of this total, 2,300,000.0 shares were purchased at a weighted average price of $8.86 per share as a part of the secondary offering in May. We also purchased 400,000.0 shares under our share repurchase authorization at a weighted average price of $8.17 per share. As of the end of the second quarter, we had approximately $2,800,000 remaining on our share repurchase authorization. Finally, I'd like to discuss our updated outlook for the remainder of fiscal twenty twenty five. We have exceeded our expectations for the first half with strong U.

[Michael Maher, CFO at Savers Value Village]

S. Comps and continued sequential improvement in Canada. New stores are meeting our expectations, putting them on track to begin contributing to profit growth in 2026, consistent with our previously stated goal. Our profit margins reflect the short term tactical investments we're making in higher processing levels in Canada and accelerating the conversion of two Peaches locations through our operating model. Additionally, a stronger Canadian dollar is contributing to better total sales results, but with limited short term earnings impact due to hedging.

[Michael Maher, CFO at Savers Value Village]

Based on these factors and the momentum we are seeing in our business, we are raising our previously stated outlook for the year. Our updated full year outlook for 2025 now includes the following: net sales of $1,670,000,000 to $1,690,000,000 comparable store sales growth of 3% to 4.5% net income of $47,000,000 to $58,000,000 or $0.29 to $0.36 per diluted share adjusted net income of $67,000,000 to $78,000,000 or $0.41 to $0.48 per diluted share adjusted EBITDA of $252,000,000 to $267,000,000 capital expenditures of $125,000,000 to $140,000,000 and 25 new store openings. Our outlook for net income assumes net interest expense of approximately $67,000,000 and an effective tax rate of approximately 30%. For adjusted net income, we're assuming an effective tax rate of approximately 27%. I'd also like to briefly touch on the expected cadence of results for the third and fourth quarters.

[Michael Maher, CFO at Savers Value Village]

We expect sales growth in the third quarter to be roughly consistent with the second quarter, with total sales growth in the high single digit percentage range and comparable store sales growth in the mid single digits. We plan to open 10 new stores during the quarter. We expect fourth quarter total sales growth in the mid teens percentage range, including the impact of the fifty third week, with comparable store sales growth in the low single digits as we begin to lap stronger comparisons. We expect adjusted net income and adjusted EBITDA in dollars to be roughly balanced between the third and fourth quarters, with the fourth quarter slightly higher than the third quarter. This concludes our prepared remarks.

[Michael Maher, CFO at Savers Value Village]

We would now like to open the call for questions. Operator?

[Operator]

Yes, sir. Thank you. Ladies and gentlemen, we'll now begin the question and answer session. And we now have our first question. This comes from Matthew Boss from JPMorgan. Your line is now open. Please go ahead.

[Matt Boss, Equity Research Analyst at JP Morgan]

Great. Thanks and congrats on the nice quarter.

[Mark Walsh, CEO & Director at Savers Value Village]

Thanks Matt.

[Michael Maher, CFO at Savers Value Village]

Thanks Matt.

[Matt Boss, Equity Research Analyst at JP Morgan]

Mark, could you elaborate on the cadence of the second quarter same store sales maybe across The U. S. And Canada? How you've seen momentum progress into the third quarter? And Mark, just taking a step back, how much of the inflection do you attribute to the team's execution relative to macro improvement?

[Mark Walsh, CEO & Director at Savers Value Village]

Thanks for the question, Matt. Let's start let's start in The US. Look, The US business was very strong. Like, the team executed our strategy exceptionally well, you know, delivering that sharp sharp price value, the elevated shopping experience, and and merchandising selection that delivered what our customers are demanding resonated with consumers across the the demographic spectrum, and that trend continued with increasing penetration in the younger and higher household income demographics. We're very pleased with that.

[Mark Walsh, CEO & Director at Savers Value Village]

You add to that execution the secular trend, and ultimately value is winning. We saw that in our transactions and our basket improvements. I also add that the New York new store fleet has met its goal. So it's been a very, very satisfying quarter for us in The US. One final note on The US business, and this goes actually to the Canadian business as well.

[Mark Walsh, CEO & Director at Savers Value Village]

Our team continues to provide that fast, friendly donation approach. As you heard, we're close to 80% OSD green drop mix in terms of our supply. That's a fantastic place for us to be. Now the Canadian team had a little bit of a different executional challenge, and they rose to the occasion. We really focused our Canadian team on incremental efforts in meeting our thrift our our thristers' expectations on selection.

[Mark Walsh, CEO & Director at Savers Value Village]

And you combine that with a sharp value proposition Great.

[Matt Boss, Equity Research Analyst at JP Morgan]

Best of luck.

[Mark Walsh, CEO & Director at Savers Value Village]

And again, this is the I'm sorry?

[Matt Boss, Equity Research Analyst at JP Morgan]

Oh, I'm sorry. Go ahead.

[Mark Walsh, CEO & Director at Savers Value Village]

Oh, and the results of these efforts, I think, you've seen the continued improvement in our business. The sales improvements by cohort was widespread. The lower end and the higher end of household income cohort showed the most improvement, which is really a powerful indicator of our model strength and wide acceptance in. And, Matt, are you there?

[Matt Boss, Equity Research Analyst at JP Morgan]

Yeah. I can hear you.

[Mark Walsh, CEO & Director at Savers Value Village]

Yeah. We had a little technical problem. Sorry about that.

[Matt Boss, Equity Research Analyst at JP Morgan]

Okay.

[Mark Walsh, CEO & Director at Savers Value Village]

I was saying that the lower and higher end of our income cohort showed the most improvement in Canada.

[Mark Walsh, CEO & Director at Savers Value Village]

I think it's a powerful indicator of our model strength and wide acceptance in in that country. And the younger cohort was also an area of growth. Just wanna touch on, as indicated in the prepared remarks, we did invest in selection in this quarter. And as the q three starts, we are zeroing in on that equilibrium between items put out and items sold. I think the vertical integration of our model is one of the unique elements of our of our position in retail remains the strength of the company.

[Mark Walsh, CEO & Director at Savers Value Village]

Ultimately, the trend is continuing into July, and we love the momentum as we as we head into the, third quarter. Michael, why don't you touch on the cadence of the

[Michael Maher, CFO at Savers Value Village]

Yeah. Sure.

[Mark Walsh, CEO & Director at Savers Value Village]

The comps that Matt asked.

[Michael Maher, CFO at Savers Value Village]

Yeah, Matt. So we saw comps accelerate pretty meaningfully in both countries beginning in May and continuing into June, and we've seen that trend continue to accelerate into July in both countries as well.

[Matt Boss, Equity Research Analyst at JP Morgan]

Wow. It's great color. Maybe, Michael, just as a follow-up relative to this year's 15.4% EBITDA margin guidance, is there a way to think about the progression of margins beyond this year if we see consistent low single digit same store sales? Just given I know you have the new the new store maturity curve. Just wanna understand all the different pieces.

[Michael Maher, CFO at Savers Value Village]

For sure. Yeah. Matt, as we've said many times that we believe our long term algorithm includes high teens EBITDA margins. We continue to believe that. For the near to medium term, we'll likely be in the mid teens, and that reflects the investments that we're making in new stores, which we're now in year two of that journey.

[Michael Maher, CFO at Savers Value Village]

As we continue to build out that pipeline, we expect margins to improve. That won't be overnight, but we do think our 2025 EBITDA margin is roughly the trough.

[Matt Boss, Equity Research Analyst at JP Morgan]

It's great color. Best of luck.

[Michael Maher, CFO at Savers Value Village]

Thanks, Matt.

[Mark Walsh, CEO & Director at Savers Value Village]

Thanks, Matt.

[Operator]

Thank you. And the next question comes from Brook Roach from Goldman Sachs. Your line is now open. Please go ahead.

[Brooke Roach, VP - Equity Research at Goldman Sachs]

Good afternoon and thank you for taking our question. Mark, I was hoping you could elaborate on some of these transitory headwinds to margin that you're looking at seeing into the back half of the year that's weighing on the incremental flow through from these really strong comps. Can you help us understand what those things are? How transitory they are? And then, Michael, could you quantify the impacts that we're seeing and how that phases through the year?

[Mark Walsh, CEO & Director at Savers Value Village]

Yeah. Appreciate the question, Brooke. And we'll have Jabron I think Jabron will have some perspective on it as well. Look. After after we reported the first quarter, as Michael just mentioned, the business really took off.

[Mark Walsh, CEO & Director at Savers Value Village]

We're really excited about that acceleration. And we took the opportunity to feed an improving trend in Canada by increasing selection. That's one of the transitory issues that we're we're referring to. And then we accelerate our two peaches conversion, which in the in the scheme of the businesses, not nearly as significant as that that feeding of the of the trend in Canada. We believe that this will help drive long term durable growth.

[Mark Walsh, CEO & Director at Savers Value Village]

I think Michael could go over the financial implications. But, Shupron, why don't you take a second and outline what we did in Canada on the selection piece? Sure. Thanks, Mark.

[Jubran Tanious, COO at Savers Value Village]

Yeah, Brooke. As Mark mentioned earlier, you know, we we've seen sequential strengthening in Canada in terms of transactions and sales. And if you recall where we were this time last year with some significant pullbacks in production and, frankly, lessons learned from that, we wanted to feed the momentum. And when we produce at equilibrium, we're trying to match items to the floor to anticipated transactions. So as you think about the lap, as you think about the strengthening trend, it's sort of an inherently imprecise thing.

[Jubran Tanious, COO at Savers Value Village]

And what we know is that it's hard to get it right on the pin, especially with a dynamic situation like that. But if we're gonna air, we're gonna air on the side the side of selection to the Canadian consumer. And that's exactly what we've done. So as we think about remainder of year and things start to settle down, certainly from a comp perspective, we'll be able to dial that production amount in to get more in line with equilibrium, if that makes sense. And then the second piece of that that Mark mentioned is the two peaches fleet.

[Jubran Tanious, COO at Savers Value Village]

A reminder to the group, this is the acquisition that we made a little over a year ago, fairly modest seven store chain in the greater Atlanta market, de minimis to our overall p and l. But what it represents is a strategic beachhead for us as we look to expand in The US Southeast and take advantage of that white space. So we converted the first two stores, sort of savorize them, if you will, bringing them up to our standards of selection and merchandising. And we took the opportunity to accelerate the conversion of the remaining five as we are currently actively prospecting new sites in The US Southeast.

[Michael Maher, CFO at Savers Value Village]

So, Brooke, this is Michael. Just to speak to your question about financial impact to that, we think q two is the peak impact. We're as Jebron just said, we're lapping the beginning of the pullback from last year, and we're we're we're the exact reverse of that this year. We're really on our front foot and driving volume. So we saw that play out last year in terms of, obviously, reduced demand in the third quarter.

[Michael Maher, CFO at Savers Value Village]

We expect to see the reverse of that improved sales trends in the third quarter of this year. As the trends sort of normalize going forward from here and we find that equilibrium, I would expect the second half gross margins to be much closer to last year than we saw in the first half. Same thing on the Two Peaches investment. Again, as Ron indicated, small. The cost of that is in the low single digit millions of dollars and now largely behind us as well.

[Michael Maher, CFO at Savers Value Village]

So, again, expecting second half gross margins to be closer to l y.

[Brooke Roach, VP - Equity Research at Goldman Sachs]

Great. Thanks so much. I'll pass it on.

[Mark Walsh, CEO & Director at Savers Value Village]

Thanks, Brooke. Thank

[Operator]

you. And the next question comes from Randy Konik from Jefferies. Your line is now open. Please go ahead.

[Randal Konik, Managing Director at Jefferies & Company Inc]

Appreciate it. Hey, guys. I guess, Mark, just hearing the commentary thus far, it just sounds like there's a lot more visibility in the business, less volatility. Maybe comment on that and maybe elaborate a little bit on the you kind of talked positively about transaction and basket. And you also made a comment, maybe a little more granular there if you can.

[Randal Konik, Managing Director at Jefferies & Company Inc]

On the pricing side, you talked about if the kind of the industry starts to move a little bit on pricing and you have that great price gaps. We know you have a low average dollar value of, let's say, 5 or so per unit. Do you see some opportunity while maintaining those price gaps to get a little lift, further in AUR potentially? So it just feels like where we're going from here is a lot more visibility in the business, a lot more opportunity to kind of drive the business both through transaction basket size, even AUR, and just things kind of keep moving in the right direction, execution, etcetera. So maybe kind of pull that all together and kind of react to those comments.

[Mark Walsh, CEO & Director at Savers Value Village]

Sure. Thanks for the question, Randy. So, look, I think on the pricing opportunity, the team does a great job. We're in the field all the time, performing competitive price work, understanding what not only our direct thrift competitors are doing, but what the discount retailers doing as you mentioned. Our price gaps are pretty substantial to the discount retail world 40 to 70%.

[Mark Walsh, CEO & Director at Savers Value Village]

Look. If that price gap were to widen, it gives us an opportunity and optionality. And I'm not gonna talk about the optionality, but it certainly gives us more optionality. Either way, it's very advantageous to us. It gives us an opportunity to really gain share.

[Mark Walsh, CEO & Director at Savers Value Village]

And I think that's really ultimately what we're what we're trying to do. From a visibility standpoint, I think what I what I would how I react to that is our strategy reflects the visibility into the business. We saw opportunities to invest. We've made quick decisions. I think the the strategic investment in selection in Canada, continuing to improve on a trend that has now taken hold over three consecutive quarters, is all about visibility.

[Mark Walsh, CEO & Director at Savers Value Village]

So the team is focused on the data we're receiving, how we use that data to drive the business forward. I think you're seeing it in a 6.2 comp in The US in terms of execution and the third straight quarter of sequential improvement in Canada.

[Randal Konik, Managing Director at Jefferies & Company Inc]

Super helpful. I guess, Michael, lastly for you. Two things. Just you gave us the guidance for the third and fourth quarter on the EBITDA, I I guess, dollars balanced. Any kind of granularity that we should be thinking about from a gross margin versus SG and A perspective just to help us from a modeling perspective for everybody on the call?

[Randal Konik, Managing Director at Jefferies & Company Inc]

And then secondarily, as you think about or what we've been hearing about in the the real estate market is supply is is opening up more and more. So it feels like you guys should have some more, you know, visibility and even more opportunity as we go into '26 and '27 from a real estate perspective. Maybe give us some your thoughts there as well on real estate. Thanks.

[Michael Maher, CFO at Savers Value Village]

Sure. Thanks, Randy. I'll I'll go ahead and take your question on the the guidance and the cadence of that, and then maybe let Jevon speak to real estate. So as far as, the components of that guide, I would say, as I mentioned earlier, first of all, margin's gonna be closer to last year in the second half overall. I would expect those comparisons to sequentially improve from q three to q four largely because we're continuing to see the new store class from last year mature, and that helps to provide a continuing and growing tailwind.

[Michael Maher, CFO at Savers Value Village]

As far as OpEx overall for the year, I I expect that to be slightly better than last year as a percentage of sales. The the OpEx dollars are a little bit lumpy by quarter in the second half. What I would say is that as a percentage of sales, I expect OpEx to be reasonably consistent between q three and q four.

[Randal Konik, Managing Director at Jefferies & Company Inc]

Great.

[Jubran Tanious, COO at Savers Value Village]

And then, Randy, this is Jabron. The new stores, yeah, as Mark mentioned in the prepared comments, we're pleased with this the new store performance that we have so far. We're also very pleased with the pipeline formation that we're seeing. So, I think we've talked about this in the past, and and I believe the momentum has continued. We're seeing good muscling up by the team.

[Jubran Tanious, COO at Savers Value Village]

We're seeing high quality deals come across the conversation with landlords. We're seeing a good appetite from them in terms of the mainstreaming and realization that Thrift can be a compelling part of their real estate mix. So, absolutely, we are looking at high quality deals. We we are very pleased with the pipeline going into 2026, and we expect that to continue in the out years.

[Matt Boss, Equity Research Analyst at JP Morgan]

Thanks, guys.

[Mark Walsh, CEO & Director at Savers Value Village]

Thanks, Randy.

[Jubran Tanious, COO at Savers Value Village]

Thanks, Randy.

[Operator]

Thank you. And the next question comes from Mark Altschwager from Baird. Your line is now open. Please go ahead.

[Mark Altschwager, Senior Research Analyst at Robert W. Baird & Co]

Great. Thank you. Maybe starting with that the last point on the real estate. You did refine the store opening targets this year to 25 versus the 25 to 30. I guess what happened to the five at the high end?

[Mark Altschwager, Senior Research Analyst at Robert W. Baird & Co]

Is that getting pushed into early twenty twenty six? And could that potentially mean a more front end loaded, real estate opening schedule for for next year or or perhaps a faster pace of openings if if those were pushed a little bit later?

[Jubran Tanious, COO at Savers Value Village]

Yeah. No. No meaningful change. Listen. It's, we we've always believed it's gonna be '25 to 30.

[Jubran Tanious, COO at Savers Value Village]

You know, we we want to do high quality deals. We feel very confident about the 25. We expect next year to be a very similar number. But there's nothing magical about, you know, midpoint of 25 to 30, honestly, Mark. So, no, there's nothing systemic underneath any of that.

[Mark Altschwager, Senior Research Analyst at Robert W. Baird & Co]

Okay. And then could you update us on on labor costs and what you're seeing from an inflation perspective there at the front of the store? And then on the production side, what opportunities do you see to drive some greater efficiency as you execute on these higher production levels? Thank you.

[Michael Maher, CFO at Savers Value Village]

Hey, Mark. This is Michael. I'll I'll take the labor cost thing and then let Mark speak to the production piece. So, yeah, I'd say fairly typical. Labor costs, you know, they they grow.

[Michael Maher, CFO at Savers Value Village]

If the hourly labor cost, wages grow, they typically outpace inflation. This year is no exception. Not particularly different though from our long term averages.

[Mark Walsh, CEO & Director at Savers Value Village]

I think on the production side, our approach is always to be innovative as we think about every part of our business. So we're constantly trying to improve our process. There are we are testing different approaches as we speak. They're not ready for prime time. With that, clearly, as a meaningful part of our cost structure, this is a point in which we really place a lot of emphasis.

[Mark Walsh, CEO & Director at Savers Value Village]

So as the quarters progress, we should be talking more about innovation, as we progress down that path.

[Mark Altschwager, Senior Research Analyst at Robert W. Baird & Co]

Excellent. Thank you.

[Michael Maher, CFO at Savers Value Village]

Thanks, Mark.

[Mark Walsh, CEO & Director at Savers Value Village]

Thanks, Mark.

[Operator]

Thank you. And the next question comes from Michael Lasser from UBS. Your line is now open. Please go ahead.

[Michael Lasser, Equity Research Analyst - Hardlines, Broadlines & Food Retail at UBS Group]

Good evening. Thank you so much for taking my question. In the last several years, Sabre has seen a significant inflection in its second half profitability relative the margin relative to the second quarter. Now you are guiding to a margin that is similar to your second quarter. So so why should that be the case?

[Michael Lasser, Equity Research Analyst - Hardlines, Broadlines & Food Retail at UBS Group]

To what degree are some of the, unanticipated costs that impacted the second quarter going to linger into the second half of the year? And given those unanticipated costs and the difficulty that it, that you found processing in Canada, are there systems or other investments that you can make to improve the visibility with which you continue to forecast the business?

[Michael Maher, CFO at Savers Value Village]

Michael, this is Michael. Let me take the first part of that question about the half two margins. So first of all, our overall view on half two margins, midpoint is roughly unchanged from where we were before.

[Michael Maher, CFO at Savers Value Village]

So, really, what this is, I, you know, I I think the biggest change this year relative to any prior year in our history is just the acceleration of our new store growth and the impact that that has on our profit margins in the near term. And as we've mentioned before, that was backloaded last year, so that's weighing on our margins as we go through this year. We are now entering the second year of that and seeing those stores mature. And the good news is they are they are meeting our expectations in terms of in terms of that inflection. But that that does continue to be a factor in terms of our EBITDA margins.

[Michael Maher, CFO at Savers Value Village]

The other dynamics that we talked about earlier on this call, the Canada processing, the Two Peaches conversions, Again, we believe those were peak impacts in the second quarter, much less impact as we go forward into the back half of the year. One other factor though that does play into the updated guidance and the change in sales relative EBITDA is the stronger Canadian dollar. When we began the year and initially provided guidance, it was trading at about 70¢ US. That's now a little north of 72, close to 73 if you believe some of the, you know, forward rates. That has an impact on our on our sales.

[Michael Maher, CFO at Savers Value Village]

Our sales Canadian, business sales when translated into US dollars are now higher, and that's almost half of the incremental sales in our new, in our new in our new guidance midpoint relative to the previous guidance. It's not much of an impact to the bottom line because of our hedging. It's specifically designed to minimize swings in the short term in our profit related to FX. But over the longer term, the stronger Canadian dollar is good for us, all else equal. It just doesn't have a a meaningful impact on the bottom line in 2025.

[Michael Lasser, Equity Research Analyst - Hardlines, Broadlines & Food Retail at UBS Group]

In in on investments that could be necessary to improve the visibility in the business?

[Mark Walsh, CEO & Director at Savers Value Village]

You mean I'm sorry. Go ahead, Michael. Because you were reading a text that last

[Michael Lasser, Equity Research Analyst - Hardlines, Broadlines & Food Retail at UBS Group]

The question is, are there investments in systems or other areas of the infrastructure that Savers could make to increase the visibility into the profit outlook for the business?

[Mark Walsh, CEO & Director at Savers Value Village]

Well, I I think what we're trying what we're testing we're actively looking at every process that we have in this company to look for improvements. Our goal is to increase the profitability of the business, increase the ability for us to even be more nimble than we already are through technology, through process improvements. So that is part of our DNA. I think over the window of the last five years, we've dramatically shifted the way Thrift operates certainly within our company, and we hope to do it that similar similar transformation in the next five years.

[Michael Maher, CFO at Savers Value Village]

Yeah, Michael. This is Michael again. I would just add too that, like anything, in in periods of of change when we are looking to find that equilibrium, for example, the Canadian macro challenges we've experienced over the last year, the the some of the self inflicted issues that we had beginning in the third quarter of last year, rebalancing and refining that equilibrium sort of makes forecasting inherently more imprecise. When as we're now finding that equilibrium or finding that balance, it it tends to be easier to forecast within a given range in in the near term.

[Michael Lasser, Equity Research Analyst - Hardlines, Broadlines & Food Retail at UBS Group]

Understood. Thank you very much, and good luck.

[Michael Maher, CFO at Savers Value Village]

Thank you.

[Operator]

Thank you. Yes. And the next question comes from Peter Keach from Piper Sandler. Your line is now open. Please go ahead.

[Analyst]

Hi. This is Sarah on for Peter. Thanks for taking our question. Selection or value selection seem to be a driver for strength in both The US and Canada. I'm just wondering, is there anything to read into those comments or perhaps specific improvements on the processing side that could be translating to better sales?

[Jubran Tanious, COO at Savers Value Village]

Yeah. Thanks for the question. This is Jabron. I I would tell you that we are always looking to dial in what we put in front of the shopper for the particular time of year that we're in. So to give you a particular example, I think this group is familiar that we do back stock off season product.

[Jubran Tanious, COO at Savers Value Village]

And we have gotten better and better over the years as part of a continuous improvement effort that Mark has talked about to become more and more precise about putting the right thing on the floor in the right amount and at the right time of year. So as you think about, for example, a seasonal transition. Well, we are not like typical retail where we do a wholesale flip, for example. We match customer preferences and slowly contract our out of season and expand our incoming season to match customer preference as we go. So I think that is just one example of several that allow us to become sharper and sharper in terms of our value proposition and selection to the shopper.

[Mark Walsh, CEO & Director at Savers Value Village]

Yeah. I think in best in class, if think about best in class thrifters, which we we believe we are, Drifters demand selection, and they demand cost and freshness. And us turning we and we turn 15 times a year. That's part of our DNA. That what that's what makes us special.

[Mark Walsh, CEO & Director at Savers Value Village]

I think that's what we expect in our and our shoppers expect of us.

[Analyst]

Okay. Great. Thank you.

[Mark Walsh, CEO & Director at Savers Value Village]

Thank you. Thank you. Bye.

[Operator]

Thank you. And the next question comes from Owen Rickert from Northland Capital Markets. It comes from Anthony Chukumba from Loop Capital Markets. Your line is now open. Go ahead.

[Anthony Chukumba, MD & Senior Research Analyst at Loop Capital Markets LLC]

Thanks for taking my question. Congrats on a really strong quarter. Thank you, Anthony. No problem. So embedded into your original guidance, if I remember correctly, it like a $10,000,000 or so headwind, from the fact you had all these sort of mature stores and obviously they it takes your stores a while to mature because or longer to mature because you have to collect the donations.

[Anthony Chukumba, MD & Senior Research Analyst at Loop Capital Markets LLC]

Right? Is that still the the, the estimate, I guess, that's built into your revised guidance?

[Michael Maher, CFO at Savers Value Village]

This is Michael, Anthony. Yes. No change in that. The new stores are progressing according to our previous outlook.

[Anthony Chukumba, MD & Senior Research Analyst at Loop Capital Markets LLC]

Got it. And then just just one last thing on on Canada and certainly really encouraging to see the improved performance there. I remember last year, part of the reason that you probably cut back a bit too much in terms of your inventory receipts in Canada. How much of just kind of getting back in stock in Canada, how much of that has that continued to be a tailwind? Or is that you know, tailwind sort of run the course at this point? Thank you.

[Mark Walsh, CEO & Director at Savers Value Village]

I think I think after this this last quarter, we've gotten selection where we want it to be. As Jibran articulated, that that delicate equilibrium is always something we're chasing. And I think we feel good about where we're starting the third quarter, and we feel good about the the the continued momentum into the third quarter July in that particular aspect of our business.

[Anthony Chukumba, MD & Senior Research Analyst at Loop Capital Markets LLC]

Got it. Good luck with the back half of the year. Thanks.

[Mark Walsh, CEO & Director at Savers Value Village]

Thank you.

[Michael Maher, CFO at Savers Value Village]

Thanks, Anthony.

[Operator]

Thank you. And there are no further questions at this time. I'll turn the call over back to Mr. Mark Walsh for any closing remarks. Please go ahead, sir.

[Mark Walsh, CEO & Director at Savers Value Village]

Thank you. And thanks, everyone, for your interest in Savers, and we look forward to updating you on our second half progress in late October. Talk to you then. Thank you.

[Operator]

Thank you. This concludes our conference call for today. Thank you all for participating. You may now disconnect.

Participants

Executives

• Mark Walsh, CEO & Director
• Michael Maher, CFO
• Jubran Tanious, COO

Analysts

• Matt Boss, Equity Research Analyst at JP Morgan
• Brooke Roach, VP - Equity Research at Goldman Sachs
• Randal Konik, Managing Director at Jefferies & Company Inc
• Mark Altschwager, Senior Research Analyst at Robert W. Baird & Co
• Michael Lasser, Equity Research Analyst - Hardlines, Broadlines & Food Retail at UBS Group
• Analyst
• Anthony Chukumba, MD & Senior Research Analyst at Loop Capital Markets LLC