Pet Valu Q3 2026 Earnings Results & Report

Pet Valu EPS Results

• Actual EPS: C$0.44
• Consensus EPS: N/A
• Beat/Miss: N/A
• One Year Ago EPS: N/A

Pet Valu Revenue Results

• Actual Revenue: C$299.52 million
• Expected Revenue: N/A
• Beat/Miss: N/A
• YoY Revenue Growth: N/A

Pet Valu (TSE:PET) is Canada's leading retailer of pet food and pet-related supplies with over 800 corporate-owned or franchised locations across the country. For 50 years, Pet Valu has earned the trust and loyalty of pet parents by offering knowledgeable customer service, an extensive product offering and engaging in-store services. Through its local neighbourhood stores and digital platform, Pet Valu offers more than 10,000 competitively-priced products, including a broad assortment of exclusive, holistic and award-winning proprietary brands. The Company is headquartered in Markham, Ontario, and has distribution centres in Brampton, Ontario, Surrey, British Columbia and Calgary, Alberta. Its shares trade on the Toronto Stock Exchange (TSX: PET ). To learn more, please visit: petvalu.

Pet Valu Q3 2026 Earnings Call Transcript

Key Takeaways

• Positive Sentiment: Pet Valu reported 3% revenue growth and 4% systemwide sales growth in Q3, with same-store sales returning to positive territory at 1.5%. Adjusted EBITDA rose 5%, and adjusted diluted EPS increased 10%.
• Positive Sentiment: The company raised its full-year adjusted EBITDA margin outlook to approximately 21.5%, citing stronger-than-expected expense leverage. It also highlighted continued market-share gains and improving customer transactions.
• Negative Sentiment: Full-year adjusted diluted EPS growth is now expected in the low single digits, while same-store sales guidance is flat to 1%. Management said Q4 adjusted EBITDA margin could decline about 90 basis points year over year, reflecting typical seasonal promotional intensity and uncertainty.
• Neutral Sentiment: Pet Valu expects 37 new stores in 2026, but said tighter real estate availability is likely to persist into 2027. Digital channels, including click and collect and AutoShip, continued to support sales, though management did not quantify their contribution.

Presentation

[Operator]

Good morning, everyone. Thank you for standing by. Welcome to Pet Valu's third quarter 2026 earnings conference call. My name is Steven, and I will be coordinating today's call. All lines have been placed on mute to prevent any background noise. Please note that following the formal remarks, there will be a question-and-answer session. If you would like to ask a question at that time, please press star one one on your telephone keypad. If you are using a speakerphone, please lift the handset before pressing any keys.

[Operator]

We kindly request that you limit your time to one question plus a follow-up before cycling back into the queue so that we allow time for as many of you to ask a question as possible. I would now like to turn the call over to James Allison, Vice President of Investor Relations and Treasury at Pet Valu. Please go ahead, Mr. Allison.

[James Allison, VP of Investor Relations and Treasury at Pet Valu]

Good morning, and thank you for joining Pet Valu's call to discuss our third quarter 2026 results, which were released earlier this morning and can be found at our website at investors.petvalu.ca. With me on the call is Greg Ramier, Chief Executive Officer, and Linda Drysdale, Chief Financial Officer. Before we begin, I would like to remind you that management may make forward-looking statements, which include guidance and underlying assumptions.

[James Allison, VP of Investor Relations and Treasury at Pet Valu]

Forward-looking statements are based on expectations that involve risks and uncertainties, which could cause actual results to differ materially from those expressed today. For a broader description of risks related to our business, please see our Q3 2026 MD&A, 2025 annual information form, and other filings available on SEDAR+. Today's remarks will also be accompanied by an earnings presentation, which can be viewed through our live webcast and is also available on our website. Now, I would like to turn the call over to Greg.

[Greg Ramier, CEO at Pet Valu]

Thank you, James, and good morning, everyone. I'll start by reviewing a few highlights from the third quarter, after which Linda will discuss our financials and our updated outlook for 2026. Our business delivered strong performance in Q3, as the adjustments to our commercial plan and advancements of our long-term strategies continued to resonate with devoted pet lovers, all while delivering strong results to the bottom line. We met or exceeded our expectations across all key performance indicators, with revenue growth of 3%, adjusted EBITDA margin above 22%, and adjusted net income per diluted share growth accelerating to 10%, all while navigating sustained pressure on consumer demand from macroeconomic forces. We were particularly pleased to see stronger systemwide sales growth of 4%, underpinned by sustained market share gains and the return to positive same-store sales growth of 1.5%.

[Greg Ramier, CEO at Pet Valu]

We saw the strongest growth of average unit retails in several years as industry deflation eased in the quarter and we cycled more of our pricing actions from 2025. Same-store transactions also stabilized, with improvements across each of our segments, and in particular, our best customers, underscoring the effectiveness of our commercial plan, product offering, and in-aisle expertise to drive traffic to our channels. Looking at product, growth was driven by enduring humanization and premiumization trends, while we also saw nice progression in hard lines. I'll expand on both of these trends shortly. We successfully paired solid sales and revenue growth with stable margins, supply chain savings, and excellent cost control to deliver strong profit growth in a tight environment. I want to congratulate our franchisees and ACEs across the organization, whose steadfast focus and effort were critical to achieving these outcomes.

[Greg Ramier, CEO at Pet Valu]

In the quarter, we also continued to progress on each of our three focuses in our mission to be Canada's preferred pet retailer. First, to be Canada's local and everywhere pet specialty retailer, we opened another seven stores in the quarter, including entering the rural Ontario markets of Marathon and Fort Frances, as well as further entrenching our leadership in Newfoundland with our 15th location in the province.

[Greg Ramier, CEO at Pet Valu]

With 22 stores open year-to-date, we have made solid progress on our network expansion plans and have lots more activity underway in the fourth quarter. For the full year, we expect a total of 37 new stores as we adapt to real estate market conditions while not compromising on the quality of new sites we consider. In addition to new stores, we had another busy quarter in resale activity, with seven corporate stores sold to new and existing franchisees.

[Greg Ramier, CEO at Pet Valu]

At the end of Q3, our franchise network collectively operated 71% of our 882 stores coast to coast. Our digital channels remained a tailwind to our business in the quarter, led by growth in click and collect and online delivery platforms, which leverage the unmatched scale and penetration of our Canada-wide store network. Our AutoShip subscription business continues to be a particular point of strength, with click and collect recurring subscriptions expanding fourfold year-to-date. It is overwhelmingly clear our stores and the relationships our franchisees and ACEs share with our customers are at the center of why devoted pet lovers choose Pet Valu for their pets' needs, regardless of how they choose to engage with our brand. To deliver the best pet customer experience, our teams are focused on delivering even better products, exceptional value, and more meaningful engagement to devoted pet lovers.

[Greg Ramier, CEO at Pet Valu]

Enduring humanization and premiumization demand trends once again drove growth across our offering. In addition to culinary, we are seeing this materialize in elevated demand for health and wellness supplements, solution-based feeding, and sustainable litter. We leaned further into these trends in the quarter, launching new innovation under our proprietary brands alongside our deep national brand selection. This included Performatrin Prime Digestive Care, the introduction of Performatrin Ultra Solutions-based foods, the expansion of Performatrin Prime into supplements, and the broadening of our eco-litter lineup under Fresh 4 Life. These efforts keep us at the forefront of evolving humanization and premiumization trends, where we see a long runway of growth. A particular highlight for me in the quarter was our improved performance in hardlines, the strongest results we've seen since early 2023.

[Greg Ramier, CEO at Pet Valu]

This improvement has been led by growth in toys, but we are also starting to see this broaden into other subcategories like waste management and collars and leashes, where we have started to introduce new innovation and position our proprietary brands. While there is more work to do across the hardlines portfolio, we are encouraged by these early successes and particularly the reception from devoted pet lovers.

[Greg Ramier, CEO at Pet Valu]

In the quarter, we took another step in our journey to deepen engagement with our customers and provide more personalized value. Following the rollout of enhanced loyalty data available to ACEs at the checkout in early July, we activated personalized offers at the till late in the quarter, leveraging our loyalty data. While it is still early, we are pleased with initial results and expect this to gradually build momentum as customers and our ACEs become more familiar with this new capability.

[Greg Ramier, CEO at Pet Valu]

Moving to our third focus, to fortify strong wholesale and retail fundamentals. Our team delivered the fifth consecutive quarter of year-over-year distribution cost leverage. Once again, we were able to achieve this despite elevated fuel costs, which emphasizes the magnitude of productivity and scaling benefits unlocked by our modern supply chain network. We also reached a significant milestone, with our network as a whole now operating at twice the productivity compared to our pre-transformation baseline. While our automation installation at our Brampton DC has been a core contributor to this achievement, we have also seen strong improvements in our more manual facilities in B.C. and Alberta, supported by multiple initiatives and the hard work of our local teams.

[Greg Ramier, CEO at Pet Valu]

On the fuel front, our transportation teams are taking the actions you would expect to help mitigate the impact of elevated costs, from optimizing the form of transport to leveraging our catalog of carriers to fulfill last-mile e-commerce delivery. As we celebrate the accomplishments of our unmatched Canadian pet specialty supply chain, there is still so much opportunity ahead of us as our business scales over the next decade plus.

[Greg Ramier, CEO at Pet Valu]

Overall, I am very pleased to see how our business has responded to the evolving environment we have experienced in 2026. By keeping the needs of our customers at the core of everything we do and taking actions on the elements we can control, our Q3 results showcase the resilience and earnings potential of our business model in today's slower growth environment, with further upside when macro conditions normalize. With that, I will pass it over to Linda to review our financials. Linda?

[Linda Drysdale, CFO at Pet Valu]

Thank you, Greg. We delivered another quarter of strong financial performance in Q3, meeting or exceeding our expectations across all key metrics, supported by focused execution across our teams. We returned to positive same-store sales growth, maintained stable gross margins, and delivered strong cost leverage, all while navigating an environment marked by value-seeking behavior and elevated fuel costs. This underscores the success of our strategies to deliver value to our customers, our franchisees, and shareholders in today's environment. I will review some of our key financial highlights from the quarter before turning to our full-year outlook and some high-level thoughts on 2027. System-wide sales were CAD 389 million, an increase of 4%, driven by network expansion and same-store sales growth of 1.5%.

[Linda Drysdale, CFO at Pet Valu]

While we saw sustained momentum in same-store basket trends, the highlight was a meaningful improvement in transactions, with progression seen across all our loyalty segments, and in particular, our best customers. As Greg shared, year-over-year performance in hardlines improved, narrowing the gap to the consistent growth we are seeing in consumables. Q3 revenue was CAD 300 million, increasing 3.5% from last year, once again within our full-year guidance range and similar to system-wide sales growth.

[Linda Drysdale, CFO at Pet Valu]

Gross margin was 32.5%, in line with our expectations and consistent with our Q2 trend. Compared to Q3 last year, rate declined approximately 100 basis points after excluding non-recurring costs related to the supply chain transformation in 2025. This was mainly driven by price investments in late 2025, as well as higher fuel and occupancy costs, partially offset by further distribution cost leverage. Selling, general, and administrative costs were CAD 54 million.

[Linda Drysdale, CFO at Pet Valu]

Excluding share-based compensation and costs not indicative of business performance, SG&A was CAD 49 million, or 16.4% of revenue, representing an improvement of 140 basis points from last year. The rate primarily benefited from higher corporate store resale activity, as well as leverage on other operating costs, driven by efforts across the business to manage discretionary expenses. As a result, adjusted EBITDA grew 5% to CAD 67 million, and adjusted EBITDA margin was 22.2%, up 20 basis points from last year. Net income was CAD 27 million, compared to CAD 25 million last year. Excluding share-based compensation and items not indicative of our underlying performance, adjusted net income was CAD 30 million, or CAD 0.44 per diluted share, representing year-over-year growth of 8% and 10%, respectively.

[Linda Drysdale, CFO at Pet Valu]

Turning to our balance sheet and cash flow, we ended the third quarter in strong financial position, with CAD 174 million in liquidity, reflecting CAD 23 million in cash on hand and approximately CAD 150 million in room under our revolver. Net debt leverage, including our net lease obligations, improved 0.1x sequentially to 2.2x, driven by our earnings growth. Net capital expenditures were CAD 3 million in Q3, bringing us to CAD 8 million year-to-date. We continue to deploy capital towards network growth, store reinvestment, and maintenance projects, all while benefiting from proceeds from our established corporate resale program. Free cash flow in the quarter was CAD 25 million, similar to last year. On a trailing four-quarter basis, free cash flow conversion was 41%, in line with our aspirational target of 40% or greater.

[Linda Drysdale, CFO at Pet Valu]

We returned the vast majority of our free cash to shareholders in the quarter, with CAD 15 million in share repurchases under our NCIB and CAD 9 million in dividends. So far in the fourth quarter, we have repurchased another CAD 8 million. Turning to our outlook. As Greg noted earlier, demand across retail remains constrained, as it has for most of 2026, with consumers contending with macro uncertainty, evolving trade conditions, and elevated fuel costs. Our teams continue to navigate the current environment with focus on the elements we can control, from how our commercial plan shows up to our customers, to how we invest and deploy capital to drive growth both in the near and long term.

[Linda Drysdale, CFO at Pet Valu]

With another solid quarter behind us, we have updated our full-year targets to reflect year-to-date performance and the continued momentum seen in early Q4, balanced against the uncertainty of the current environment. We now expect revenue growth of between 2.5% and 3.5% on a 52-week comparable basis, supported by 37 new stores, flat to 1% same-store sales growth, and slightly higher wholesale penetration. Adjusted EBITDA margin is now expected to be approximately 21.5%, up from 21%, due to stronger-than-expected expense leverage seen year-to-date. Factoring in our narrowed revenue growth range and increased adjusted EBITDA margin target, we now expect adjusted net income per diluted share growth in the low single-digit range on a 52-week comparable basis. On capital allocation, we now expect business reinvestment to total approximately CAD 30 million, down from CAD 35 million due to timing of projects.

[Linda Drysdale, CFO at Pet Valu]

This consists of approximately CAD 18 million in net capital expenditures and CAD 12 million in transformation costs. At the same time, we plan to continue returning our free cash flow to shareholders through regular quarterly dividends and active share buyback program under our NCIB, which we plan to renew in early December. Before passing the call back to Greg, I would like to provide some high-level thoughts on 2027 as we begin to map out our plans for next year. Given the clouded macroeconomic outlook, our base case assumes growth in the Canadian pet industry remains consistent with the pace seen this year, as the resilient humanization and premiumization trends we see in our business are tempered by a prevalent value-seeking behavior.

[Linda Drysdale, CFO at Pet Valu]

As we have consistently delivered in recent years, we expect to outpace industry growth, building market share through greater convenience and deeper customer connections, while supporting the healthy margins and strong cash conversion our business has and can deliver. As always, we will share more details regarding our outlook for 2027 when we report our Q4 results in March. Back to you, Greg, for some closing thoughts.

[Greg Ramier, CEO at Pet Valu]

Thank you, Linda. As I highlighted earlier, the strong performance we saw in Q3 was only made possible by the focus and effort put forth by all our ACEs and franchisees. Our success in the quarter, and progressively through this year, clearly demonstrates that when we are aligned beyond a common purpose and objective, we are truly stronger together. This was the key theme at our annual store conference this past summer. Alongside hundreds of our ACEs and franchisees, we gathered to celebrate the past 50 years of serving Canadian devoted pet lovers and align on how we will shape the next 50 together. Thank you to all our ACEs, franchisees, and leaders for all that you do each day to make Pet Valu Canada's preferred pet retailer. With that, we will now be happy to take your questions.

[Operator]

Thank you. At this time, we will conduct the question-and-answer session. As a reminder, to ask a question, you will need to press star one one on your telephone and wait for your name to be announced. To withdraw your question, please press star one one again. Our first question comes from the line of Vishal Shreedhar of NBC. Your line is now open.

[Vishal Shreedhar, Analyst at NBC]

Hi, thanks for taking my questions, and congrats on the results. Can you give us your perspective on the trends now that you've anniversaried price investments partway through the quarter and into Q4, and discretionary is gaining traction? Should investors anticipate subsequent improving same-store sales growth and less pressure on gross margin? Are those reasonable expectations?

[Greg Ramier, CEO at Pet Valu]

Morning, Vishal, and thanks. I'll cover the first part of that, and then I'll hand it off to Linda to talk about guidance. Generally speaking, industry-wide demand trends tracked in line with recent quarters. We saw devoted pet lovers continue to be very intentional in their spending, showing an unwavering commitment to buy high-quality products for their pet, but also a heightened desire to get those products at the best value. Looking specifically at our channels, we gained share in the quarter, and we saw an improvement in our same-store sales trend, which we believe ties back to all the work we've done over the last year across multiple fronts, from price investments to commercial plan adjustments, to new store growth, to exciting product innovations, and the trends that we've seen in humanization and premiumization.

[Greg Ramier, CEO at Pet Valu]

Part of this improvement has come from easing deflationary pressure on our basket as we lap our 2025 price investments. But we're very pleased to also see transactions stabilize in the quarter, with improvements across each of our loyalty segments, which tells us that devoted pet lovers like these changes and investments, and it gives us strong conviction on both our model and our strategy. As to how that plays out into the future, I'll just let Linda touch on that for you, Vishal.

[Linda Drysdale, CFO at Pet Valu]

Yeah, and I'd say year-to-date, we're tracking well against our outlook, with revenue up 3.4%, same-store sales growth 0.4%, adjusted EBITDA margin sitting at 21.4%, and we've grown adjusted EPS by 3.5%. As we look at the balance of the year, I'd say the high and low end of our range is really based on the same-store sales linking to the shape of demand, more specifically what we're seeing in transactions and the recovery in hard lines. Feeling good about our profit guidance, given the levers within our control. On margins specifically, we see upside over the longer term. In this environment, we're focused on managing stable margins while driving top-line growth.

[Vishal Shreedhar, Analyst at NBC]

Okay. Thank you for that perspective. You highlighted in your commentary the improving traffic, which was a nice development in the quarter. Can you talk about, in particular, what resonated with the consumer this quarter in the traffic? Was it back-end weighted as you lapped the price increases, or was it more consistent through the quarter?

[Greg Ramier, CEO at Pet Valu]

What we saw in the quarter, Vishal, was a slight improvement through Q3 across both traffic and basket, due to some of the elements that we're lapping from last year, like you talked about with particularly our Lowered and Locked investments. Our commercial plan, with both the promotional frequency and the work that we've done in-store around our assortment and service, resonated with devoted pet lovers, and we saw that sequentially improve through the quarter. I would call out, though, for Q4, what we've seen to date is results quite similar to the average in Q3.

[Vishal Shreedhar, Analyst at NBC]

Thank you for your commentary.

[Operator]

Thank you.

[Greg Ramier, CEO at Pet Valu]

Thanks, Vishal.

[Operator]

Our next question comes from the line of Irene Nattel of RBC Capital Markets. Your line is now open.

[Irene Nattel, Analyst at RBC Capital Markets]

Thanks, and good morning, everyone. Really nice to see the hard lines piece coming back a little bit. Can you talk about where you're seeing pockets of relative strength and how you're positioned as we head into the important holiday season with respect to hard lines? Thank you.

[Greg Ramier, CEO at Pet Valu]

Thanks, Irene. To start, just to remind everybody that hard lines plays a very important part of our offering. It naturally complements our role in consumables, or our strengths in consumables. Over the last years, this space has become more competitive, so we've been positioning us to win in the environment, and there's three key elements to that. The first is we're continually refreshing products to highlight innovation, newness, and excitement, and we're leading with national brands with that. That has shown progress.

[Greg Ramier, CEO at Pet Valu]

Second, we're leveraging our established proprietary brands to deliver better value in evergreen high-velocity products. That has shown some progress. Third, we're sharpening our promotional plan to make it easier for customers to add these items to their basket with programs like Item of the Month, which has also shown progress. This started in toys, which is where we've seen the most success to date.

[Greg Ramier, CEO at Pet Valu]

We are broadening that out into other categories, as I mentioned in my results. We see a path and a runway on hard lines here.

[Irene Nattel, Analyst at RBC Capital Markets]

That's great. Thank you. In your prepared remarks, you also talked about some POS shifts enabling you to leverage loyalty at the cash. Can you talk a little bit more about it and how this might evolve and help drive basket, presumably?

[Greg Ramier, CEO at Pet Valu]

Thanks. Really appreciate the question. We did launch personalized offers at the point of sale late in Q3, so it's still early. But we're very encouraged with what we're seeing, both based on the pilot that we did earlier this summer and with the performance since we've rolled it out more broadly. We do expect this to continue to build as our customers and ACEs become more familiar with the new capability, and we're starting to leverage some of the other tools we have around email to draw attention to these personalized offers. From a high level, they're really meant to do two things, Irene. They're meant to build basket and allow our ACEs the opportunity to build customers' baskets, and to be able to increase trips using personalization of offers. We're still very early days, but encouraging results so far.

[Irene Nattel, Analyst at RBC Capital Markets]

Thank you.

[Greg Ramier, CEO at Pet Valu]

Thanks, Irene.

[Operator]

Thank you. Our next question comes from the line of Chris Li of Desjardins. Your line is now open.

[Chris Li, Analyst at Desjardins]

Hi. Good morning, everyone. Greg, I was wondering, how would you characterize the promotional intensity so far across the industry? Have you seen competitive intensity change sequentially? Are you seeing any signs of them being more or less rational? Thanks.

[Greg Ramier, CEO at Pet Valu]

Thanks, Chris. We haven't seen a meaningful change. The environment remains competitive but rational. What is encouraging is the stable trading that we're seeing, given the cost pressures that are in the system. We're entering a busy holiday season, which typically has a bit more promotional activity, but nothing we've seen so far suggests anything out of the ordinary. We continue to work under the assumption that the environment remains competitive through the balance of the year.

[Chris Li, Analyst at Desjardins]

Okay, that's helpful. My other question is, sorry if you touched on this already, but I was wondering, how did same-store sales trend through the quarter, and what is it so far in Q4?

[Greg Ramier, CEO at Pet Valu]

The Q3 sales showed slight improvement through the quarter, particularly with what we were lapping. So, slight improvement in Q3 as the quarter progressed. Q4, we've seen results to date that are quite similar to Q3 in average. So, continued same-store sales growth, but on average to what we saw in Q3.

[Chris Li, Analyst at Desjardins]

Okay. Thanks so much.

[Linda Drysdale, CFO at Pet Valu]

I just thought maybe the one thing I'd just add there is that we, obviously, there's big spending periods ahead of us, so there's still a lot to go in the quarter.

[Chris Li, Analyst at Desjardins]

Yeah, that makes sense. All the best. Thank you.

[Greg Ramier, CEO at Pet Valu]

Thank you, Chris.

[Operator]

Thank you. Our next question comes from the line of Martin Landry of Stifel. Your line is now open.

[Martin Landry, Analyst at Stifel]

Hi. Good morning, everyone. I wanted to look at your strategy as you approach Black Friday and the holiday period. How does your marketing spending look like versus last year? Do you intend to be more promotional, less promotional? Any color would be helpful.

[Greg Ramier, CEO at Pet Valu]

Martin, I think you should expect a nice balance from us in the quarter, having some exciting promotions for our customers, but making sure that we maintain stable margins through that. We are very focused in Q4 on the combination of convenience, quality, value, and expertise, combined with a strong commercial plan. That commercial plan, looked at it in detail. I am happy with how it is laid out for the quarter, both for Black Friday and through the rest of the holidays for both consumables and hard lines, and how we are using personalized value within that.

[Martin Landry, Analyst at Stifel]

Okay. Looking at your results, you now have two consecutive quarters of double-digit EPS growth. Same-store sales growth seems to have inflected positively. I was wondering if you can discuss your long-term growth algorithm. I understand, Linda, you talked about stable EBITDA for next year in terms of margin. Longer term, could we see low single digits same-store sales growth? Could that be combined with slight margin expansion? With buyback, could that bring EPS growth to high single digits, low double digits on a sustainable basis?

[Linda Drysdale, CFO at Pet Valu]

Martin, I will take that. Obviously, we are still forming our views for 2027, and certainly beyond that, and plan to come back with our formal outlook in March, as per our usual practice. In the shorter term, I just point to the three remarks I made in my prepared remarks, which first is the environment. We do not expect the demand environment to meaningfully change from where it is today. We have shown that we can succeed and grow within these conditions, and we expect to do so next year.

[Linda Drysdale, CFO at Pet Valu]

The next thing I would point to is maintaining our healthy adjusted EBITDA margins. Third, we continue to maintain the strong cash conversion that is made possible by our model. That should provide us with ample free cash flow for deployment, including through our share buybacks and dividends. With respect to EPS, I am not going to provide a range for that today.

[Linda Drysdale, CFO at Pet Valu]

As we've shown in recent quarters, our business model is capable of delivering that bottom line growth in the current environment, and we expect to do so, but the pace will depend on several factors, including macro forces.

[Martin Landry, Analyst at Stifel]

Okay. You're seeing maintaining margins in 2027, but is there a long-term potential for margin to expand over time?

[Linda Drysdale, CFO at Pet Valu]

I would just go back to the pacing and that we've said from an adjusted EBITDA margin perspective, historically, we've said we've been in that 21%-23% range. I think that's a reasonable expectation over the long term.

[Martin Landry, Analyst at Stifel]

Okay. Perfect. Thank you, and best of luck.

[Linda Drysdale, CFO at Pet Valu]

Thank you.

[Operator]

Thank you. Our next question comes from the line of Cheryl Zhang of TD Cowen. Your line is now open.

[Cheryl Zhang, Analyst at TD Cowen]

Hey, good morning, everyone, and thanks for taking our question. I'd like to first ask on the consumables. Can you comment on the performance of this category over the quarter, and are you seeing any notable changes in consumer behavior in terms of this category?

[Greg Ramier, CEO at Pet Valu]

Thanks, Cheryl. It's Greg. As we shared in the remarks, growth continues to be led by consumables, and in particular, pockets that appeal to humanization and premiumization trends, such as supplements, solution-based feedings, and high-protein diets with categories like culinary. Those are all areas we saw strong performance in. At the same time, we did see improved trends in hard lines, which continue to stabilize, given the strategy that I talked through with Irene.

[Cheryl Zhang, Analyst at TD Cowen]

Okay, got it. On the store count, I think you brought down your 2026 new store adds by a touch and noted the real estate conditions. Could you please maybe elaborate on that, and how should we be thinking about 2027?

[Greg Ramier, CEO at Pet Valu]

Yeah, great question. Thanks, Cheryl. We have refined our target for the year for stores based on the greater line of sight for what will be completed by December. As of today, we've opened 28 stores, set up teams busy over the next several weeks to bring us to 37 before Christmas. As I shared in the remarks, we continue to adapt to market conditions around the availability of greenfield sites and second-use space, which have been tighter in recent years. We've pivoted into pockets of growth, like Alberta and rural Canada, that we've noted previously. One consistent through all of this is our uncompromising focus on the quality of the sites we consider. Each store we and our franchisees open is a meaningful investment into the community it serves, so we're focused on it being long-term successful.

[Greg Ramier, CEO at Pet Valu]

We're still in the process of actively refining the pipeline for 2027. We'll provide a new store or store range and target for 2027 when we speak to you in March. What I can say is based on discussions that we're having with landlords and developers, we do expect that this market tightness to remain in place through next year.

[Cheryl Zhang, Analyst at TD Cowen]

That's very helpful. Thank you.

[Greg Ramier, CEO at Pet Valu]

Okay. Thanks, Cheryl.

[Operator]

Thank you. Our next question comes from the line of Ty Collin of CIBC. Your line is now open.

[Ty Collin, Analyst at CIBC]

Hey, good morning. Thanks for taking my questions. To start, I am just wondering if you could provide a little more detail around the building blocks of the 1.4% ticket growth this quarter, and specifically what sort of role mix and average price might have played in that. Then, Linda, could you just maybe speak a little more to why you decided to bring down the upper end of the full-year same-store sales guide?

[Greg Ramier, CEO at Pet Valu]

Thanks, Ty. I will start with the same-store sales backdrop. We did see sequential improvements tied to improvement in traffic, and that actually materialized across each of our loyalty segments, particularly our best, most loyal customers. So very happy to see that. At the same time, we did see solid growth in average basket with the return of some inflation as we lapped last year's price investment. That is certainly helping. But we also continue to see the benefits from the humanization, premiumization, and mix, as devoted pet lovers seek out higher quality and more specialized products. So those are the two components that we saw the most strength. We are still seeing both of those as we talked about in Q4 to date.

[Linda Drysdale, CFO at Pet Valu]

Yeah, I will just take on the same-store sales for the quarter, for Q4. So year-to-date, we are at 0.4%. I still see opportunity for a strong return in Q4, but as I mentioned earlier, there are still a number of big weeks to come.

[Ty Collin, Analyst at CIBC]

Okay, got it. Thanks. You talked a little bit about obviously higher fuel costs and some of the inflation that already exists in the system. Are you seeing your vendors looking to take more price at this point, and how do you feel about your ability to pass a little bit more of that along to your consumers, both in Q4 and as we look ahead to 2027?

[Linda Drysdale, CFO at Pet Valu]

Yeah. Well, first off, in Q3, what we saw was related to our direct transportation costs, both on inbound from vendors and outbound to stores. With respect to product costs, we are seeing some cost pressure from vendors, not dissimilar to historical levels. Teams are focused on carefully managing that, leveraging scale and relationship with our national brand partners to minimize those impacts so that we can provide the best value possible to our devoted pet lovers.

[Ty Collin, Analyst at CIBC]

Okay. Thanks.

[Greg Ramier, CEO at Pet Valu]

Thanks, Ty.

[Operator]

Thank you. Our next question comes from the line of Michael Glen of Raymond James. Your line is now open.

[Michael Glen, Analyst at Raymond James]

Hey. Just to start, Greg, can you maybe give an update on how your AutoShip program performed during the quarter? Did you continue to see good traction with that?

[Greg Ramier, CEO at Pet Valu]

Thanks, Michael. I will start with e-commerce in general. As I shared, sales through our digital channels continue to be a tailwind for us. So pleased with that in the quarter, and particularly in areas that leverage our in-store convenience, such as click and collect and online delivery platforms. AutoShip subscriptions is now a meaningful part of our e-commerce business, and I have been particularly pleased with the subscription within click and collect, which is a fantastic recurring subscription, and it shows how much our customers value that combined with the in-person engagement they receive with our ACEs and franchisees.

[Michael Glen, Analyst at Raymond James]

Okay. Then maybe on engagement with new customers, I know you're having, or the way you speak about it, you're having a lot of success with your best customers. What are some of the programs or strategies that you're thinking about in terms of capturing more wallet across those sort of occasional customers?

[Greg Ramier, CEO at Pet Valu]

Michael, it's a great question. I think for competitive reasons, I will summarize it as the commercial plan and our value position, and combined with the quality we have as an important element, our in-store ACEs, and being able to activate and build that basket and win the return trip. Then on the personalized front, we have a long runway of things to do on this. We've been happy with progress to date. The offers and the personalized offers that we're doing are starting to show some resonance, both in being able to build the basket, and in being able to build and win repeat trips. Still pretty early days. I'm not going to go into the details around the offers, because we, from competitive reasons, just don't want to share that. But we've seen a nice start with that.

[Michael Glen, Analyst at Raymond James]

Okay. Thank you.

[Operator]

Thank you. As a reminder, to ask a question, you'll need to press star one one on your telephone. Our next question comes from the line of Adrienne Yih of Barclays. Your line is now open.

[Mike Vu, Analyst at Barclays]

Good morning. This is Mike Vu for Adrienne Yih, and thanks for taking our question. I know, Greg, you just touched on digital, but it's great to see the momentum, so I want to ask a little bit more about that. As your digital sales continue to grow, how do the purchasing patterns of the omnichannel customers compare with the store-only customers? Do those customers who use click and collect, delivery, or AutoShip demonstrate a higher retention or greater total spending over time versus the in-store-only customers?

[Greg Ramier, CEO at Pet Valu]

Michael, thank you. The answer on that is yes on all fronts. Our omnichannel customers, whether they are click and collect-focused online delivery platforms or do direct-to-consumer, they still spend a large portion of their spend in stores. Those customers have more loyalty. We would generate more trips and more spend, and therefore more lifetime value with them. So we've been very happy with how the optionality of how you experience our brand has translated into customers seeking out to shop with us more often and spending more over the long term.

[Mike Vu, Analyst at Barclays]

Got it. Thank you. Can you just provide us an update on the performance of the Item of the Month program? I know you talked about it a lot in the past, so just curious, are there any learnings from there or anything to know about that? Is the program driving incremental units and basket size, or helping bring in new customers more frequently to the stores or online or the digital channel in general?

[Greg Ramier, CEO at Pet Valu]

Thanks, Michael. The Item of the Month program, which is specifically designed as an add-to-the-basket hard lines program, has been very successful for us. We started this in the first quarter of this year. It is building momentum, and it's been a very important part of our hard lines story. But it is part of the story, not the only thing.

[Greg Ramier, CEO at Pet Valu]

The hard line strategy around having innovation and some excitement in the category to be able to win a purchase, to have everyday, evergreen, high-volume, strong price position products through our proprietary brands, and then having programs like this over and above that add an incremental item to the basket and get the power of our store ACEs excited about doing that with devoted pet lovers. They all play a role in the performance that we're seeing within hard lines, and they're all very important in this environment. The Item of the Month program has been a real winner for us so far.

[Mike Vu, Analyst at Barclays]

Great. Thank you very much.

[Greg Ramier, CEO at Pet Valu]

Thanks, Michael.

[Operator]

Thank you. Our next question, we welcome back Chris Li of Desjardins. Your line is now open.

[Chris Li, Analyst at Desjardins]

Oh, thanks for taking the follow-up. I apologize if you have already commented on this, but if my math is right, I think your guidance implies EBITDA margin for Q4 to be down around 90 basis points. Is my math right? If so, what is driving that margin? Thank you.

[Linda Drysdale, CFO at Pet Valu]

Yeah. Your math is correct, Chris. With elevated promotional intensity that we typically see in Q4, there remains some uncertainty in how the quarter will unfold. Once again, we have continued our pragmatic approach to our outlook, built within the elements that we have control over.

[Chris Li, Analyst at Desjardins]

Okay. Thank you.

[Operator]

Thank you. I am showing no further questions at this time. I would now like to turn it back to Greg Ramier for closing remarks.

[Greg Ramier, CEO at Pet Valu]

Excellent. Thank you for joining us. Thank you for all the questions. As you heard, we are pleased with both our Q3 results and our progress. Looking forward to updating you all on our Q4 and 2027 outlook next time we talk. Thanks very much.

[Operator]

Thank you for your participation in today's conference. This does conclude the program, and you may now disconnect.

Participants

Executives

• James Allison, VP of Investor Relations and Treasury
• Greg Ramier, CEO
• Linda Drysdale, CFO

Analysts

• Vishal Shreedhar, Analyst at NBC
• Irene Nattel, Analyst at RBC Capital Markets
• Chris Li, Analyst at Desjardins
• Martin Landry, Analyst at Stifel
• Cheryl Zhang, Analyst at TD Cowen
• Ty Collin, Analyst at CIBC
• Michael Glen, Analyst at Raymond James
• Mike Vu, Analyst at Barclays