Pet Valu Q3 Earnings Call Highlights

Key Points

• Q3 sales and earnings grew: Revenue rose 3.5% to CAD 300 million, same-store sales increased 1.5%, and adjusted EPS climbed 10% to CAD 0.44.
• Pet Valu raised its 2026 adjusted EBITDA margin target to approximately 21.5% from 21%, while forecasting 2.5%–3.5% revenue growth and flat-to-1% same-store sales growth.
• Transactions stabilized and hardlines improved, while digital channels supported growth. The company generated CAD 25 million in free cash flow and returned capital through CAD 15 million in share repurchases and CAD 9 million in dividends during the quarter.

Pet Valu TSE: PET reported higher third-quarter sales and earnings as same-store sales returned to growth, and the Canadian pet retailer raised its full-year adjusted EBITDA margin target.

Revenue rose 3.5% to CAD 300 million, while systemwide sales increased 4% to CAD 389 million. Same-store sales grew 1.5%, supported by stronger basket trends and an improvement in transactions, Chief Financial Officer Linda Drysdale said on the company’s earnings call.

Net income increased to CAD 27 million from CAD 25 million a year earlier. Adjusted net income rose 8% to CAD 30 million, and adjusted earnings per diluted share climbed 10% to CAD 0.44. Adjusted EBITDA increased 5% to CAD 67 million, with the margin expanding 20 basis points to 22.2%.

Margin outlook raised

Pet Valu now expects an adjusted EBITDA margin of approximately 21.5% for 2026, up from its prior target of 21%, citing stronger-than-expected expense leverage. It also narrowed its revenue growth forecast to 2.5% to 3.5% on a 52-week comparable basis and expects same-store sales growth of flat to 1%.

The company expects low-single-digit growth in adjusted net income per diluted share on a comparable basis. Drysdale said the updated outlook reflects year-to-date performance and momentum in early fourth-quarter trading, balanced against uncertainty in the consumer environment.

Chief Executive Officer Greg Ramier said fourth-quarter same-store sales to date were similar to the third-quarter average. Drysdale cautioned that major spending periods remained ahead. She also confirmed an analyst’s calculation that the guidance implied an approximately 90-basis-point decline in the fourth-quarter EBITDA margin, noting the promotional intensity typically seen during the period.

For 2027, Pet Valu’s base case assumes Canadian pet industry growth remains consistent with this year’s pace. The company expects to outpace the industry while maintaining healthy margins and cash conversion, Drysdale said. Detailed guidance is expected when Pet Valu reports fourth-quarter results in March.

Transactions stabilize as hardlines improve

Ramier said transactions stabilized in the third quarter, with improvements across loyalty segments, particularly among the company’s best customers. Basket trends also benefited as the company cycled past some of its 2025 price investments and deflationary pressure eased.

Consumables continued to lead growth, including products tied to demand for premium and specialized pet care, such as supplements, solution-based foods and high-protein diets. Hardlines performance improved to its strongest level since early 2023, Ramier said, led by toys and extending into categories including waste management, collars and leashes.

Pet Valu introduced personalized offers at checkout late in the quarter using loyalty data. Ramier said early results were encouraging, although the program remains in its early stages. The offers are intended to help increase basket sizes and customer trips.

Digital channels also contributed to growth, led by click-and-collect and online delivery. Ramier said recurring click-and-collect subscriptions expanded fourfold year to date. He added that customers who shop across channels tend to be more loyal, make more trips and spend more over time than store-only customers.

Costs, stores and cash returns

Third-quarter gross margin was 32.5%, approximately 100 basis points below the prior-year level after excluding nonrecurring 2025 supply-chain transformation costs. Drysdale attributed the decline mainly to late-2025 price investments and higher fuel and occupancy costs, partly offset by distribution efficiencies.

Adjusted selling, general and administrative expenses were CAD 49 million, or 16.4% of revenue, an improvement of 140 basis points. Drysdale said the rate benefited primarily from increased corporate-store resale activity and leverage on other operating costs.

Pet Valu opened seven stores during the quarter and ended the period with 882 locations, 71% of which were operated by franchisees. The company expects to open 37 stores for the full year. Ramier said availability of suitable real estate has been tighter in recent years and that the company expects those conditions to persist into 2027.

Free cash flow was CAD 25 million in the quarter. Pet Valu repurchased CAD 15 million of shares and paid CAD 9 million in dividends during the period, with another CAD 8 million in buybacks completed so far in the fourth quarter. The company plans to renew its share repurchase program in early December, Drysdale said.

About Pet Valu (TSE:PET)

Pet Valu 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.

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