Savers Value Village Inc. ((SVV)) has held its Q3 earnings call. Read on for the main highlights of the call.
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The recent earnings call of Savers Value Village Inc. showcased a blend of optimism and caution. The company is experiencing positive momentum in the U.S. market, driven by robust sales growth and strategic expansion plans. However, challenges persist in the Canadian market, compounded by increased operating expenses. Notable achievements include strong U.S. sales growth and successful debt refinancing, but the Canadian economy and some underperforming stores remain hurdles to overcome.
Strong U.S. Sales Growth
The U.S. segment of Savers Value Village Inc. reported a significant sales increase of 10.5%, with comparable store sales rising by 7.1%. This growth was fueled by an uptick in both transaction volume and average basket size, highlighting the company’s strong foothold in the U.S. market.
Progress in Canadian Market
Despite macroeconomic challenges, the Canadian business showed resilience with a 3.9% growth in comparable store sales. This marks the fourth consecutive quarter of sequential improvement, indicating a slow but steady recovery in the region.
New Store Openings and Expansion Plans
Savers Value Village Inc. opened 10 new stores in the quarter and has ambitious plans to open 25 more in 2025. The company is also eyeing new markets, such as North Carolina and Tennessee, for expansion in 2026, reflecting its strategic growth initiatives.
Improved Financial Metrics
The company reported an adjusted EBITDA of $70 million, accounting for approximately 16.4% of sales. A strategic refinancing of debt has significantly reduced interest expenses, providing a more flexible capital structure.
Increased Active Loyalty Members
The loyalty program of Savers Value Village Inc. saw an increase, reaching approximately 6.1 million active members. This growth underscores the company’s successful customer engagement strategies.
Canadian Macroeconomic Challenges
The Canadian market continues to face high unemployment and inflation, particularly impacting performance in Southwest Ontario. These macroeconomic factors pose ongoing challenges for the company.
Store Closures Due to Underperformance
In response to underperformance, Savers Value Village Inc. closed six stores, including three Peaches stores. This move is expected to be EBITDA-accretive by 2026, aligning with the company’s focus on optimizing store performance.
Increased Operating Expenses
Operating expenses rose by 19% to $100 million, driven by new store growth and other factors. This increase highlights the cost pressures associated with the company’s expansion efforts.
Impact of New Store Growth on Margins
The cost of merchandise sold as a percentage of net sales increased by 80 basis points, primarily due to new store openings and higher processing costs in Canada. This reflects the financial impact of the company’s aggressive expansion strategy.
Forward-Looking Guidance
Looking ahead, Savers Value Village Inc. has updated its guidance for fiscal 2025. The company anticipates net sales of $1.67 billion to $1.68 billion, with comparable store sales growth of 4.0% to 4.5%. Adjusted net income is projected to be between $71 million and $75 million, while adjusted EBITDA is expected to range from $252 million to $257 million. These forecasts account for macroeconomic pressures in Canada and the underperformance of certain stores.
In conclusion, the earnings call of Savers Value Village Inc. paints a picture of a company navigating through a mix of opportunities and challenges. While the U.S. market continues to thrive, the Canadian segment faces headwinds. The company’s strategic expansion plans and financial refinements are promising, yet the road ahead requires careful management of macroeconomic factors and operational costs.