Savers Value Village(SVV) - 2025 Q3 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Total net sales increased by 8.1% to $427 million, with a constant currency increase of 8.6% [12] - Comparable store sales (COMPS) increased by 5.8%, with U.S. COMPS up 7.1% and Canadian COMPS up 3.9% [12][19] - Adjusted EBITDA for the quarter was $70 million, representing an adjusted EBITDA margin of 16.4% [16] Business Line Data and Key Metrics Changes - U.S. business sales grew by 10.5% to $235 million, driven by both transactions and average basket size [12][19] - Canadian net sales increased by 5.1% to $161 million, with a constant currency increase of 6.1% [12] - U.S. segment profit was $48 million, up $3 million year-over-year, while Canadian segment profit was $45 million, up $0.4 million [16] Market Data and Key Metrics Changes - The Canadian macro environment remains challenging, with unemployment above 7% and inflationary pressures affecting lower-income consumers [8][9] - The U.S. market shows strong momentum, with a notable increase in younger and more affluent customer cohorts [6][12] Company Strategy and Development Direction - The company plans to open 25 new stores in 2025, focusing on U.S. expansion due to significant growth opportunities [4][10] - A strategic shift towards U.S.-centric growth is emphasized, with 75% to 80% of growth capital allocated to the U.S. market [22] - The company aims to maintain a targeted 20% store-level contribution margin and improve operational efficiency [4][24] Management's Comments on Operating Environment and Future Outlook - Management acknowledges ongoing macroeconomic pressures in Canada but remains optimistic about U.S. growth [5][18] - The company is tightening its revenue and earnings outlook for 2025, projecting net sales of $1.67 billion to $1.68 billion [19] - Management expects Canadian COMPS to remain flat in the fourth quarter due to challenging conditions [18] Other Important Information - The company has successfully refinanced its debt, expecting annual interest expense savings of approximately $17 million [16] - A new $50 million share repurchase authorization has been approved by the board of directors [18] - The company has kept 3.2 billion pounds of usable items out of landfills over the past five years, highlighting its commitment to sustainability [11] Q&A Session Summary Question: Can you unpack the Canadian market further? - Management noted that while there has been sequential improvement in Canada, macro challenges persist, including high unemployment and inflation [21] Question: What are the drivers behind the margin pressures? - The primary drivers include new store growth and processing challenges in Canada, which management is actively addressing [30] Question: How is the U.S. business performing in terms of customer transactions? - The U.S. business is seeing strong transaction growth, particularly among younger and higher-income consumers [26] Question: What is the strategy for new market expansion? - The company plans to enter Tennessee and North Carolina, leveraging local supply and community engagement strategies [32][39] Question: How will the company manage profitability between U.S. and Canadian segments? - Management indicated a focus on maintaining profitability in the U.S. while being disciplined with costs in Canada [44]