Savers Value Village Inc. ((SVV)) has held its Q4 earnings call. Read on for the main highlights of the call.
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Savers Value Village Inc. recently held an earnings call that revealed a positive sentiment overall, driven by strong growth and strategic expansion within the U.S. market. This optimism was supported by a flourishing loyalty program and a robust pipeline for new store openings. However, challenges such as increased costs and short-term financial impacts from new stores, combined with economic uncertainties in Canada, present hurdles that temper the company’s outlook for the near future.
U.S. Business Performance
Savers Value Village’s U.S. operations showcased impressive performance, with double-digit total revenue growth. This growth was propelled by accelerated new store developments and solid comparable store sales, leading to a 10.5% increase in net sales, totaling $220 million. Comparable store sales rose by 4.7%, highlighting the strength of the U.S. market for the company.
Loyalty Program Growth
The company’s loyalty program demonstrated significant expansion, boasting double-digit percentage growth in active members over the past year. Loyalty members accounted for an impressive 72% of total sales during the quarter, up from 70% the previous year, showcasing increased customer engagement and retention.
New Store Openings
Savers Value Village successfully opened nine new stores within the quarter, aligning with their 2024 new store targets. Looking ahead, the company plans to open 25 to 30 new stores in 2025, aiming for a long-term goal of achieving a 20% store-level adjusted EBITDA margin for sustainable growth.
Adjusted EBITDA Performance
In terms of profitability, the company generated a significant $74 million in adjusted EBITDA, equating to over 18% of sales. This performance underscores the operational efficiency and profitability of Savers Value Village’s business model.
Strong Balance Sheet
The company’s financial position remains strong, with $150 million in cash and cash equivalents. Additionally, Savers Value Village maintains a net leverage ratio of 2.1x at the end of the quarter, reflecting a stable and manageable level of debt relative to earnings.
Challenges in the Canadian Market
The Canadian market presented challenges, with net sales declining by 2.7% due to a weaker Canadian dollar. On a constant currency basis, Canadian net sales fell by 0.2% to $155 million. A notable 2.5% decline in comparable store sales was primarily driven by reduced transaction volumes.
Cost Increases and Operating Expenses
The company faced increased costs, with the cost of merchandise sold rising by 230 basis points to 44.3% of net sales. This increase was attributed to the impact of new stores and reduced leverage on lower Canadian comparable store sales. Additionally, selling, general, and administrative expenses rose to 22.9% of net sales, primarily due to new store openings and preopening expenses.
Profitability Challenges with New Stores
New store profitability remains a challenge, with initial operations expected to result in a net headwind of approximately $10 million to adjusted EBITDA in 2025. This is due to the early-stage lack of profitability of these new establishments.
Canadian Economic Uncertainty
Potential new tariffs in Canada contribute to economic uncertainty, affecting Savers Value Village’s planning capabilities in the region. This adds another layer of complexity to the company’s strategic operations in the Canadian market.
Forward-Looking Guidance
Looking towards 2025, Savers Value Village anticipates opening 25 to 30 new stores, contributing to projected net sales between $1.61 billion and $1.65 billion. Comparable store sales growth is expected to be between 0.5% and 2.5%, with the U.S. market outperforming Canada. The company forecasts adjusted EBITDA to range from $245 million to $265 million, with capital expenditures planned between $125 million and $150 million. While new stores may initially impact EBITDA negatively by approximately $10 million, profitability is expected to improve by 2026 as these stores mature. Despite challenges in the Canadian market, the company remains committed to its long-term growth trajectory.
In conclusion, the earnings call from Savers Value Village Inc. paints a picture of a company poised for long-term growth, driven by robust U.S. market performance and strategic expansions. However, the challenges in Canada and initial financial pressures from new store openings present hurdles that need to be navigated carefully. Investors and stakeholders can take comfort in the company’s strong financial positioning and forward-looking strategies aimed at overcoming these obstacles and ensuring sustained growth.
