Savers Value Village, Inc. Q2 FY2025 earnings call

• Highlights: Second quarter sales in U.S. grew 10.5% with comp store sales up 6.2%; Canada comp store sales grew 2.6% with acceleration from prior quarter. Opened 4 new stores in Q2 and expect 25 in 2025. Loyalty program reached over 6 million active members. Adjusted EBITDA was $69 million, 16.5% of sales. Raised revenue and earnings outlook for 2025.
• Execution: U.S. execution strong with value and selection resonating; Canada making progress despite macro challenges, with 3 consecutive quarters of comp improvement.
• New Stores: Opened 4 in Q2, refining guidance to 25 in 2025. Invested in Canada to improve assortment, and in U.S. Southeast with 2 Peaches conversions. Expanded automated book processing to 50% of fleet.

U.S. Business: Sales grew 10.5%, with comp store sales up 6.2% driven by transactions and average basket. U.S. segment profit was $49 million, up $0.5 million versus the prior year, primarily due to increased profit from comparable stores, partially offset by the impact of new stores and 2 Peaches conversions. Canada Business: Delivered 2.6% comp store sales growth, an acceleration of 200 basis points from the prior quarter. Canada segment profit was $39 million, down $5 million versus the prior year period due to deleveraging of expenses as a percentage of sales, primarily associated with efforts in Canadian production to build demand and a weaker Canadian dollar. In terms of revenue contribution, U.S. net sales were $229 million (54.9% of total net sales $417 million), while Canada net sales were $157 million (37.6% of total net sales).

• Raised 2025 outlook: Net sales $1.67 billion to $1.69 billion; comparable store sales growth 3% to 4.5%; net income $47 million to $58 million or $0.29 to $0.36 per diluted share; adjusted net income $67 million to $78 million or $0.41 to $0.48 per diluted share; adjusted EBITDA $252 million to $267 million; capital expenditures $125 million to $140 million; 25 new store openings.
• Q3 outlook: Sales growth roughly consistent with Q2, high single-digit total sales growth, mid-single digits comparable store sales growth, plan to open 10 new stores.
• Q4 outlook: Total sales growth mid-teens percentage range (including 53rd week impact), comparable store sales growth low single digits, adjusted net income and adjusted EBITDA dollars balanced between quarters, Q4 slightly higher than Q3.

• Canadian macroeconomic challenges including prolonged choppy environment, elevated unemployment, inflation, volatile consumer confidence, and trade/tariff uncertainty.
• Short-term impact of investments in Canada selection and U.S. 2 Peaches conversions on margins.
• Imprecision in forecasting during periods of rebalancing and equilibrium finding, especially in Canada.

Q: Congrats on a nice quarter. Could you elaborate on the cadence of the second quarter same-store sales maybe across the U.S. and Canada? How you've seen momentum progress into the third quarter?

A: Mark T. Walsh and Michael W. Maher discussed comps accelerating in both countries starting May, continuing into June and July, with momentum continuing into July.

Q: Relative to this year's 15.4% EBITDA margin guidance, is there a way to think about the progression of margins beyond this year if we see consistent low single-digit same-store sales?

A: Michael W. Maher said long-term goal is high teens EBITDA margins, near to medium term mid-teens reflecting new store investments.

Q: Could you update us on labor costs and what you're seeing from an inflation perspective there at the front of the store? And then on the production side, what opportunities do you see to drive some greater efficiency as you execute on these higher production levels?

A: Michael W. Maher talked about labor costs growing typically outpacing inflation, and Mark T. Walsh mentioned constant innovation in production processes to improve efficiency.