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Savers Value Village (NYSE:SVV) Delivers Solid Q1 Results Amidst Macro Headwinds
Published on September 24, 2024 | Ticker: SVV

Savers Value Village, Inc. (NYSE:SVV), the leading for-profit thrift retailer in the United States and Canada, reported its financial results for the first quarter of fiscal year 2024, showcasing resilience in the face of macroeconomic challenges.

Financials

The company's net sales for the quarter reached $354.2 million, representing a 2.5% increase compared to the same period last year. This growth was driven by a 2.8% net increase in the number of stores year-over-year and a 0.3% increase in comparable store sales. Notably, the U.S. Retail segment delivered a 2.3% increase in comparable store sales, while the Canada Retail segment saw a 2.6% decline.

Savers Value Village's adjusted EBITDA for the quarter increased 2.1% to $60.3 million, with an adjusted EBITDA margin of 17.0%. The company's adjusted net income grew 32.3% to $13.9 million, or $0.08 per diluted share, compared to $10.5 million, or $0.07 per diluted share, in the prior-year period.

Performance Factors

The company's performance was impacted by several factors during the quarter. Severe weather in January resulted in store closures and traffic disruptions, affecting sales by approximately 50 basis points. Additionally, unfavorable holiday shifts in Canada at the beginning and end of the fiscal quarter associated with New Year's and Good Friday impacted Canadian sales by approximately 90 basis points.

Segment Performance

Savers Value Village's U.S. Retail segment continued to demonstrate strong momentum, with net sales increasing 4.7% and comparable store sales growing 2.3%. This growth was driven by an increase in both average basket size and transaction count. In contrast, the Canada Retail segment experienced a 0.6% increase in net sales, with comparable store sales declining 2.6% due to a decrease in transaction count from non-loyalty members.

The company's cost of merchandise sold as a percentage of net sales increased 260 basis points to 44.7%, primarily due to higher material, labor, benefits, and freight costs. Salaries, wages, and benefits expense decreased 9.6% year-over-year, reflecting lower incentive compensation, partially offset by $18.0 million in IPO-related stock-based compensation expense.

Liquidity

Savers Value Village's balance sheet remains strong, with $102.1 million in cash and cash equivalents as of March 30, 2024. The company's total borrowings outstanding were $765.8 million, and its net leverage based on a trailing 12-month adjusted EBITDA was 2.1x. During the quarter, the company took several steps to strengthen its balance sheet, including amending its senior secured credit agreement, redeeming $49.5 million of senior secured notes, and terminating its interest rate and cross-currency swaps, realizing net proceeds of $38.0 million.

Outlook

Looking ahead, the company reiterated its full-year 2024 net sales guidance of $1.57 billion to $1.59 billion, with a comparable store sales increase in the range of 2% to 3%. However, the company expects the lower end of the range due to the continued macro headwinds in Canada. Adjusted EBITDA is expected to be in the range of $330 million to $340 million, with the lower end of the range reflecting the negative year-one contribution from the recently acquired 2 Peaches stores, increased marketing efforts in Canada, and investments in the team and processes to support accelerated new store openings.

Recent Developments

Savers Value Village's growth trajectory continues to accelerate, with plans to open 22 new stores organically and an additional 7 stores through the acquisition of 2 Peaches, a regional thrift store chain in Georgia. This acquisition provides the company with a strategic foothold in the southeastern United States, a key growth market. The company also remains focused on expanding its supply chain capabilities, with plans to open a new centralized processing center in California and additional off-site production facilities to support its growing store network.

Conclusion

Despite the near-term macroeconomic challenges in Canada, Savers Value Village's long-term growth prospects remain strong. The company's unique value proposition, strong brand recognition, and loyal customer base position it well to capitalize on the growing consumer demand for secondhand goods. With a focus on operational excellence, strategic investments, and disciplined execution, Savers Value Village is poised to continue delivering value to its shareholders.

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