Pet Valu reports 48% increase in 2007 third quarter net income on continuing strong sales and gross margins



    All financial results are expressed in U.S. dollars unless otherwise
    indicated

    MARKHAM, ON, Nov. 6 /CNW/ - Pet Valu, Inc. announced today unaudited
third quarter results for fiscal 2007. On a consolidated basis, net income was
$3.1 million or $0.36 per share as compared to $2.1 million or $0.25 per share
for the third quarter of fiscal 2006. Earnings per share excluding
non-comparable items for the most recent 52 week period ended September 29,
2007 were $1.31 or C$1.46 as compared to $0.97 or C$1.11 for the 52 week
period ended September 30, 2006.

    
    (in thousands of U.S. dollars, except EPS)

                                   13 Weeks   13 Weeks   39 Weeks   39 Weeks
                                      ended      ended      ended      ended
                                   Sept. 29,  Sept. 30,  Sept. 29,   Sept 30,
                                       2007       2006       2007       2006

    No. of Stores                       344        351        344        351
    Sales and Revenue             $  41,518  $  37,454  $ 116,056  $ 107,036
    Gross Profit                  $  12,872  $  11,169  $  35,037  $  30,311
    EBITDA(1)                     $   5,711  $   4,599  $  14,100  $  10,510
    EBITDA excluding
     non-comparable items         $   5,711  $   4,637  $  14,100  $  10,716

    Net Income                    $   3,141  $   2,126  $   7,663  $   4,267
    Net Income excluding
     non-comparable items(2)      $   3,141  $   2,150  $   7,663  $   4,399

    Basic EPS                     $    0.36  $    0.25  $    0.88  $    0.54
    Fully Diluted EPS             $    0.31  $    0.21  $    0.75  $    0.46

    Basic EPS excluding
     non-comparable items(3)      $    0.36  $    0.25  $    0.88  $    0.56
    Diluted EPS excluding
     non-comparable items         $    0.31  $    0.22  $    0.75  $    0.48

    Non-comparable items
     (before tax)
    Financing initiatives costs           -  $      38          -  $     206
    Applicable tax on
     non-comparable items                 -  $     (14)         -  $     (74)
    

    NON-COMPARABLE ITEMS

    Non-comparable items in fiscal 2006 included legal and other costs
related to a financing initiative that was ultimately not pursued.

    SALES

    Comparable store sales for the thirteen week period ending September 29,
2007 increased by 6.4% in Canada and by 2.6% in the U.S. as compared to the
thirteen week period ending September 30, 2006. During the quarter, the
Company continued with the implementation of programs designed to shift its
product offering to higher-margin, high-quality pet products.

    
    CANADIAN OPERATIONS
    (in thousands of U.S. dollars)

                                   13 Weeks   13 Weeks   39 Weeks   39 Weeks
                                      ended      ended      ended      ended
                                   Sept. 29,  Sept. 30,  Sept. 29,   Sept 30,
                                       2007       2006       2007       2006

    No. of Stores                       280        284        280        284
    Sales and Revenue              $ 32,728   $ 28,726   $ 89,544   $ 81,211
    Gross Profit                   $ 10,545   $  8,833   $ 27,901   $ 23,244
    EBITDA                         $  5,350   $  3,828   $ 13,028   $  9,518
    EBITDA excluding
     non-comparable items          $  5,350   $  3,866   $ 13,028   $  9,724

    Net Income                     $  2,819   $  1,834   $  6,776   $  3,578
    Net Income excluding
     non-comparable items          $  2,819   $  1,858   $  6,776   $  3,710

    Non-comparable items
     (before tax)
    Financing initiatives costs           -   $     38          -   $    206
    Applicable tax on
     non-comparable items                 -   $    (14)         -   $    (74)



    U.S. OPERATIONS
    (in thousands of U.S. dollars)

                                   13 Weeks   13 Weeks   39 Weeks   39 Weeks
                                      ended      ended      ended      ended
                                   Sept. 29,  Sept. 30,  Sept. 29,   Sept 30,
                                       2007       2006       2007       2006

    No. of Stores                        64         67         64         67
    Sales and Revenue              $  8,790   $  8,728   $ 26,503   $ 25,825
    Gross Profit                   $  2,452   $  2,460   $  7,509   $  7,440
    EBITDA                         $    486   $    516   $  1,446   $  1,365
    Net Income                     $    446   $    416   $  1,261   $  1,062
    

    There were no non-comparable items in the U.S. operations in the first
three quarters of either fiscal 2007 or fiscal 2006.

    LAND ACQUISITION AND WAREHOUSE DEVELOPMENT

    In July 2007, the Company acquired a 9.6 acre parcel of land in Whitby,
Ontario for $1.9 million. The Company plans to design and build warehousing
facilities on the land to accommodate current and future expansion of product
lines carried. The new facility also has the potential to replace some of the
Company's existing leased facilities. The parcel of land is of a sufficient
size to accommodate additional future development for either of these
purposes. The cost of building the facility is expected to be financed by cash
flow from operations and, as required, a conventional mortgage.

    LITIGATION

    In the third quarter of fiscal 2007 Pet Valu, Inc. and Pet Valu Canada
Inc. (the "Pet Valu Companies") were joined, or targeted to be joined, as
defendants, along with certain other pet food retailers, in certain potential
class action lawsuits concerning the manufacture and sale of pet food products
alleged to contain melamine. The actions in which the Pet Valu Companies were
joined were commenced in British Columbia, Saskatchewan, and Newfoundland
(although no court documents with respect to the Newfoundland action have been
served on them). The action in which they were targeted to be joined was
commenced in Ontario.
    In the early part of the fourth quarter of fiscal 2007, the
above-mentioned actions in British Columbia and Ontario were stayed (i.e., not
permitted to proceed at this time) by the courts of those provinces. These
stays were granted because of determinations by those courts that one or more
other potential class action lawsuits in which the Pet Valu Companies were not
named as defendants should proceed instead. However, there remains the
possibility that the Pet Valu Companies could be joined as defendants in the
lawsuits presently existing in Ontario and British Columbia that were not
stayed. As a result of these determinations, there are currently no lawsuits
concerning the aforesaid allegedly tainted products proceeding against the Pet
Valu Companies in Ontario or British Columbia.
    Recently, the Pet Valu Companies learned that they may be served with
court documents in respect of a motion to join them as defendants in a
potential class action lawsuit pending in the Province of Manitoba. This
lawsuit makes similar allegations to those made in the other proceedings
referred to above. If the motion proceeds and the Pet Valu Companies are added
as defendants in this lawsuit, they will defend themselves vigorously in
respect thereof.
    The lawsuits in Saskatchewan and Newfoundland continue to exist. Because
the Pet Valu Companies do not carry on business in any Canadian provinces
other than Ontario and Manitoba, they are currently determining whether they
have been properly joined as defendants in the Saskatchewan action and will do
so with respect to the Newfoundland action if they are served with the court
documents which commenced that action.

    OUTLOOK

    The Company's financial goal will be to efficiently utilize available
capital by applying cash flow to projects that meet targeted returns. In
general, the current focus of the Company will be toward generating profit
improvements from existing operations and re-engineering the platform for
future growth.

    CONFERENCE CALL

    Pet Valu, Inc. will host a live conference call on November 8, 2007 at
10:00 a.m. (EST) to discuss its financial results for its third quarter of
fiscal 2007 and to answer questions from participants concerning those
results. The discussion will be led by the Company's Chief Executive Officer,
Geoffrey Holt and its Chief Financial Officer, Dale Winkworth. To access via
tele-conference please dial 416-642-5212, if calling within the Greater
Toronto Area, and toll free at 1-866-321-6651, if calling outside the GTA. A
playback of the event will be made available for seven days after the event.
To access the playback of the event, please dial 416-915-1028 along with the
passcode number of 917516, if calling within the GTA, and toll free at
1-866-244-4494 (along with passcode) if outside the GTA.

    
    NON-GAAP FINANCIAL MEASURES

    (1) EBITDA is not a recognized measure under GAAP. As this measure does
        not have a standardized meaning prescribed by GAAP, the Company's
        method of calculating EBITDA may differ from other companies. The
        Company believes that EBITDA is a useful supplemental measure as it
        provides investors with an indication of cash available prior to debt
        service, capital expenditures and income taxes.

    (2) Net Income excluding non-comparable items is not a recognized measure
        under GAAP. As this measure does not have a standardized meaning
        prescribed by GAAP, it is unlikely to be comparable to similar
        measures presented by other companies. The Company believes that
        earnings excluding non-comparable items is a useful supplemental
        measure. It is used by the Company to assess its underlying
        performance from continuing operations and to provide a more useful
        comparison by eliminating non-recurring items.

    (3) EPS excluding non-comparable items is not a recognized measure under
        GAAP. As this measure does not have a standardized meaning prescribed
        by GAAP, it is unlikely to be comparable to similar measures
        presented by other companies. The Company believes that earnings
        excluding non-comparable items is a useful supplemental measure. It
        is used by the Company to assess its underlying performance from
        continuing operations and to provide a more useful comparison by
        eliminating non-recurring items.
    

    FORWARD LOOKING STATEMENTS

    Certain information in this news release is forward-looking and is
subject to important risks and uncertainties. Forward-looking information
includes information concerning the Company's future financial performance,
business strategy, plans, goals, objectives, business prospects and
opportunities. The forward-looking information reflects predictions and does
not in any way reflect a guarantee. Factors which could cause actual results
or events to differ materially from current expectations include, among other
things: the ability of the Company to successfully implement its strategic
initiatives and whether such strategic initiatives will yield the expected
benefits; competitive conditions in the businesses in which the Company
participates; changes in consumer spending; the outcome of legal proceedings
as they arise; general economic conditions and normal business uncertainty;
the availability of suitable store locations; customer preferences towards
product offerings; adverse climate changes; the occurrence of a pandemic or
other catastrophic event which could create shortages of labour, products or
services required to operate the business profitably; fluctuations in foreign
currency exchange rates; changes in the Company's relationship with its
merchandise and service suppliers; interest rate fluctuations and other
changes in borrowing costs; and changes in laws, rules and regulations
applicable to the Company or the markets in which the Company operates. The
Company cautions that this is not an exhaustive list of factors that may
affect the forward-looking information in this news release. Potential
investors and readers are urged to give careful consideration to all of these
factors in evaluating any forward-looking information and are cautioned not to
place undue reliance on such information. While the Company believes that its
forecasts and assumptions are reasonable, results or events predicted in this
forward-looking information may differ materially from actual results or
events.

    Pet Valu is a specialty retailer of pet food and pet-related supplies
operating Company-owned and franchised locations in Canada and the U.S. The
TSX stock symbol for Pet Valu Canada Inc., Pet Valu, Inc.'s publicly traded
Canadian operating subsidiary, is PVC.





For further information:

For further information: Michael Fitzgerald, Secretary, (905) 946-1200,
extension 3503

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PET VALU CANADA INC.

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