Pet Valu reports first quarter 2009 financial results



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

    MARKHAM, ON, May 12 /CNW/ - Pet Valu, Inc. announced today first quarter
results for fiscal 2009. On a consolidated basis, net income for the quarter
ended April 4, 2009 was $2.7 million or $0.27 per diluted share as compared to
net income of $2.8 million or $0.28 per diluted share for the first quarter of
fiscal 2008. Excluding non-comparable items, net income was $3.0 million or
$0.29 per diluted share as compared to net income of $2.8 million or $0.28 per
diluted share for the first quarter of fiscal 2008. Non-comparable items in
the first quarter of fiscal 2009 included legal and other costs related to the
Company's exploration of strategic alternatives.

    COMPARABLE STORE SALES

    Comparable store sales for the quarter ending April 4, 2009 increased by
7.9% in Canada and by 8.9% in the United States as compared to the quarter
ending March 29, 2008. During the quarter, higher margin high-quality pet
product sales have continued to show strong growth and a more positive
shopping experience for customers has contributed to higher sales.

    
    RESULTS
    (in thousands of U.S. dollars,
     except EPS)
                                             13 Weeks ended   13 Weeks ended
                                              April 4, 2009   March 29, 2008
    No. of stores                                       357              341
    System wide sales                               $49,101          $53,270
    Sales and revenue                               $41,274          $42,800
    EBITDA(1)                                        $4,448           $5,227
    EBITDA excluding non-comparable items(1)         $4,813           $5,227
    Loss on foreign exchange                           $178             $248

    Net income                                       $2,722           $2,838
    Net income excluding
     non-comparable items(2)                         $2,965           $2,838

    Basic EPS                                         $0.29            $0.32
    Fully diluted EPS                                 $0.27            $0.28
    Basic EPS excluding
     non-comparable items(3)                          $0.31            $0.32
    Diluted EPS excluding
     non-comparable items(3)                          $0.29            $0.28

    Non-comparable items:
    Strategic alternative related costs                $365                -
    Applicable tax on non-comparable items            ($122)               -



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

                                             13 Weeks ended   13 Weeks ended
                                               Apr. 4, 2009    Mar. 29, 2008
    No. of Stores (end of period)                       295              279
    System wide sales                               $39,638          $44,582
    Sales and Revenue                               $31,815          $34,107
    EBITDA(1)                                        $3,600           $4,888
    EBITDA excluding non-comparable items(1)         $3,965           $4,888
    Loss (Gain) on foreign exchange                    $178             $248

    Net Income                                       $1,899           $2,517
    Net Income excluding
     non-comparable items(2)                         $2,141           $2,517

    Non-comparable items:
    Strategic alternative related costs                $365                -
    Applicable tax on non-comparable items            ($122)               -



    U.S. OPERATIONS
    (in thousands of U.S. dollars)
                                             14 Weeks ended   13 Weeks ended
                                               Apr. 4, 2009    Mar. 29, 2008
    No. of Stores (end of period)                        62               62
    System wide sales                                $9,463           $8,688
    Sales and Revenue                                $9,460           $8,692
    EBITDA(1)                                          $848             $339
    Net Income                                         $823             $320
    

    KEY ACCOMPLISHMENTS

    During fiscal 2008 and the first quarter of fiscal 2009, the Company
pursued key priorities intended to improve results from operations, liquidity,
capital resources and cash flow.

    Reniching

    The Company continued to pursue a long-term objective of shifting its
product offering to higher-margin, high-quality pet products, which include
pet specialty brands and private label products featuring a wellness-focused
approach to pet nutrition. This reniching program has improved and is expected
to continue to improve operating profits and enhance the image of the Company
as a specialty retailer.

    Acquisition

    On August 22, 2008, the Company completed the purchase of a 15 store pet
food and supply business known as BERRYS or BERRYS...YOUR PETSCHOICE. These
stores are all located in eastern Ontario. The purchase price of C$2.4 million
was financed using Pet Valu's existing bank operating line. The Berrys
operations and the anticipated operating synergies are expected to
incrementally contribute an approximate C$600,000 to Pet Valu's consolidated
income before income taxes during the first 12 months of inclusion within the
Pet Valu group of stores.

    Inventory Investment

    The Company's inventory buying system is designed to take advantage of
opportunities, including those in relation to cost inflation. As a result, the
Company's warehouse inventory levels have increased by approximately C$0.9
million during the first quarter 2009. The Company believes that recent
declines in various commodity prices will slow the rate of any cost increases
in fiscal 2009 and will likely result in a reduction of these inventories in
fiscal 2009.

    Development of Canadian Corporate Store Programs

    During fiscal 2008, the Company dedicated an increasing amount of effort
to the operation of its Canadian company-owned stores by developing and
implementing programs designed to increase sales and operating profitability.
These programs included more product and sales training for corporate store
staff and an incentive program for corporate store managers. These programs
have contributed to an increase in comparable store sales of 9.7% for
company-owned stores in Canada, in the first quarter of fiscal 2009.

    Amendment of Bank Credit Agreement

    During the third quarter of fiscal 2008, the Company entered into an
agreement with its principal bank to amend its existing credit agreement dated
as of July 14, 2006 ("Credit Agreement"). The amendment increased the
revolving line of credit in the Credit Agreement from a maximum of C$15
million to a maximum of C$20 million. In addition, the amendment created a new
C$5 million term loan that bears interest at prime plus 1% and is repayable in
24 equal monthly installments. The amendment did not materially change any
other terms contained in the Credit Agreement.

    Repayment of 10% Non-convertible Debentures

    In accordance with a debenture holder agreement dated July 24, 2006, the
scheduled repayment of principal and accrued interest for the 10%
non-convertible debentures created under this agreement was made on July 24,
2008 by cash payments to the debenture holders. The amount of the payments was
C$8,877,836, consisting of principal repayments of C$8,820,000 and accrued
interest of C$57,836. These payments were financed from the new bank term
loan, the Company's bank operating line and funds provided from operations.

    OUTLOOK

    The Company continues to pursue strategic initiatives to improve earnings
during 2009 as were outlined in the Outlook section of the fiscal 2008 Annual
Report.

    Strategies Addressing Current Economic Conditions

    The Company has implemented specific programs to address recession-based
impacts. These include specific initiatives with respect to reductions in
occupancy costs and other cost areas where reductions might be possible as a
result of the current economic conditions. Cost reductions on warehouse leases
are expected as leases are renewed during the third quarter of fiscal 2009 or
otherwise negotiated for new facilities.
    To the extent that there has been changes to the customer buying patterns
as a result of the current economic conditions, the Company's financial
performance has not been materially impacted. The Company will continue to
monitor activity in all the markets in which the Company operates and respond
accordingly.

    Pursuit of Organic Growth

    Organic growth has resulted primarily from the Company's reniching
programs, including the additions of new differentiated products and the
continued development of private label products. These reniching programs are
on-going and include various degrees of product differentiation, staff
training, facilities upgrades, and customer service initiatives. The Company
will continue to focus on these programs for the foreseeable future with the
goal of increasing sales, maintaining strong margins and improving the
customer experience and product selection.

    Franchising

    An updated franchise program is expected to be finalized later this year
in order to extend the terms of existing franchise agreements, facilitate the
franchising of corporate stores, and improve the capacity to enter new markets
by franchising greenfield stores.

    Initiatives to Sustain Growth in Earnings

    Improvements to the efficiency of the operation of the business are being
sought through expanded automation in relation to both routine decision-making
and inventory management. Improvements to productivity are being pursued
through the introduction of performance management measures at all levels of
staffing.
    Improvements to margins are being pursued through the continuous
expansion of private label lines and the introduction of more specialized
products.

    REVIEW OF STRATEGIC ALTERNATIVES

    As previously disclosed, the Company commenced a review of its
alternatives to enhance shareholder value with the advice and assistance of
its financial advisor, TD Securities Inc., and its legal advisors after
receiving an unsolicited approach from a potential acquirer. The Company's
board of directors has established a special committee of directors to
supervise the review process and to make recommendations to the Company's
board of directors. There can be no assurance that any definitive transaction
proposal will result from this process, or that any transaction, if proposed
will be completed.

    ANNUAL GENERAL MEETING OF SHAREHOLDERS

    The Company's annual general meeting of shareholders will be held on May
14, 2009 at the Toronto Board of Trade at 2:30 pm EDT. During the meeting,
commentary regarding the Company's financial results for the first quarter of
fiscal 2009 will be presented by the Company's CEO, Geoffrey Holt. The Company
will not be hosting a separate conference call for the first quarter ended
April 4, 2009.

    
    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; the outcome of strategic alternatives being
considered by the Company's board of directors; 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.

    COMPANY PROFILE

    Pet Valu is a specialty retailer and wholesaler of pet food and
pet-related supplies and a franchisor of pet food and pet-related supply
outlets. 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

Organization Profile

PET VALU CANADA INC.

More on this organization


Custom Packages

Browse our custom packages or build your own to meet your unique communications needs.

Start today.

CNW Membership

Fill out a CNW membership form or contact us at 1 (877) 269-7890

Learn about CNW services

Request more information about CNW products and services or call us at 1 (877) 269-7890