Pet Valu reports 2007 second quarter net income rises by 128% on strong sales and gross margins



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

    MARKHAM, ON, Aug. 7 /CNW/ - Pet Valu, Inc. announced today unaudited
second quarter results for fiscal 2007. On a consolidated basis, net income
was $2.8 million or $0.32 per share as compared to $1.2 million or $0.16 per
share for the second quarter of fiscal 2006. Earnings per share excluding
non-comparable items for the most recent 52 week period ended June 30, 2007
were $1.20 or C$1.36 as compared to $0.91 or C$1.06 for the 52 week period
ended July 1, 2006.

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

                                13 Weeks    13 Weeks    26 Weeks    26 Weeks
                                   ended       ended       ended       ended
                                 June 30,     July 1,    June 30,     July 1,
                                    2007        2006        2007        2006

    No. of Stores                    344         349         344         349
    Sales and Revenue           $ 38,645    $ 35,501    $ 74,538    $ 69,582
    Gross Profit                $ 11,918    $  9,919    $ 22,164    $ 19,142
    EBITDA(1)                   $  4,861    $  3,175    $  8,389    $  5,911
    EBITDA excluding
     non-comparable items       $  4,861    $  3,260    $  8,389    $  6,080

    Net Income                  $  2,774    $  1,219    $  4,523    $  2,141
    Net Income excluding
     non-comparable items(2)    $  2,774    $  1,273    $  4,523    $  2,249

    Basic EPS                   $   0.32    $   0.16    $   0.51    $   0.28
    Fully Diluted EPS           $   0.27    $   0.13    $   0.44    $   0.24

    Basic EPS excluding
     non-comparable items(3)    $   0.32    $   0.17    $   0.51    $   0.30
    Diluted EPS excluding
     non-comparable items       $   0.27    $   0.14    $   0.44    $   0.25

    Non-comparable items
     (before tax)
    Financing initiatives costs        -    $     85           -    $    169
    Applicable tax on
     non-comparable items              -    $    (31)          -    $    (61)
    

    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 June 30, 2007
increased by 7.1% in Canada and by 2.5% in the U.S. as compared to the
thirteen week period ending July 1, 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    26 Weeks    26 Weeks
                                   ended       ended       ended       ended
                                 June 30,     July 1,    June 30,     July 1,
                                    2007        2006        2007        2006

    No. of Stores                    279         282         279         282
    Sales and Revenue           $ 29,749    $ 26,824    $ 56,826    $ 52,485
    Gross Profit                $  9,477    $  7,496    $ 17,356    $ 14,411
    EBITDA                      $  4,448    $  2,822    $  7,678    $  5,311
    EBITDA excluding
     non-comparable items       $  4,448    $  2,907    $  7,678    $  5,480


    Net Income                  $  2,435    $    975    $  3,957    $  1,744
    Net Income excluding
     non-comparable items       $  2,435    $  1,029    $  3,957    $  1,852

    Non-comparable items
     (before tax)
    Financing initiatives
     costs                             -    $     85           -    $    169
    Applicable tax on
     non-comparable items              -    $    (31)          -    $    (61)


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

                                13 Weeks    13 Weeks    26 Weeks    26 Weeks
                                   ended       ended       ended       ended
                                 June 30,     July 1,    June 30,     July 1,
                                    2007        2006        2007        2006

    No. of Stores                     65          67          65          67
    Sales and Revenue           $  8,897    $  8,677    $ 17,713    $ 17,097
    Gross Profit                $  2,566    $  2,548    $  5,057    $  4,980
    EBITDA                      $    538    $    479    $    960    $    849
    Net Income                  $    463    $    369    $    815    $    646
    

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

    VENDOR PRODUCT RECALLS

    In the first half of fiscal 2007, certain vendors announced recalls of
certain production runs for certain products. There have not been any new
product recalls since May 2007. These recalls received significant media
attention and raised some concern within the industry. However, the number of
recalled products carried by the Company is limited. Accordingly, the recalls
did not have a material effect on the sales or the results of operations of
the Company. The Company's 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 is believed to be providing a competitive advantage
to the Company with respect to consumers looking for alternative foods for
their pets.

    OUTLOOK

    The Company has several key operating objectives for 2007 and 2008. A
primary objective will be to continue re-engineering existing operating
practices to highest industry standards. In this regard, the Company will be
seeking to improve its technological systems, including those related to
materials handling, as well as those where there are opportunities to increase
automation of routine practices throughout the business. The Company will also
be reviewing its fuel and energy strategies so as to improve distribution
efficiencies; its merchandising models so as to be able to fully utilize
varying store sizes within the scope of small box retailing; its franchising
systems in Canada; and its risk management strategies.
    As well, the Company plans to upgrade the shopping experience at its
stores under "Better Pet Nutrition" reniching, including enhancements to store
image and services, expansion of differentiated product selection, the
identification of more targeted store location criteria, improvements to space
management programs, and the integration of an e-commerce component to the
business.
    The Company intends to validate a U.S. market expansion platform that
addresses changes in both the niche positioning of competitors as well as
changes in consumer purchasing trends. On another front, the Company plans on
strengthening the capacity of management to complete its operating and growth
objectives, as well as improving the productivity of management by
establishing higher levels of accountability in relation to strategic business
planning, project management and inter-departmental coordination.
    The Company's financial goal will be to efficiently utilize available
capital by applying cash flow to projects that meet targeted returns. In that
regard, the Company acquired a parcel of land in Ontario in July 2007 for the
purpose of building a custom designed warehouse to suit future warehousing
requirements. The Company may also utilize available capital for acquisitions
as opportunities arise.
    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 August 9, 2007 at
10:00 a.m. (EDT) to discuss its financial results for its second 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 351731, 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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