Savers Value Village, Inc. Q4 FY2024 earnings call

• Fourth quarter trends were within expectations, with U.S. business solid and generating positive comp sales growth, while Canadian business saw sequential improvement but not yet at expected levels. - Opened 9 new stores in the quarter and have a plan for 25 to 30 new store openings in 2025. - Loyalty program had double-digit growth in active members, with loyalty members accounting for 72% of total sales in the quarter. - Focused on sharp value and freshness in Canada, which engendered positive consumer reaction but more work needed. - Innovation initiatives like automated book processing rolled out to support over 156 stores.

The U.S. segment saw net sales increase 10.5% to $220 million in the fourth quarter, with comparable store sales up 4.7% driven by growth in transactions and average basket. The Canadian segment had net sales decline 0.2% to $155 million on a constant currency basis, and comparable store sales down 2.5% primarily due to a decrease in transactions. The U.S. is the key growth market, contributing a significant portion of total revenue.

• 2025 outlook includes 25 to 30 new store openings, mostly in the second half. - Net sales expected to be between $1.61 billion and $1.65 billion. - Comparable store sales projected to increase 0.5% to 2.5%, with the U.S. outperforming Canada. - Adjusted net income estimated at $62 million to $77 million, and adjusted EBITDA at $245 million to $265 million. - Capital expenditures budgeted at $125 million to $150 million. - 2025 is a 53-week fiscal year, with the 53rd week estimated to add approximately 1.5% to total sales growth.

• Uncertainty from potential new tariffs in Canada. - Weakness of the Canadian dollar negatively impacting sales and adjusted EBITDA. - Macro-economic pressures on lower-income consumers in Canada affecting the business.

Q: Speak to current health of U.S. business and drivers of sequential improvement in Canada?

A: Mark Walsh stated the U.S. business is solid with positive comp sales growth, and Canada saw sequential improvement after rebalancing production levels in August but is still not at the desired level.

Q: Elaborate on new store pipeline for 2025 and timeline for inflection to new store profitability?

A: Michael Maher said new stores average $3 million in sales in the first year, lose money, become profitable by year two, with approximately $10 million EBITDA drag in 2025, and there's a temporary lull in Q1 with Q2 and Q3 picking up.

Q: Unpack 2025 guide and factors driving EBITDA margin deleverage?

A: Michael Maher mentioned a $10 million headwind from new stores, the weaker Canadian dollar, and a new definition including pre-opening expenses, with core comp EBITDA flat with comp growth.

Q: Speak to proportion of sales from loyalty customers and customer cohorts?

A: Mark Walsh said loyalty sales proportion increased, with an increase in household income above $100k, some trade down in higher income cohorts, but pressure on lower income consumers in Canada offsetting gains.

Q: Cadence of EBITDA margin throughout 2025?

A: Michael Maher said Q1 has low single-digit sales growth, with EBITDA margin in the high-single digits to low-double digits, and the remaining quarters more consistent with the full year outlook.

Q: Pricing adjustments in Canada and impact of weather on U.S. business?

A: Mark Walsh said prices were sharpened on a small set of items with positive results, and Jubran Tanious said the U.S. is well covered on apparel selection with back stocking.

Q: Expectation of Canadian business comp positive in 1Q and EBITDA impact from new stores in 2026?

A: Michael Maher said 1Q is expected to be positive, and 2026 will see benefits from maturing stores with a significant number of stores in the first five years.

Q: Trade-down benefit in Canada and expectations if pressures persist?

A: Mark Walsh said there is trade down from higher income cohorts, but pressure on lower-income consumers in Canada offsets the gains.

Q: Long-term store target in Canada and key Canadian KPIs to track?

A: Jubran Tanious said long-term growth is in the U.S., and Michael Maher mentioned inflation in nondiscretionary categories as a key KPI in Canada