Pet Valu Holdings (CA:PET) reported its Q4 2022 results on March 7. While the news was generally positive on the earnings front, the dividend increase caught investors by surprise.
The specialty retailer of pet food and pet-related supplies announced it would increase its quarterly dividend by 67%, to $0.10 a share from $0.06. The April 2023 payment brings the annual rate to $0.40, a yield of 1.0% at the current share price.
“2023 looks to be another promising year, as we once again target growth above the industry's long-term run-rate, while executing on several key initiatives including our supply chain transformation,” stated CEO Richard Maltsbarger in the company's press release. “Given our conviction in our outlook and our strong liquidity position, we are excited to announce a 67% increase to our quarterly dividend.”
The company’s outlook for 2023 includes revenue between $1.050 billion and $1.075 billion, same-store sales growth of 8.5% at the midpoint of its guidance, and adjusted net income per share of $1.63.
Pet Valu’s guidance for 2023 likely appears quite conservative, given some of its results in the past year.
Revenue in 2022 grew by 22.6% to $951.7 million, same-store sales were 17.1% higher than in 2021, and its adjusted net income per share was $1.59, 55.9% higher than a year earlier.
Expanding Canada Footprint
In February 2022, Pet Valu acquired Les Franchises Chico Inc. for $17 million, the largest pet specialty store franchisor in Quebec with 66 locations. The acquisition gave the Markham, Ontario-based company nearly 700 stores across Canada, with locations in every province. Chico contributed $9.7 million in franchise revenue in 2022 for Pet Valu.
For all of 2022, Pet Valu opened 48 new stores, finishing the year with 744 locations.
Days before the company reported its fourth-quarter results, Pet Valu announced that it had hired now-former director Linda Drysdale as its chief financial officer. Drysdale joined the board in November 2021.
Previous financial roles have included the CFO role at Interac Corp. and the banking unit of Canadian Tire (CA:CTC). With the new role, Drysdale stepped down as a board member on March 6. Pet Valu is searching for a replacement.
Compelling Long-Term Growth
The company’s got a three-pronged approach to growth.
One prong is to grow its store count to more than 1,200 stores across Canada. Another is driving same-store sales growth. Then, as it grows the store network, it will lean on its digital business to keep growing its sales while focusing on improving its margins and profitable growth.
Pet Valu went public in June 2021, selling 15.8 million shares at $20, garnering just under $300 million in net proceeds. It’s done two secondary offerings since. The first, in September 2021, saw its principal shareholders sell seven million shares in a bought deal at $32.25 per share. The second was this past November. Insiders sold 5.18 million shares in a bought deal at $37.40 apiece.
Roark Capital remains Pet Valu’s largest shareholder. It acquired Pet Valu in August 2009 for $144 million. At the time, the retailer had 295 stores in Ontario and Manitoba. The two secondary offerings generated over $419 million in gross proceeds for Roark and its investors. It looks like they are sticking around.
Institutional support of PET shares is high. Fintel's Fund Sentiment Score -- which uses a multi-factor quantitative model that identifies companies with the highest levels of institutional accumulation -- is 91.72. That ranks the pet food retailer's share at 578 out of 36,467 stocks in our database coverage.
Recent filings show that Bernstein loaded up on PET shares, with a 87,322 share lot disclosed in a Feb. 28 filing. That was purchased by the investment manager's International Small Cap Portfolio Advisor Class fund.
This story originally appeared on Fintel.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
