Earnings call transcript: Pet Valu Q2 2025 beats EPS forecast, stock surges

Pet Valu Holdings Ltd reported its second-quarter earnings for 2025, surpassing expectations with an adjusted EPS of $0.38, beating the forecasted $0.3324 by 14.32%. Revenue came in slightly below expectations at $280.65 million against a forecast of $281.37 million. Despite the revenue miss, the company’s stock price rose by 7.99% to $35.94 in pre-market trading, reflecting investor confidence in the company’s performance and future prospects. According to InvestingPro data, Pet Valu has demonstrated consistent profitability over the last twelve months, with analysts predicting continued profitability this year.

Key Takeaways

• Pet Valu’s adjusted EPS exceeded forecasts by 14.32%.
• Revenue slightly missed expectations but showed a 6% year-over-year increase.
• Stock surged nearly 8% in pre-market trading, indicating positive investor sentiment.
• The company opened three new stores and completed a major supply chain transformation.
• Continued focus on premium and innovative pet products.

Company Performance

Pet Valu demonstrated robust growth in Q2 2025, with a 6% increase in revenue year-over-year, reaching $281 million. The company reported system-wide sales of $370 million, a 5% rise from the previous year, and same-store sales growth of 2.6%. Pet Valu’s strategic focus on premium pet products and store expansion contributed to its solid performance amidst stable market conditions.

Financial Highlights

• Revenue: $281 million, up 6% YoY
• Earnings per share: $0.38, up 6% YoY
• Gross profit: $94 million, up 7% YoY
• Gross margin: 33.6%, down 60 basis points
• Adjusted EBITDA: $60 million, up 4% YoY

Earnings vs. Forecast

Pet Valu’s adjusted EPS of $0.38 outperformed the forecasted $0.3324 by 14.32%, marking a significant earnings surprise. However, revenue fell short of expectations by 0.26%, with actual figures at $280.65 million compared to the forecast of $281.37 million. This mixed performance did not deter investor enthusiasm, as evidenced by the stock’s rise.

Market Reaction

Following the earnings announcement, Pet Valu’s stock surged by 7.99%, reaching $35.94. This increase reflects investor confidence in the company’s strategic initiatives and growth trajectory. The stock is trading near its 52-week high of $36.05, signaling strong market sentiment. InvestingPro analysis indicates the stock generally trades with low price volatility, though it’s currently trading at a high P/E ratio relative to near-term earnings growth. For deeper insights into Pet Valu’s valuation and growth potential, investors can access the comprehensive Pro Research Report, available exclusively to InvestingPro subscribers.

Outlook & Guidance

Pet Valu remains optimistic about its full-year performance, projecting revenue between $1.180 billion and $1.210 billion. The company anticipates adjusted EBITDA in the range of $257 million to $262 million and adjusted EPS between $1.63 and $1.68. Plans to open approximately 40 new stores and expand the culinary category underline its growth strategy. InvestingPro subscribers can access additional insights, including 8 more exclusive ProTips and detailed financial metrics that help evaluate the company’s growth trajectory and market position.

Executive Commentary

CEO Richard Maltzburger expressed confidence in the company’s momentum, stating, "We are seeing great momentum in our business." President Greg Ramier highlighted the company’s dedication to customer service, saying, "Our teams are working hard to serve the needs of devoted pet lovers." CFO Linda Drizale noted, "We continue to see resilient demand for quality consumables."

Risks and Challenges

• Supply chain disruptions could impact future performance despite recent improvements.
• Market saturation in the pet industry may limit growth opportunities.
• Economic downturns could affect discretionary spending on premium pet products.
• Competitive pressures from other pet retailers and brands remain a concern.

Q&A

During the earnings call, analysts inquired about the benefits of the supply chain transformation, the strategy for culinary category growth, and competitive dynamics. Executives also addressed the loyalty program’s performance and outlined a leadership transition plan, providing clarity on future operations and strategic priorities.

Full transcript - Pet Valu Holdings Ltd (PET) Q2 2025:

Carly, Conference Call Coordinator: Good morning, everyone, and thank you for standing by. Welcome to PetValue’s Second Quarter twenty twenty five Earnings Conference Call. My name is Carly, and I’ll be coordinating today’s call. All lines have been placed on mute to prevent any background noise. Please note, following the formal remarks, there will be a question and answer session.

We kindly request that you limit your time to one question plus follow-up before cycling back into the question queue so that we can allow time for as many people to ask a question as possible. I would now like to turn the call over to James Allinson, Investor Relations at PetValue. Mr. Allinson, please go ahead.

James Allinson, Investor Relations, PetValue: Good morning, and thank you for joining PetValue’s call to discuss our second quarter twenty twenty five results, which were released earlier this morning and can be found on our website at investors.petvalue.com. With me on the call is Richard Maltzburger, Chief Executive Officer Linda Drizale, Chief Financial Officer and Greg Ramier, President and Chief Operating Officer. Before we begin, I would like to remind you that management may make forward looking statements, which include guidance and underlying assumptions. Forward looking statements are based on expectations that involve risks and uncertainties, which could cause actual results to differ materially from those expressed today. For a broader description of risks related to our business, please see our Q2 twenty twenty five MD and A, 2024 Annual Information Form and other filings available on SEDAR plus Today’s remarks will also be accompanied by an earnings presentation, which can be viewed through our live webcast and is also available on our website.

Now, I would like to turn the call over to Richard.

Richard Maltzburger, Chief Executive Officer, PetValue: Thank you, James, and good morning, everyone. We are pleased to report another quarter of strengthening performance as devoted pet lovers increasingly chose pet value for our balance of quality, convenience, value and expertise for their pet care needs. All in, this helped drive Q2 results at or ahead of our expectations across all key financial indicators. Same store sales grew 2.6, marking the third consecutive quarter of accelerated growth accompanied by a return to positive growth in same store transactions, while revenues grew 6%, once again outpacing system wide sales on higher wholesale penetration. We then successfully paired sales and revenue growth with stronger than expected margins, ultimately delivering adjusted EBITDA growth of 4% and adjusted EPS growth of 6% despite continued absorption of higher supply chain fixed costs.

These outcomes are a direct result of well crafted commercial and supply chain plans together with strong execution by our teams. All the while, we continue to advance our long term strategies to better serve Canadian devoted pet lovers and grow the long term returns for our franchisees. These actions include opening new stores, reinvesting into existing stores, enhancing our digital capabilities, improving our merchandising excellence and product innovation and strengthening our infrastructure. Greg will speak more to these in a minute. As we look into the back half of the year, we have growing conviction in the sustainability of our recent commercial success, using data and expertise to target investments that drive continued momentum in our top line and deliver margin dollars for reinvestment and returns.

Tying this together with strong performance in the first half, we are raising our full year outlook, which Linda will cover in more detail shortly. Before passing the call to Greg, I want to celebrate completion of the final major milestone in our supply chain transformation. In mid July, we commissioned our third new distribution center located in Calgary, Alberta, essentially concluding our multiyear $100,000,000 investment to modernize and upsize our distribution center capabilities. In 2022, it seemed like a daunting task to undertake the single largest and most complex investment in our company’s history. But through meticulous planning and execution, we remained on time and on budget and now operate the most advanced and resilient distribution network supporting the Canadian pet specialty sector.

This is a key moment of pride, not just for our extremely capable supply chain team, but for all of our ACEs and franchisees as we continue to elevate the standard for pet specialty retail in Canada. Well done. Now over to Greg to walk through our operational accomplishments. Greg?

Greg Ramier, President and Chief Operating Officer, PetValue: Thank you, Richard. I’d also like to commend our ACEs for delivering an excellent quarter where we tied together the strength of our tools, data and expertise to deliver the right combination of quality and value devoted pet lovers are seeking, all while driving operational efficiencies. This was made possible through the continued pursuit of our core focuses. Let me highlight some of our key accomplishments in the quarter. First, to be Canada’s local and everywhere pet specialty retailer.

We and our franchisees continued to expand our market leading store network, opening three stores in the quarter and ten year to date, bringing us to eight thirty three locations nationwide. We’ve had a busy Q3 so far, with another five stores opened by the end of this week, keeping us on track to completing approximately 40 new stores this year. We also completed nine major renovations, expansions and relocations in the quarter, helping to ensure that our more tenured stores deliver exceptional retail experiences to our customers. In our digital properties, improved customer experience unlocked by our modern architecture and subsequent enhancements is driving strong traffic and conversion improvements, sustaining online sales growth ahead of our company average. In the quarter, we introduced an everyday offer to our auto ship subscription programs delivering incremental value to devoted pet lovers on every order.

We believe this, together with the flexibility for in store or home delivery fulfillment places our auto ship program at the forefront of subscription services in Canadian pet specialty, ensuring devoted pet lovers receive industry leading convenience and value when shopping with us. In May, we integrated our recently upgraded pet profile platform into our annual casting call competition for our pet value calendar, exceptional engagement. With one of the fastest growing pet databases in Canada, we’re building stronger connections every day with our customers to help deliver the best nutrition and solutions for their pets. Turning to our second focus, delivering the best pet customer experience. Leveraging our tools and programs, our commercial playbook continues to resonate with devoted pet lovers driving positive same store transaction growth and share gains in the quarter.

We continue to win the monthly shop through targeted investments like our new lower prices across our Performatrin Prime assortment this spring, which drove an immediate acceleration in volumes. We set another record in loyalty sales penetration as we broadened our assortment of participating brands, which included the addition of Canadian Naturals, Dog and Cat Nutrition, which is made in Canada and now available in our stores coast to coast. And we deployed a sharpened promotional program, leveraging our new promotional planning tool, helping counterbalance competitive intensity with our own ability to drive both excitement and efficiency. At the same time, we further broadened our proprietary brand offering in the quarter with several new product introductions. This included new consumables products like our Performatrin culinary single serve frozen goat milk yogurt, Performatrin Prime oral care dog food and Performatrin Ultra Stuffed Bones.

And in Hardlines, we launched our JUMP LifeVest, which quickly became the number one life vest product in sales and units across our stores due to its compelling value and innovation with UV indication technology. While our marketing team continues to support all our commercial and merchandising programs, perhaps the most memorable activities in Q2 were those centered around our Canadian roots and community involvement. In May, we celebrated the Lions Foundation’s fortieth Walk for Dog Guides, hosting events in over 200 communities across Canada to raise awareness and over $1,400,000 in funds to support their life changing work. We also joined the Nova Scotia loyal program to celebrate our local businesses and entrepreneurs. In June, we ran our annual pet appreciation month campaign, where we raised approximately 2,400,000.0 in product and cash donations to support almost 500 local pet rescues and pet related causes across Canada.

And at the end of the quarter, we collaborated with CBC during their Canada Day celebration providing powerful brand moments, visibility and emotional resonance leading up to and during the event. Now moving to our third focus, to fortify strong retail and wholesale fundamentals. Following the completion of our fit up work during the quarter, we commissioned our new 295,000 square foot Calgary DC last month and will ramp up operations through the balance of the summer. As Richard mentioned, this marks the final major milestone in our nearly four year supply chain transformation, which has seen us transition from nine legacy company operated and third party overflow facilities to three modern partially automated DCs with twice the capacity and supported by industry leading warehouse management software. As you’ve heard us discuss frequently in recent quarters, the benefits of this $100,000,000 investment are becoming increasingly apparent, whether it’s through incremental wholesale revenue and profits, inventory leverage or productivity improvements.

In the second quarter, these productivity improvements exceeded our plans, contributing to our stronger than expected margin performance. We anticipate a long tail to these supply chain benefits as we continue to refine processes over the coming quarters and years and begin to leverage fixed costs starting in Q4. And finally, I’d like to share an exciting new initiative we kicked off this past quarter to further tap into Canada’s fastest growing segment in Canadian pet food, culinary, including frozen raw, gently cooked and freeze dried products. As we shared in the past, this is an area of our business which has seen over 20% annual sales growth in the last several years. Last spring, we took another step to strengthen our leadership in this category with our successful launch of Performatrin culinary frozen raw and gently cooked products.

Then in late twenty twenty four, we began to pilot an enhanced culinary experience within our stores to better showcase the appeal of culinary pet food and make it a true destination. This included expanded freezer space, enriched displays and signage, optimized planogramming and further investment into our in aisle expert advice. After a successful pilot over the last eight months, we are pleased to announce the rollout of this updated layout and training curriculum across approximately 120 of our corporate stores this year beginning in the second quarter. By year end, we expect to have over half of our corporate stores completed and will most likely expand this to other corporate stores and into our franchise network in 2026. As you can tell, our teams are working hard to serve the needs of devoted pet lovers in today’s environment, while advancing the right long term initiatives to ensure we remain at the forefront of the Canadian pet industry and deliver sustainable, profitable growth over the long term.

With that, I’ll pass it over to you, Linda.

Linda Drizale, Chief Financial Officer, PetValue: Thank you, Greg. I’m pleased to report we delivered strong earnings growth in the second quarter ahead of our plans and the directional EBITDA margin guidance provided on our last earnings call in May. I want to congratulate ACEs across our organization and in particular, our merchandising, in store and supply chain teams for their exceptional execution and relentless pursuit of efficiencies, which were the core drivers of these better than expected results. Let me unpack some of the highlights before turning to our updated outlook for the full year. We continue to see accelerating sales momentum in Q2 with system wide sales of 5% to $370,000,000 On a same store basis, sales increased 2.6%, continuing our accelerating pace of growth over the last three quarters.

We were particularly pleased to see a return to positive same store transaction growth, a testament to the effectiveness and resonance of our commercial strategies. Same store sales growth in both consumables and hardlines improved sequentially, while the relative gap between them shrank, both strong indicators we are starting to see discretionary demand stabilize. We opened three new stores in Q2 and 34 over the last twelve months, bringing us to eight thirty three sites nationwide at quarter end and placing us closer to more devoted pet lovers across Canada. We generated revenue of $281,000,000 in the second quarter, representing an increase of 6%, once again exceeding system wide sales growth driven by a further increase in our wholesale penetration with our franchisees. Gross profit was $94,000,000 up 7% from last year.

Excluding nonrecurring costs related to the supply chain transformation, gross margin was 33.6%, down 60 basis points from last year. While our rate continues to be impacted by revenue mix shifting towards wholesale merchandise sales and higher distribution and occupancy costs, it was better than we expected as we benefited from the higher commercial and supply chain efficiencies I mentioned earlier. SG and A expenses in the second quarter were $57,000,000 Excluding share based compensation and costs not indicative of business performance, our SG and A expenses were $51,500,000 or 18.3% of revenue, similar to the rate in Q1 and up 30 basis points from Q2 last year. We continue to diligently manage through expected cost inflation while investing in key capabilities to drive long term growth and efficiencies. Adjusted EBITDA grew 4% to $60,000,000 in the second quarter.

As a percentage of sales, this represented 21.4%, 40 basis points ahead of our rate in Q1 and well ahead of the directional guidance provided last call due to favorable gross margins and diligent cost management. Net income was 22,000,000 compared to $18,000,000 last year. Excluding items not indicative of our underlying performance, adjusted net income was $26,000,000 similar to last year, while adjusted net income per diluted share was $0.38 up 6% year over year, driven by a lower average share count. Now turning to our balance sheet and cash flow. We ended Q2 with $11,000,000 cash on hand and $138,000,000 in unused borrowing capacity, providing us with ample liquidity.

Total debt net of deferred financing costs was $310,000,000 an increase of $32,000,000 from Q1 as we drew on our revolver to partially fund share repurchases in the quarter. Factoring in net lease obligations, our leverage now sits at 2.4 times, up slightly from our recent trend, but well within our comfort range. Q2 inventories were $141,000,000 reflecting healthy quality stock across our DCs, corporate stores and franchisees. We delivered a ninth consecutive quarter of inventory leverage as a percentage of revenue as our supply chain transformation continues to unlock our ability to improve turnover, while ensuring we deliver industry leading customer service levels to our stores and franchisees. Net capital expenditures were $12,000,000 in the quarter, bringing us to $22,000,000 year to date.

Our investments continue to be focused on new store builds, ongoing refreshes and renovations, as well as the final setup work at our new Calgary DC ahead of its commissioning in early Q3. And finally, turning to free cash flow and shareholder returns, we generated $27,000,000 in free cash flow in Q2. This brings us to $42,000,000 year to date compared to $31,000,000 by this point last year, driven by improved net income. Free cash flow conversion on a trailing four quarter basis reached 45%, the highest level since 2021 as we exit our heightened investment cycle and leverage our working capital. We returned $82,000,000 to shareholders in the quarter through a combination of dividends and opportunistic share repurchases, including a $60,000,000 direct share repurchase from Roark Capital.

While we continue to monitor our equity valuation through the balance of 2025, given actions taken to date, we intend to allocate excess capital towards repayment of our revolver over the near term. Now to our outlook for 2025. Growth within the Canadian pet industry continues to unfold in line with the expectations we had heading into the year, with resilient demand for quality consumables and stabilizing yet still value oriented demand for more discretionary items. In this context, our teams have crafted and delivered a compelling commercial plan, which together with better efficiency gains in our supply chain and good cost control has delivered strong financial performance and market share gains in the first half of the year. Based on this, together with continued momentum into the third quarter, we have raised our full year profit expectations.

Let me run through the key highlights of our 2025 outlook, which I will remind everyone incorporates an extra week given the fifty three week calendar this year. We now expect 2025 revenues between 1,180,000,000.00 and $1,210,000,000 reflecting growth of between 810% and supported by approximately 40 new store openings, same store sales growth of between 14% and increased wholesale penetration. Based on the cadence seen in Q3 to date, we continue to expect same store sales growth to accelerate through the year. We have raised our guidance range for adjusted EBITDA to between $257,000,000 and $262,000,000 balancing our strong first half performance with continued caution in today’s macroeconomic environment. This represents growth between 46% and continues to incorporate planned investments and normalization of operating expenses, which will continue into Q3.

Factoring in our increased revenue and adjusted EBITDA ranges, we now expect adjusted net income per diluted share between $1.63 and $1.68 representing growth between 47% despite absorbing approximately $0.12 of incremental depreciation and lease liability expense associated with our new distribution centers. And finally, capital allocation. We now expect to invest approximately $45,000,000 in net capital expenditures, up from $35,000,000 as we incorporate investments associated with the rollout of our enhanced culinary experience across approximately 120 corporate stores this year. Based on our initial and expanded pilots over the last eight months, we are confident this incremental investment will be accretive to our returns as we tap further into this high growth category. We continue to aspire to convert more than 40% of adjusted EBITDA into free cash flow this year, the vast majority of which will be returned to our shareholders.

Given share repurchases completed to date, we plan to direct excess capital after dividends toward debt repayment until we have paid off our revolver, which we expect to achieve by year end. In conclusion, I am very pleased with our financial accomplishments to date, which have enabled us to enhance returns to our shareholders while continuing to operate from a position of financial strength and flexibility as we monitor the evolving environment. With that, I’ll turn it back to Richard for some closing thoughts.

Richard Maltzburger, Chief Executive Officer, PetValue: Thank you, Linda and Greg. Overall, our business has great momentum. With our commercial plans growing sales and revenue and creating stronger bottom line performance now positioning us to increase our annual guidance for fiscal twenty twenty five. We have continued to get leverage from our many customer facing technology investments and three sixty degree marketing channels, loyalty program expansion and our digital commerce platforms. And as noted with the opening of our Calgary DC, we have completed our multiyear distribution center network transformation on time and on budget, which is already delivering benefits through supporting new store openings, shipping over 40% of Chico’s wholesale product needs already this quarter and achieving variable distribution cost leverage on a per unit basis.

With this quarter’s announcement of our culinary in store rollout, we have even greater growth on the horizon. This business has a strong operating platform, is taking market share and has a tremendous future ahead of it. As stated in our release this morning, the board has unanimously adopted my recommendation for a senior leadership succession plan. Greg will succeed me as Chief Executive Officer on September year, a date that works perfectly as that is when we kick off our annual store manager and franchise conference, where I’ll be happy to formally transition day to day executive leadership to Greg at the event. Starting at September and running through April 2026, I will continue to work closely with Greg and Linda as a senior adviser and continue in my role as a board member of PetValue.

Greg and I have a detailed transition process plan for how I will continue to assist him in the more strategic aspects of the role across these next eight months. I have the utmost confidence in Greg to step into the CEO role and look forward to working closely with him on a successful transition until my retirement. As always, I wanna thank the hard work and commitment of our ACEs, franchisees, and leaders who are the driving force behind the efforts that have allowed us to more than double revenue and quintuple net income during my years leading the company. It is truly a business where the compassion, expertise, and commitment of our people make the difference, and I’ve been honored to be part of that journey. I also wanna take an opportunity here to thank my wife and children whose support across this chapter of my career has been exceptional.

When the business pivoted and became Canadian only, we knew there would be days and weeks where the whole family had to work together to make the most of this opportunity. And every day, they have been supportive of me and what it has taken for me to be both committed to pet value and to our family. Now it is time for me to transition to be more available for my family. Finally, thank you to our Board of Directors and to our long term oriented shareholders, many of which that have been with us since IPO and also those that have more recently joined us. Your support, guidance and questions have helped us sharpen our capabilities, our focus and our competitiveness.

We look forward to many years ahead of your continued support and investment. This is a great business. It’s in a great place and has a great future laid out in front of it. I’m very excited for what’s ahead and glad to be a continued part of it throughout this transition. And with that, Carly, we will now be happy to take questions.

Carly, Conference Call Coordinator: Thank you very much. We’d now like to start the Q and A part of the call. Our first question comes from Irene Nattel from RBC. Irene, your line is now open.

Irene Nattel, Analyst, RBC: Thanks and good morning, everyone. Congratulations to both you, Richard, and you, Greg. But I’m not going to ask about that yet. I’m I’m gonna focus my question on on the business and the momentum in the business. It sounds as though, and you say clearly, that things have accelerated.

Can you walk us through how much of that you think is a result of specific initiatives on your part versus what you’re seeing in the channel overall?

Greg Ramier, President and Chief Operating Officer, PetValue: Sure. Irene, it’s Greg. Thanks for the question. I will take that one. So very happy with the quarter.

Top line trends show the success momentum we’re seeing in our commercial strategies, which we really emphasize starting in Q4. A couple of key pillars that I’d like to highlight as part of that. So first, we’re continuing to win the monthly shop. As devoted pet lovers are responding well to our sharpened promotional program together with our everyday price investments, and you’ll remember sort of two important ones, our Fresh for Life litter investment in November and then in April, our Performa Term Prime investment and the actions we took there. Those have worked well.

Second, our loyalty program continues to be a point of strength. We continue to expand the assortment of brands eligible for it, and we drove the sales penetration of it to new record highs in Q2. So happy with that as well. Third is the culinary category. It continues to be a standout.

We’re seeing pet parents increasingly look to pet value as a destination for their culinary needs, which is why we’ve taken the opportunity to lean further into this with enhanced in store experience and the investment and focus that you’ve seen for the balance of the year. Together, these actions have really helped create both an increase in basket and an increase in trips. And our same store transaction growth returning to positive territory in the quarter. So we do feel these trends are sustainable because our programs and decisions are a direct product to the tools, data and expertise that the team has, and we’re getting stronger every day in that. So I thought it was a good quarter, and we feel really good about where this is going take us over the next few quarters.

Irene Nattel, Analyst, RBC: That’s really helpful. Thank you. And just a follow-up. You mentioned something in jump hardlines, but how would you describe overall the level of consumer demand in the nonessential or discretionary category? And what do you think it takes to get a little bit more momentum there?

Richard Maltzburger, Chief Executive Officer, PetValue: Yes. So, Irene, this is Richard. I’ll give a start, and then I’ll jump over to Greg to give us some more details. So let’s I just wanna pull up a little bit. Let’s just talk overall industry demand.

Look. As Linda noted on the call, we continue to see momentum and progress in both hardlines and consumables. Consumables, of course, being over 80% of the business, carrying the day very strong performance and continuing to lead, especially on the back of the key commercial pillars that Greg just outlined for you. But as Linda noted, we also saw sequential improvement in hardlines and a shrink of the gap between the two categories. And I’ll let Greg talk a little bit more to that.

Greg Ramier, President and Chief Operating Officer, PetValue: Irene, I think overall, I think we did a much we did a really good job in Q2 with balancing value and quality with our customers. So I think we’re doing a better job of meeting them where they want to be. Specifically to hardlines, we’re starting to see it stabilize. So and that’s encouraging. And I think that’s partially due to general trends in the industry, but it’s also due to the actions that we’ve taken over the last year.

And I’d highlight too, we continue to strengthen our Hardline’s proprietary brands position. You mentioned one product that continues to be a big focus for us both to give value to our consumers and to our franchisees. And in recent quarters, we’ve layered on more targeted promotional programs to help drive some excitement and build a basket with those products.

Irene Nattel, Analyst, RBC: That’s great. Thank you.

Richard Maltzburger, Chief Executive Officer, PetValue: Thank you, Irene.

Carly, Conference Call Coordinator: Thank you very much. Our next question comes from Michael Van Aelst from TD Securities. Michael, your line is now open.

Michael Van Aelst, Analyst, TD Securities: Hi, good morning, and good numbers. And it a strong quarter and stronger than what you guys had guided to actually on the margin side. So, I’m not sure if you touched on this. Got on a bit late, but, can you just clarify, I guess, why the gross margin or why the margins in general were higher than what you anticipated? But also, why if some of that timing since, you know, you’re you beat by consensus by about 5¢ and your guidance is only going up 2 to 3¢, for the full year, so that would suggest either higher cost in the second half of the year or, some additional conservatism built in.

Linda Drizale, Chief Financial Officer, PetValue: Hi, Michael. It’s Linda. I’ll take that one. So, yeah, we were pleased with how our business performed in the quarter. It was the strong execution of our strategies, which has summarized across three main buckets.

First, as you just heard Greg discuss, we saw improving success in our commercial program with our devoted pet lovers responding well to our merchandising and promotional strategies for both quality and value. Second, we realized better than expected benefit from our supply chain transformation. Teams leveraged our new facilities and systems to drive the productivity and efficiency even while we neared the go live in Calgary. And third, we did a really solid job controlling our SG and A spend, which reflects a culture of the responsible investment that we’ve fostered over recent years. With respect to the raised guidance, as per usual practice, we revisit our annual guidance each quarter.

We were looking at the strong performance we saw in the first half, those sustainable drivers underpinning that. At the same time, today’s environment is still uncertain. That limits our visibility into the future consumer spend, especially over the holiday season in the fourth quarter. We believe our rate guidance balances these dynamics with the high end of our ranges, reflecting the stability and the discretionary demand together with the weakened with the continued success of our commercial plan and the lower end, reflecting the the weaker macro environment. So, ultimately, we have the flexibility to adapt.

I’m not seeing a ton of timing in that.

Michael Van Aelst, Analyst, TD Securities: Okay. Great. So so no none of the expenses were really pushed into or programs were really pushed from q two into the back half. It’s really just your conservatism for the second half given the macro, like, this uncertainty.

Linda Drizale, Chief Financial Officer, PetValue: Yes. I would say that one thing I would call out, you will recall last year, our Q3 margins benefited from lower variable compensation. So we don’t expect that to repeat this year. So we would expect a more normal cadence quarter to quarter where we typically see our strongest adjusted EBITDA margins in the fourth quarter.

Michael Van Aelst, Analyst, TD Securities: Okay. Perfect. And then sorry. One one other thing. Where the heck did they go?

Okay. You know what? Oh, yeah. Sorry. On on your your inflation trends, it seemed to slow down from q one to q two or at least, I guess, your average transaction value growth.

So is that a reflection of the promo activity, or are you seeing underlying cost of goods sold inflation moderating?

Greg Ramier, President and Chief Operating Officer, PetValue: Michael, it’s Greg. I’ll take that one. So in the quarter, we did see very modest inflation, basically similar to our historical run rates. Our merchants did do a great job of challenging proposed cost increases from suppliers and accepting only the ones where we felt they were justified given the underlying cost and commodity inflation. But I do want to reiterate, for our guidance, it isn’t banking on higher prices or inflation.

We’re really focused on driving growth in transactions and basket with our commercial program. And that’s really tied to winning the monthly shop and leveraging our loyalty and promotional programs combined within this great in store execution to build the basket. So that’s what we’re seeing this quarter and we expect to continue.

Michael Van Aelst, Analyst, TD Securities: Right. Thank you.

Richard Maltzburger, Chief Executive Officer, PetValue: All right.

Michael Van Aelst, Analyst, TD Securities: Thank you, Mike.

Carly, Conference Call Coordinator: Thank you very much. Our next question comes from Martin Laundry from Stifel. Martin, your line is now open.

Martin Laundry, Analyst, Stifel: Hi, good morning, everyone. I would like to dig into the expansion of your culinary offering. You know, within your existing when you when you upgrade and increase your freezer space, what what what are you removing from your floor to make space for that? And and then what kind of uplift are you seeing in sales?

Greg Ramier, President and Chief Operating Officer, PetValue: Martin, it’s Greg. I’ll take that one as well. And I’ll get maybe start with a bit of color around the investment and the focus for us in general. So as you know, for the last several years, culinary food and treats has the fastest growing segment within our consumables business, and that’s really fueled by humanization and premiumization trends. We already had a strong leadership position here, but we did see an opportunity to enhance the experience even more.

So we piloted this layout within a handful of corporate stores starting last year, both expanding the freezer capacity, like you mentioned, applying a more thoughtful and intentional merchandising program and enriched signage, but just as importantly, upgrading our in aisle expertise to match. Very pleased with the results across the whole store, not just within culinary. And these investments drew in that customer who have a high lifetime value and shop in store more often. So it really surpassed our returns and led to this stage of us moving to a rollout in our corporate stores. We’re seeing solid growth in the with this customer, which drives total sales.

Richard Maltzburger, Chief Executive Officer, PetValue: And Martin, this is Richard. I would just add on to there that second part of your question around sort of what are we giving up, not a lot actually. The vast majority of this is actually a layout change as opposed to, in many cases, an incremental allocation. It really is doing a better job of centralizing not just the frozen and gently cooked products, but also the freeze dried, the supplements and all the things that go in. But as important as the actual capital investment we’re making is the training investment we’re making into the NIL expertise.

As Greg noted, these are high value, highly discerning customers, and they buy across the entire store. And so while there is a bit of an investment with the $10,000,000 going into the corporate stores, over 120 corporate stores this year, and there is some physical layout changes you’ll see, The much more subtle but much more impactful change is the impact on the training that we’re doing, the support we’re providing to that training and the expertise we’re bringing to the customers as they make these choices.

Martin Laundry, Analyst, Stifel: Okay. And can you talk about the profitability levels for that category? Is it fair to say that all that is culinary drives higher margins than your average store overall?

Richard Maltzburger, Chief Executive Officer, PetValue: So so, Martin, what I would say is it’s well in line with the overall store. Remember, this is frozen, raw, gently cooked, freeze dried, and in many cases, supplementation. And so it really does represent a broad range from everyday food to some of the higher margin goods that go into the supplementation and the care for the vet. But as Greg said, I think the most important thing to take away here is these customers buy across the whole store, right? This is a full share of wallet.

And as Greg noted in his stated remarks on the call, customers. They disproportionately shop in store, oftentimes generating weekly or biweekly trips. And so, yes, there’s a category impact, but most importantly, this is really about a customer prioritization.

Vishal Shreedhar, Analyst, National Bank: Okay.

Martin Laundry, Analyst, Stifel: Super. Thank you. That’s helpful. And, Greg, congrats on your appointment. And, Richard, it’s it’s been great working for you over the working with you over the years, and good luck in your in your future projects.

Richard Maltzburger, Chief Executive Officer, PetValue: Thank you, Martin.

Carly, Conference Call Coordinator: Thank you very much. Our next question comes from Vishal Shreedhar from National Bank. Vishal, your line is now open.

Vishal Shreedhar, Analyst, National Bank: Hi. Thanks for taking my questions. Linda, I I in this in the preliminary script, I I thought I heard you comment and confirm that same store sales growth is expected to accelerate through the year, but the same store sales growth is a range of one to four. So should we anticipate the bottom end of the range being unlikely and we should focus more on the the top half? Is is that the comment?

Linda Drizale, Chief Financial Officer, PetValue: I I we give a range for a reason, I think. You know? And I I I guess I would reflect on on on our you know, we do we do expect it to continue, I’d and also being mindful of today’s environment. Still uncertain. Lot you know, lots of the year left to come.

So so so that’s why we provide the range.

Vishal Shreedhar, Analyst, National Bank: Okay. But in the script, you did say you anticipated to accelerate through the year. That was I did hear that correctly.

Linda Drizale, Chief Financial Officer, PetValue: You did hear that correctly.

Vishal Shreedhar, Analyst, National Bank: Okay. To what degree did the con contract the partnership with Instacart and pet with Instacart and and PetValue contribute to the to the same store and and profitability, if at all?

Greg Ramier, President and Chief Operating Officer, PetValue: Michelle, it’s Greg. I will take that one. I’ll maybe start off with we were happy with our online sales and our omnichannel sales. They continue to outpace the our total store sales. The Instacart partnership was part of that omni channel growth.

It was a nice amount. It isn’t material in the grand scheme of our sales though. So I think I’d attribute more of that to our strong commercial strategies and plans with Instacart offering just another option for convenience to allow customers to more easily access that plan.

Vishal Shreedhar, Analyst, National Bank: Okay. With respect to competitive industry growth, have you seen that moderate to levels more in line with historical trends? Or is that still at elevated rates?

Richard Maltzburger, Chief Executive Officer, PetValue: Vishal, can I just clarify the question? I just wanna make sure I understood. So your question was, have we seen competitive industry growth moderate to long term trends?

Vishal Shreedhar, Analyst, National Bank: Yeah. I was talking about real estate growth in particular.

Richard Maltzburger, Chief Executive Officer, PetValue: So real estate and store growth. Okay. I just wanna make sure we understood what what the genesis of your question was. We are seeing that there has been a bit of a pullback in the industry from other competitive openings over the past year. It is once again giving us an opportunity to lean in and take share in the marketplace, thanks to the strength of our balance sheet and the strength of our real estate process and the quality and the assessment that we bring into this.

We’re quite happy with what we’ve seen to date on the year. As Greg noted on the call, we’ll be up to 15 openings by the end of this week. We’re well on track with line of sight to our 40 openings for the year. And so while maybe perhaps a few of our less well capitalized competitors have had to pull back, we continue to have a good consistent roughly 40 openings per year.

Vishal Shreedhar, Analyst, National Bank: Thank you.

Richard Maltzburger, Chief Executive Officer, PetValue: Thanks, Michelle.

Carly, Conference Call Coordinator: Thank you very much. Our next question comes from Mark Petrie from CIBC. Mark, your line is now open.

Mark Petrie, Analyst, CIBC: Yes, thanks. Good morning. I’ll echo the congratulations, Richard, on fantastic career and wish you all the best. And of course, to Greg on the new appointment, looking forward to working together. I want to ask just about gross margin again.

You’ve called out the sort of better than expected leverage from the supply chain. I know there’s different levers here, but could you parse that out a little bit? Is that just sort of pure shipping efficiency, just getting product out the door with less labor? Or is it about higher penetration Or maybe just sort of give us a sense of the materiality of the different pieces here.

Richard Maltzburger, Chief Executive Officer, PetValue: So so the great news is, Mark, first response is, thank you. Second response is, you nailed it. It’s all of those things. So it really I would say, I just wanna give credit to the supply chain team because while simultaneously getting the Calgary DC transitions this quarter, they really did pull out incremental efficiencies in both our GTA and our Vancouver warehouses. Yes, in units per hour productivity or shipping costs.

Yes, in the management of our ecommerce shipping costs with actions that they’re taking to manage on that front. And yes, in great management of the incremental SKUs. So note again that we increased our SKU count about 3,000 SKUs on a year over year basis, broadening our wholesale catalog, becoming more relevant, having already been really relevant, now even more relevant. And quite frankly, as we noted in my remarks, we’re up to over 40% of wholesale shipments now to our Chico franchisees in Quebec. So you combine all of that together, While we were expecting productivity, as Linda noted in her prepared remarks, we just got more than we expected.

Our teams are truly doing a great job, and I’m just I couldn’t be more proud of the way in which they balance both change and run the business at the same time.

Mark Petrie, Analyst, CIBC: Okay. And then I guess somewhat related question. Could you just talk about the runway for revenue to grow faster than system wide sales? I know that the increased shipments to Chico is part of that, but maybe just talk about the other levers. And is that something that you think has significant runway?

Or is this just sort of a normalization over the next kind of six to twelve months with regards to those two lines growing more in concert?

Greg Ramier, President and Chief Operating Officer, PetValue: Mark, it’s Greg. I’ll take that one. So I’d start off by saying we’re very pleased to see our revenue continue to outpace system wide sales growth and really driven by wholesale shipments to our franchisees. Richard just talked about the additions and strength to our product category. That absolutely helps us sharpen our ability to be able to serve our franchisees and with the new supply chain capability, both on time and in full.

The

Richard Maltzburger, Chief Executive Officer, PetValue: gap

Greg Ramier, President and Chief Operating Officer, PetValue: that currently seeing, we do expect that to taper over time, a longer time period than what you just mentioned, but over time. But so we still see opportunity in being able to grow our franchise shipments as we add new brands and fulfill more of their sales needs. And we still see a lot of runway left in Chico. So we’re at 40% sales penetration now. That will be at 50% by the end of the year, and there’s still runway after that.

Richard Maltzburger, Chief Executive Officer, PetValue: And the only thing I would add, Mark, is that it can be a bit lumpy quarter to quarter. Some of it’s impacted just by the timing of when we introduce new brands or we expand distribution across the country. So the actual gap itself will taper over time. Exactly the pace will sometimes be dependent upon just what happened in the quarter.

Mark Petrie, Analyst, CIBC: Okay. Got that. Helpful comments. Thank you and all the best.

Richard Maltzburger, Chief Executive Officer, PetValue: Thanks, Mark.

Carly, Conference Call Coordinator: Thank you very much. Our next question comes from Chris Lee from Disinsurance.

James Allinson, Investor Relations, PetValue0: Chris, you’re Good morning, everyone. Thank you.

James Allinson, Investor Relations, PetValue1: Good morning, everyone. Yeah. Richard and Greg, let me first extend my congrats to you both. And, Richard, very happy to hear that you’ll be able to spend more time with your family. It’s really well.

Well deserved. Thank you, Chris. Maybe first maybe first a follow-up question. Sorry if I missed it earlier, but the culinary category, can you remind us roughly what percentage of sales currently come from the culinary category? I remember it’s it’s pretty low at the moment.

Greg Ramier, President and Chief Operating Officer, PetValue: Chris, it’s Greg. So continue to see strong double digit increases in it. Our sales penetration is more or less in line with what you would see in the industry. So in the range that you just said, sort of mid to mid single digits. We do expect this to increase over time.

And but I do want to reiterate that higher culinary sales in and of themselves is not the only benefit from this initiative. Richard talked about that. This is a high value customer. They have high lifetime value. They’re our priority for both that and the fact that they are much more likely to want to come to a store every week.

So they typically, as a reminder, spend double and with more trips.

James Allinson, Investor Relations, PetValue1: Got it. Okay. That’s helpful. And then with respect to your effective strategies in terms of gaining market share, I’m just curious, as you’re having success in that area, have you seen any notable changes in terms of competitive intensity or reaction from your competitors, especially since the market is still fairly uncertain? Are you seeing any uptick in competitive intensity overall?

Greg Ramier, President and Chief Operating Officer, PetValue: Chris, it’s Greg again. No. So, I think no real change in the environment. It does remain competitive, but no real change. I think what has changed is our approach.

So we’ve sharpened it, with the tools that we’ve talked about and our team to enhance the effectiveness of our program. And we’ve been able to use that to drive both sales and revenue and exceed our margin targets or margin expectations as you heard. So we’ve been happy with that. I think we I believe we are the real change that drove our results in the quarter.

James Allinson, Investor Relations, PetValue1: Got it. Okay. And then Greg, maybe just the last one. I think you touched on this earlier already, but I know it’s still very early, but can you give us an update on what you’re seeing so far in your new promo planning tool, I think, that you launched just maybe a month or two ago?

Greg Ramier, President and Chief Operating Officer, PetValue: It it’s one of the factors on that has allowed us to do what I just mentioned around driving sales and revenue with being able to do that with effective margin. Wouldn’t say it’s the only factor. I think our stores have done a great job of utilizing the promotional plans that we have. Our team, we’ve added some talent and we’ve learned through this since we started on this plan in Q4. The tool helps support that though.

James Allinson, Investor Relations, PetValue1: Got it. Okay. Great. Thanks very much, and have a great rest of the summer.

James Allinson, Investor Relations, PetValue: Thanks, Chris. Thank

Carly, Conference Call Coordinator: you very much. Our next question comes from Michael Glenn from Raymond James. Michael, your line is now open.

James Allinson, Investor Relations, PetValue0: Hey, good morning. Thank you. Just on the Chico penetration, the 50% target rate, what are some of the like if I think of that relative to the network outside of Quebec, what are some of the big product categories that remain in place to get that penetration rate, narrow the gap between 50% and where the network is as a whole?

Richard Maltzburger, Chief Executive Officer, PetValue: Certainly. Just as a reminder, the overall network, Michael, is roughly around 90% penetration. We do not self distribute cold chain at this point. So so our frozen brawl is through an outside distributor. Beyond that, much of what the rest of the network purchases are small regional products and things that we test, usually small producers that can’t quite support the entire network yet.

If you look at the difference between that and where we are today in Quebec, there’s still a handful of larger Quebec brands that may or may not come into our supply chain over time, depending upon if we also see opportunity in potential provinces outside of that. Once you get past a few of those brands, it’s really thousands of smaller items that, you know, just they take time. It really just a matter of introducing them. A key factor, of course, is Quebec language laws. For example, we have almost 2,000 proprietary brand SKUs in total in the network, but only a little over a thousand that we’ve currently been able to make compliant with Quebec language.

And it’s really important to us to honor the the local expectations. And so part of this is just transition over time, Michael. It’s just making sure that we’ve got the right products to be able to put in that are relevant for the Quebec market.

James Allinson, Investor Relations, PetValue0: Okay. And then industry as a whole, what do you see in terms of data on overall pet population growth right now? Is pet population starting to grow again or pet adoption rate starting to pick up? Any data or insights that you have there would be interesting.

Richard Maltzburger, Chief Executive Officer, PetValue: Really, Michael, we’re just still seeing the same general trend. It’s a pretty stable environment, kind of like where we were prior to the pandemic. If you go even back to our IPO materials, we were very clear. There’s a little bit of pet population growth per year. Generally, you’re about 63% to 65% of Canadian households have a pet, several with multiple pets.

That’s been a pretty consistent percentage over the long term, thirty plus years worth of tracking. Really what drives our industry is premiumization and humanization. And as we’ve seen in our results, especially with the outsized performance and our premium consumables and the investment we’re making in the culinary, that is still the core drivers of our above average growth.

James Allinson, Investor Relations, PetValue0: Okay. Thank you.

Richard Maltzburger, Chief Executive Officer, PetValue: Thank you, Michael.

Carly, Conference Call Coordinator: Thank you very much. Next question comes from Adrian Yee from Barclays. Adrian, your line is now open.

James Allinson, Investor Relations, PetValue2: Great. Good morning. And let me add my congratulations, Richard. What a great way to go out on top of all these the commitments of the of the past four years. So congrats there, and congrats to Greg.

Looking forward to working with you. Thank you. Absolutely. So either either for one for one of you or or both of you, kind of the $100,000,000 investment over the past, you know, four years, it really sounds like you are at this tipping point. Greg, you mentioned ongoing or leverage in the fourth quarter.

I’m just trying to figure out from a capacity utilization, from a store’s capacity, Chico’s is doing 40%, can grow more. Where are you at it sounds like you’re in the early part of the journey. So how should we think about this on a longer term, a two or a three year horizon? How much can this, kind of generate in terms of fulfilling the network?

Richard Maltzburger, Chief Executive Officer, PetValue: So, Adrienne, let me start first with just your broader question about capacity. Then I’ll actually turn to Linda to talk a little bit about sort of how it’s going to help to contribute to results over time. So the good news is we’ve doubled capacity. Now, especially with Calgary in place, we are at two times the capacity we had. Now remember, we were at a 115% capacity utilization in 2023.

So some of that was necessary just to keep up with the existing business we already had two plus years ago. So we have great capacity utilization today. At the same time, we’ve actually left incremental space available in each one of the three warehouses that we can add rack and or automation over time to to increase that capacity when or if the capital is required. We are still very early in getting the productivity. We’re still very early.

We love what we’re seeing in the units per hour productivity that teams are generating. We like what we’re seeing out of the automation that we put into the GTA. But again, we’re still not even quite out of the old Calgary facility. That doesn’t technically happen till the end of next month. So we’re still very much at the last major milestone of the actual change itself.

But I’ll turn it over to Linda to just talk a little bit of sort of expectation of contribution over time.

Linda Drizale, Chief Financial Officer, PetValue: Yes. So what I would say on that front, like marrying up the there’s puts There’s a on the on the on the whole gross margin side. So marrying up those efficiencies in the supply chain that Richard was just talking about together with our commercial strategy will at the same time, we’ll be having the mix shift towards wholesale and, of course, those fixed costs from you know, as we we are still absorbing those in the in the back half of this year. So putting all of that together, we do expect that those things will start to balance out, and then we can see some upward trajectory starting in 2026 as we leverage those fixed costs and continue to benefit from those productivity and efficiency tailwinds from the transformation.

James Allinson, Investor Relations, PetValue2: Perfect. Thank you very much. In terms of the proprietary brand penetration, where do we sit now? And how should we think about that kind of over time? And then my second question is the loyalty program.

How many loyalty customers do you have? Obviously, with everything that you’re doing, you must be seeing sort of an acceleration in kind of conversion. And what percent do they make up of total sales? Thanks.

Greg Ramier, President and Chief Operating Officer, PetValue: Adrian, maybe I’ll kick off the loyalty question first. $3,000,000 just under 90% sales penetration in the quarter. So that’s a record for us. We were happy with how that helped drive our monthly customers and just happy with it in general as we expanded out the number of programs or number of brands that are eligible for it. So that remains an area that we can continue to leverage.

On proprietary brands Yeah.

Richard Maltzburger, Chief Executive Officer, PetValue: I’ll jump in there, Adrian. We were roughly 25% penetration is what we released within our AIF. Interestingly enough, we’re still there, if not turning a corner and increasing penetration. What has been very interesting though is on a year over year basis, we’ve actually increased our proprietary brand unit penetration by over 200 basis points. So remember, when we did a lot of finding value for the customer by converting to our own brands, we actually took down retail prices in many of those cases by 5% to 20%.

In addition, with the value pillars that Greg talked about, specifically investment we made in November on Fresh for Life Litter and then in April on Performance and Prime, we’re creating incremental dollar value to the customer. We’re seeing a great unit pickup. And as I just said, in this past quarter, we turned the corner and are starting to see penetration growth rates on a dollar perspective as well.

James Allinson, Investor Relations, PetValue2: That’s great. Last housekeeping question, Linda, the fifty third week, the contribution in sales and EPS, if you have that, please?

Linda Drizale, Chief Financial Officer, PetValue: Yes. We’ve said roughly like 2% for that 53 break.

James Allinson, Investor Relations, PetValue2: Great. Thank you very much. Great quarter and congrats. Thank you.

Carly, Conference Call Coordinator: Thanks. Thank you very much. Our next question comes from Chris Murray from ATB Capital Markets. Chris, your line is now open.

James Allinson, Investor Relations, PetValue3: Yes. Thanks, folks. Good morning. Hey, first of congratulations. I think that you’re done on a really successful run at PetValue.

It’s really been fun to work with you. And Greg, looking forward to working with you as well. Just turning back to supply chain, a couple of quick questions here. So first of all, as Calgary comes online and now you’ve got sort of three facilities, as you said, room to grow, how to move stuff around. I think as we’ve seen the newer facilities mature, can you talk a little bit about how you think both the regional and maybe the national profile could change on how you do different programs, either that’s for e commerce or stuff like that, now that you’ve had the capability more nationwide to do some distribution?

Greg Ramier, President and Chief Operating Officer, PetValue: Chris, it’s Greg. I’ll take that one. This helps an awful lot. So the doubling of capacity, especially starting in Ontario, we built a very strong extended aisle program that we were then as we added capacity to first Vancouver and then Calgary and now Calgary, we’re able to add those items into that assortment, first for our stores on the items that have proven to really work through extended aisle and then for our e commerce business to be able to get those to customers faster and more efficiently.

Richard Maltzburger, Chief Executive Officer, PetValue: And and in addition, I would just highlight, I don’t know if you noticed, but we also took a step forward with our auto ship program, during the quarter, especially leveraging our advantage, having the only auto ship program and especially pet and, I think, maybe one of the very few in all of retail that actually allows the customer to either order to their home or for a subscription pickup in store. And so this has, again, enabled further flexibility in us being able to service customers when, where and however they choose.

James Allinson, Investor Relations, PetValue3: Okay. That’s helpful. And then the other question is, as we’re talking about sort of the growth in in in either frozen or fresh, is there any thoughts around adding cold chain into your into the facilities at this point? Is it still too early?

Richard Maltzburger, Chief Executive Officer, PetValue: Yeah. It’s really still too early for that, Chris. We’re still, like I said, finishing the transition in Calgary. So we’ll get through that. Every year, as we look at our planning, we make capital conversations around what’s the best use of capital and the next step we should take.

Right now, as we just announced, that next best use of capital is the culinary investment that we’re making, incremental $10,000,000 of capital we announced for this year. And probably similar levels next year as we continue and finish out the rollout in our corporate stores and likely begin some of our franchise stores. And but yes, Chris, each and every year, take up what’s that next best use. That will be one of the things we look at over time. But today, there’s still an opportunity to really grow the penetration in the sales and then determine whether or not we need to make a change and how we actually manage the distribution.

James Allinson, Investor Relations, PetValue3: All right. I’ll leave it there. Thanks, folks.

Richard Maltzburger, Chief Executive Officer, PetValue: Good. Thanks, Chris. Thanks.

Carly, Conference Call Coordinator: Thank you very much. At this time, I would like to hand the call back to Richard Marzburger for any further remarks.

Richard Maltzburger, Chief Executive Officer, PetValue: As always, thank you to everybody listening in, all of our long term investors, all the people that are interested in the and all of you for your great questions. And as I said on the call, what you’ve done to help sharpen our focus and our competitiveness, over the years. I really appreciate all the kind words this morning on the call. This, like I said earlier, is a great business. We’ve got platform.

We’re a growing company. I’m extremely proud of our, executive leadership team and excited to see what they continue to do in the future. So with that, thank you all so much. And the team will come back and talk with you in November.

Carly, Conference Call Coordinator: As we conclude today’s call, we’d like to thank everyone for joining. You may disconnect your lines.

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