Pet Valu Holdings Ltd. (PET) Earnings Call Transcript & Summary

No. There are no comments or questions. As there were no comments or questions, we will now proceed.

The final item of business to consider is the nonbinding advisory resolution on the company's approach to executive compensation. This approach is set out starting on Page 28 of the circular along with the full text of the advisory resolution which is set out on Page 23 of the circular. This vote is advisory-only and nonbinding on the company and the Board. However, the Board will consider the outcome of the vote as part of its ongoing review of executive compensation. I move on an advisory basis, and not to diminish the role and responsibilities of the Board of Directors, that the shareholders accept the approach to executive compensation disclosed in the circular delivered in advance of this meeting. Are there any comments or questions on the advisory vote of the executive compensation?

No, there are no comments or questions. As there are no comments, we will now proceed.

This completes the matters to be voted on at this meeting. The polls will close in 1 minute so if you've not yet voted on a matter, please do so immediately. [Voting]

While we are waiting for the polls to close, let me advise you that immediately after the close, our scrutineer will provide me with the preliminary tabulation of the results on each matter voted on based on proxies received in advance of the meeting and votes cast at this meeting. I will now announce those results. Poll ballot results for each item submitted to the shareholder vote at this meeting will be posted on the company's SEDAR profile following the meeting. The polls are now closed, and I have received the scrutineer's preliminary report. The preliminary report results are as follows. With respect to the number of directors, a majority of the common shares voting on this motion voted for, setting the number of directors for the ensuing year at 9. With respect to the election of directors, for each of the nominees has received a sufficient number of for votes to be elected to the Board until the next Annual General Meeting and that for each nominee, the number of withheld votes is less than the number of for votes. With respect to the appointment of the company's auditor, a majority of the common shares voting on this motion voted for, appointing Ernst & Young as the auditor of the company until the next Annual General Meeting and for authorizing the directors to fix the remuneration payable to the auditor. With respect to the advisory resolution on the company's approach to executive compensation, a majority of the common shares voting on this motion voted for, adopting the advisory resolution. I declare that each of the motions submitted to a vote of the shareholders at this meeting has been approved. We have completed the formal business for which this meeting has been called. I now ask if anyone has any other business they would like to bring before the meeting. If you wish to bring another motion or objection before this meeting, please click the messaging tab and type your question. I'll pause now to allow any attendees to submit comments. Now are there any other motions or objections?

No. There are no motions or objections.

There being no other business or objection, I now declare this meeting terminated. I'll now hand the proceedings over to Richard Maltsbarger, President and Chief Executive Officer of the company.

Thank you, Tony. On behalf of the Board, our franchise owners, our leaders and our ACEs across Canada. I would like to thank you for attending the meeting and for your ongoing support of Pet Valu. I'd like now to share with you a short presentation on Pet Valu, our accomplishments and our plans, which will then be followed by a formal Q&A session. Please take a moment to review the caution regarding forward-looking statements and non-IFRS measures provided on your screen. During this presentation, we may make forward-looking statements, which may involve certain assumptions and have inherent risks and uncertainties. Actual results could differ from these statements. 2022 was another exceptional year for Pet Valu. We drove our third consecutive year of double-digit same-store sales growth. We set a record for new store growth across our network. We welcome Chico franchisees into the Pet Valu family and, through all of this, continue to outpace our already robust growth in the pet industry to continue to earn market share. In fact, we expanded our market-leading position, grabbing 300 basis points of share. We enhanced our product offering through expansion of our award-winning proprietary brand portfolio alongside our leading selection of premium national brands. We deeply invested in the development of our people through new small animal expert courses, enhanced manager training and broader leadership development. We and our customers raised over $2 million for animal-related causes and have found forever homes for over 3,000 pets. And we did this all while delivering a record year in both our top and bottom line. These accomplishments aren't happenstance, but rather the culmination of well-planned and well-executed initiatives that have positioned our business to drive sustainable, profitable growth over the long term. And the most critical ingredient to this success and our growth engine are our people and Our Four Paws culture. It's our people who bring a healthy balance of safety, compassion, expertise and efficiency to work every day and deliver on Our Four Paws promise. It's our people who either directly or indirectly help form meaningful and lasting connections with devoted pet lovers across Canada. And it's our people that I say thank you for all that they do to be able to help to continue to build our company. And while every team is integral to our success, I want to draw attention to our growing network of franchisee owners. Pet Valu is proud to support over 330 franchisees who collectively operate over 500 Pet Valu, Chico, Bosley's or Paulmac's locations across Canada, comprising over 70% of our locations. With an average tenure of almost a decade, our franchisees have enduring bonds with their devoted pet lover customers, often across the entire lives of their pets. Our franchisees' entrepreneurial fire, together with our close community connections, drive stronger long-term returns on invested capital to Pet Valu shareholders as we leverage this asset-light growth model. In order to better serve our growing network of franchised and corporate stores, together with our burgeoning e-commerce offering, in 2022, we embarked on an ambitious supply chain transformation that will see us invest $110 million into the Canadian economy to create what we believe will be Canada's strongest pet specialty supply chain. This transformation will optimize our aging distribution network to 3 modern, automated facilities while doubling our capacity to support another decade of growth. The first phase consists of the construction of our new GTA distribution center, which is progressing on schedule and on budget. As you can see, walls are up, floors are poured, and we are now readying for putting in the racking equipment and IT installation that we need to work towards a ramp-up starting in early Q3. The highly anticipated opening of this new DC will unlock substantial capacity in Central and Eastern Canada while driving greater asset efficiency as we offload for more expensive third-party storage and integrate targeted automation capabilities. As these DCs come online, they will help enhance our ability to serve our customers by offering a broader product catalog to our corporate and franchise stores. This will allow us to tap into higher potential future wholesale revenues across both existing and future stores. We see the potential to add more than 500 locations over the next 10-plus years. We are particularly excited for our continued expansion into Canada's many rural markets, which are compelling opportunities that we believe our business is uniquely positioned to serve. These are markets such as St. Mary's, the town in Southwest Ontario, consisting of approximately 9,000 people who, until recently, did not have an easy access to pet specialty brands through existing local retail until we opened our store in September. And examples like these are small-scale store footprint of approximately 3,600 square feet provide an effective entry cost and are often led by franchisees with a deep understanding and connection with the local community. Another compelling opportunity for us lies in Quebec. In February, we celebrated our first anniversary of entering Canada's second largest pet market through our Chico acquisition. We are successfully executing our multi-phased integration of the business. First, we scaled up the organization with strong local leadership to assist with the transition from the original founders. Second, we commenced a gradual introduction of our proprietary brand portfolio and are excited to see buy-in from 100% of our Chico franchisees. Prior to our acquisition, less than 5% of Chico's sales consisted of proprietary brands, and we believe with our introductions that we can build this up over time to be more in line with our legacy network average near 30%. We will soon embark on the third phase of our integration by offering our broader wholesale product catalog to Chico as we ramp up our new distribution center in the GTA. We believe this will unlock significant wholesale revenue opportunity while simplifying weekly order processes for our Chico franchisees. And finally, we will look to enhance Chico's technology platform to better integrate with Pet Valu as we continue updating systems in both businesses. Throughout all of this, Chico continues to be one of the fastest-growing pet specialty chains in Quebec, having grown from 66 stores at acquisition to over 80 within our first year of ownership. We believe there is opportunity for more than 200 Chico locations in Quebec, providing us with growth runway over the next decade plus. 2022 also saw us continue to build out our full suite of e-commerce capabilities, which, when combined with our over 700 store locations, enables us to offer an unmatched omnichannel experience and convenience to devoted pet lovers across Canada. Having already enabled a full transactional website with direct-to-home or in-store pickup fulfillment, we expanded our e-commerce offering with the launch of our AutoShip subscription service, allowing customers to regularly receive essential pet food or supplies either directly to their home or for pickup at their local store. All of these investments and actions continue to position Pet Valu to deliver our mission of being Canada's preferred pet retailer as we deliver the products, care, expertise and memorable moments in stores and online to a growing number of devoted pet lovers across Canada. With us now 1/3 of the way through 2023, we are continuing to build out our physical presence with 40 to 50 new stores planned for this year across all markets. We are continuing to enhance our merchandise offering through proprietary brand extensions and exclusive partnerships with national brands. We are continuing to enhance our in-store experience through ongoing expertise training for our ACEs and expansion of our popular in-store services, especially our role as Canada's self-serve dog wash destination. We are continuing to enrich our digital presence, both on our website and through our loyalty program as we align with industry best practices and capabilities. And as we've noted, we continued to invest in our supply chain, our franchisees and Our Four Paws culture. Together, our ACEs, our franchisees and our leaders are always building and proving the strongest foundation for long-term profitable growth in the Canadian pet industry. Together, we will continue to be the place Canadians turn to for the most challenging and most rewarding parts of being a devoted pet lover. This is Pet Valu. We love what we do. This concludes my prepared remarks, and I'd be happy to respond to any questions. I will pause for a moment to allow questions to be submitted. Seeing as there are no questions, this concludes our presentation. Thank you for joining us today via webcast or over the telephone and for your continued support of Pet Valu.