Pet Valu is Finally Off its Leash and Ready to Run

Anyone with a furry companion doesn’t need convincing about investing in a company that sells pet food and toys. Pets aren’t just animals; they’re cherished members of the family. The resilient pet industry even grew during the 2008 financial crisis and the recent global pandemic.

Our clients are shareholders of Pet Valu, which is up 25% so far this year.

Roark Capital and their associates took Pet Valu public in 2021, but retained a 62% stake. Since then, it’s sold down its position four times to raise cash for new investments—the last of which wrapped up last week. Each time Roark sold a large block of PET stock, it capped the stock’s momentum and frustrated existing shareholders (including us!). With that overhang now gone, the stock is free to run.

While some investors worry about intense competition from PetSmart, Walmart, and Amazon, we view Pet Valu as having an edge because it’s a Canadian gem that is benefitting from the “buy Canada” movement. In fact, only 15% of its inventory is imported from the U.S. In other words, the tariff impact is not a major concern.

In recent years, they’ve also built three distribution centers in the Greater Toronto Area, Vancouver, and Calgary, which will lower costs and pave the way for the double-digit earnings per share growth that analysts expect to see starting next year.

At just 15x projected 2027 earnings—well below the S&P 500 average—it’s attractively priced for a company targeting up to 4% same-store sales growth this year.

Even though Pet Valu is already well-represented within five kilometers of 75% of all Canadians, management has plans to open 40-50 stores each year until it eventually reaches 1200 total locations. That’s almost 50% more than today’s 830 stores, with much of that opportunity in rural Canada.

The company itself recognizes its stock is undervalued at today’s price and plans to allocate a “significant portion” of its free cash flow to share repurchases in the future.

Now truly ‘off its leash’ and ready to run, Pet Valu offers a unique investment opportunity in a resilient sector. Contact us at info@schneiderpollock.com and let’s talk about how this might fit into your portfolio.

-written by Jeff Pollock