About 63 to 65 per cent of Canadian households now own a pet.Cole Burston/The Globe and Mail
Move over, Aritzia Inc. and Dollarama Inc.: Pet Valu Holdings Ltd. PET-T, a purveyor of pet supplies, has grabbed the Canadian retailing spotlight this year with a tremendous rally.
But can the stock hold investor attention?
The share price has risen nearly 44 per cent so far in 2025, as of Thursday, following an explosive rally since April. The performance is besting Dollarama’s 38-per-cent gain and Aritzia’ 35-per-cent bump over the same period.
Gone are the days when Pet Valu may have appealed to investors looking for a way to profit from all those pampered golden labradoodles that appeared in dog parks during the pandemic.
Now, the bullish case for the stock rests on profits, a new distribution system, a long runway for expansion – and lots of tasty treats.
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“It’s a pretty stable environment, kind of like where we were prior to the pandemic,” said Richard Maltsbarger, Pet Valu’s chief executive officer, during a conference call with analysts this week.
Growth in the pet population has been relatively stable over the past 30 years, with about 63 to 65 per cent of Canadian households owning a pet, he explained.
But what really drives the pet supplies industry is what Mr. Maltsbarger calls “premiumization,” or branded consumables that can expand margins and attract loyal customers.
Say what you want about looking your best with up-to-date office attire or treating your children to memorable experiences.
Pets – I can say this confidently with a young long-haired dachshund at home – are where the real spoiling occurs: On top of consistent food, there are toys, treats, matching collars and leashes – you name it.
By the looks of Pet Valu’s latest quarterly results, which were released this week and exceeded analysts’ expectations, other pet owners share this view.
Revenue in the second quarter increased 6 per cent year-over-year. Same store sales – or sales at locations that have been operating for at least a year – increased 2.6 per cent. Net income increased 5.5 per cent, to 38 cents per share.
The lookahead is attractive, too. Pet Valu expects revenue growth will accelerate through the second half of the year. And it is on track to open 40 new stores this year, bringing the total to 863.
That is still shy of its long-term goal of 1,200 stores – tantalizing investors with the possibility that the retailer, currently valued at less than $2.5-billion based on the value of its outstanding shares, won’t be a small player for much longer.
Bargain hunters who prefer to focus on tarnished gems might not like the current upward trajectory of the share price, which is implying that a lot of good news is already priced in.
As well, the stock can be volatile. After the labradoodle rally ended in 2023, the share price fell more than 40 per cent.
But there are a few reasons why Pet Valu’s rally could continue this time.
The first reason is technical. Roark Capital, the private equity firm, has been offloading its stake in Pet Valu, which may have put some pressure on the share price since the pet supplies company’s initial public offering in 2021.
Roark is now completely out.
“This has removed the selling overhang on the stock that has been there since the IPO. In fact, it has been replaced by the company re-purchasing its own shares,” said Doug Cooper, an analyst at Beacon Securities, in a note.
Another reason: Pet Valu has just completed a $100-million distribution network with modern facilities in Calgary, Toronto and Vancouver.
The hefty multiyear investment should increase the efficiency of the supply chain, drive online sales growth, allow the company to offer more products and respond quickly to the demands of new stores.
A third reason why investors should consider sticking with Pet Valu: Despite the stock’s rise this year, analysts do not think the valuation is particularly stretched.
The stock trades at 21.7-times estimated 2025 earnings, according to S&P Global Market Intelligence.
That’s in line with the historical average for Pet Valu, cheaper than global peers in the pet supplies sector and appropriate for a company that should be able to return to profit growth in the mid-teens by 2026, according to Mark Petrie, an analyst at CIBC Capital Markets.
Pet Valu may not have the cachet of Aritzia or the size of Dollarama. But the stock’s long-term potential makes it a Canadian retailer worth watching.