Pet Valu (TSE:PET) reported second-quarter 2026 results marked by improved profitability, continued revenue growth and further market-share gains, as the Canadian pet retailer adjusted promotions, tightened costs and benefited from supply-chain initiatives.
Revenue increased 3.6% year over year to CAD 291 million, near the high end of the company’s annual guidance range, while total system-wide sales rose 2% to CAD 377 million. The company said sales were supported by new-store openings, e-commerce momentum and increased wholesale penetration as franchisees purchased more through Pet Valu.
Margins Improve Sequentially
Chief Executive Officer Greg Ramier said the company’s second-quarter profitability represented an inflection from first-quarter trends. Gross margin was 32.5%, improving 110 basis points sequentially from the first quarter, while adjusted EBITDA margin reached 22.4%.
Gross margin declined from 33.6% a year earlier, after excluding minor non-recurring supply-chain transformation costs in the comparable period. Chief Financial Officer Linda Drysdale said the year-over-year decline primarily reflected price investments made in late 2025 and higher occupancy costs from a greater corporate store count, partly offset by distribution cost efficiencies.
Adjusted EBITDA rose 8% to CAD 65 million, and the adjusted EBITDA margin increased 100 basis points from the prior year. Net income rose 14% to CAD 25 million. Adjusted net income totaled CAD 28 million, or CAD 0.41 per diluted share, up 7% and 8%, respectively.
Drysdale said selling, general and administrative expenses, excluding share-based compensation and other non-underlying items, were CAD 49 million, or 16.8% of revenue. The rate improved 150 basis points year over year, aided by gains from corporate-store resales. Pet Valu sold 11 corporate locations to new and existing franchisees during the quarter, matching a company record and including the first resales under its Chico banner. The company said the gains from refranchising were about CAD 4.5 million.
Promotions, Loyalty and Digital Growth
Ramier said Pet Valu recalibrated its commercial plan during the quarter, particularly its promotional approach, to balance value for customers with margin dollars. The company highlighted its Item of the Month hardlines program, which it said has gained momentum by offering lower-price, high-appeal products that customers can add to their baskets.
The company also cited continued strength in culinary consumables, toys and its digital offerings. Demand for Click & Collect and online delivery helped drive what management described as record digital growth, while the AutoShip subscription service grew both in dollar terms and as a share of digital sales.
Pet Valu did not disclose digital sales penetration, but Ramier said its digital business is growing faster than the broader industry’s digital segment. The company also said its loyalty program accounted for 90% of sales, providing visibility into customer behavior. It reported growth in monthly loyalty shoppers, while noting fewer visits from non-loyalty customers who tend to be more promotion-focused and have smaller baskets.
Management said loyal customers were visiting somewhat less frequently amid elevated fuel costs but were purchasing more during each visit. Ramier said the company did not see evidence of material forward buying that would affect third-quarter demand.
Store Network and Supply Chain
Pet Valu opened seven stores during the quarter and 15 through the first half of 2026, ending the period with 877 locations across Canada. About 71% of locations were franchised. The company said it is focusing expansion on growing markets including Alberta and Quebec, as well as underserved rural communities.
Management said stores opened over the past year have had good starts and acceptable return profiles. Pet Valu continues to see an opportunity to operate 1,200 or more stores across Canada, Ramier said.
The company’s supply-chain transformation continued to support margins. Ramier said benefits stem from labor-management systems, distribution-center training, performance management and purchasing scale. Drysdale said supply-chain efficiency has been among the company’s largest margin tailwinds over the past four quarters and is expected to provide additional benefits in coming quarters and years.
Pet Valu ended the quarter with CAD 175 million in liquidity and net debt leverage of 2.3 times, including net lease obligations. Inventory declined 5% from a year earlier to CAD 134 million. Free cash flow increased to CAD 33 million from CAD 27 million in the prior-year quarter, aided by lower capital requirements and proceeds from corporate-store resales.
Outlook Reiterated
The company reiterated its 2026 outlook, including revenue growth of 2% to 4% on a comparable-week basis and an adjusted EBITDA margin of about 21%. First-half revenue increased 3.4%, while year-to-date adjusted EBITDA margin was 20.9%.
Drysdale said Pet Valu expects revenue growth in the second half to remain within its targeted range, supported by new stores, e-commerce and wholesale penetration. The company also expects corporate-store resale gains in the second half to be similar to those seen year to date, though split between the third and fourth quarters.
Management said its outlook does not depend on a material improvement in the consumer environment. While higher fuel costs, trade-related developments and broader macroeconomic uncertainty may affect demand and costs, executives said the company is focusing on promotional discipline, vendor relationships, cost control and high-conviction investments.
During the quarter, Pet Valu returned CAD 38 million to shareholders through CAD 20 million in share repurchases and CAD 18 million in dividends. The company said it repurchased an additional CAD 6 million of shares early in the third quarter.
About Pet Valu (TSE:PET)
Pet Valu Holdings Ltd is engaged in providing pet-related products through its stores. Its products include Dry Food, Wet Food, Frozen raw food, Jerky Treats, and Training treats among others. The services offered by the company include Dog Wash, Adoption, Grooming, and Frozen Raw.
