Q1 2025 Savers Value Village Inc Earnings Call

Good afternoon, and welcome to Sievers Foggiest villages conference call to discuss financial results for the first quarter ending March 2000 19025.

Operator: Good afternoon and welcome to Savers Value Village's conference call to discuss financial results for the first quarter ending March 29, 2025. At this time, all participants are in the listen-only mode. Later, we will conduct a question and answer session and instructions will follow at that time.

This time all participants are in a listen only mode. Later, we will conduct a question and answer session and instructions will follow at that time.

Operator: Please note that this call is being recorded and a replay of this call and related materials will be available on the company's Investor Relations website. The comments made during this call and the Q&A that follows are copyrighted by the company and cannot be reproduced without written authorization from the company.

Please note that this call is being recorded and a replay of this call and related materials will be available on the company's investor Relations website.

Comments made during this call and the Q&A that follows are copyrighted weight of company and cannot be reproduced without written authorization from the company.

Certain comments made during this call may constitute forward looking statements are.

Operator: Certain comments made during this call may constitute forward-looking statements, which are subject to significant risks and uncertainties that could cause the company's actual results to differ materially from expectations or historical performance. Please review the disclosure on forward-looking statements included in the company's earnings release and filings with the SEC for discussion of these risks and uncertainties. Please be advised that statements are current only as of the date of this call, and while the company may choose to update these statements in the future, it is under no obligation to do so unless required by applicable law or regulations.

They are subject to significant risks and uncertainties that could cause the company's actual results to differ materially from expectations or historical performance.

It should be to the Scotia and forward looking statements included in the company's earnings release and filings with the S. E C for a discussion of risks and uncertainties.

He used to be at five such statements are current only as of the date of this call and while the company may choose to update these statements in the future. It is under no obligation to do so unless required by applicable law or regulation.

Operator: The company may also discuss certain NANGAP financial measures. A reconciliation of each of these NANGAP measures to the most directly comparable CAP financial measure can be found in today's earnings release and SEC filing.

The company May also discuss certain non-GAAP financial measures a reconciliation of each of these non-GAAP measures. The most directly comparable GAAP financial measure can be found in today's earnings release and SEC filings.

Operator: Joining from management on today's call are Mark Walsh, Chief Executive Officer, Jubran Tanious, President and Chief Operating Officer, Michael Maher, Chief Financial Officer, and Ed Iruma, Vice President of Investor Relations and Treasury.

Mike Walsh: Joining from management on today's call I'm, Mike Walsh, Chief Executive Officer, Javan Pennies, President and Chief Operating Officer, Michael Mayer, Chief Financial Officer, and Ed <unk>, Vice President of Investor Relations and Treasury.

Mark Walsh: Mr. Walsh, you may go ahead, sir. Thank you and good afternoon, everyone. We appreciate you joining us today.

Speaker Change: Mr. Walsh you May go ahead Sir.

Speaker Change: Thank you and good afternoon, everyone. We appreciate you joining us today, let me start by giving you a few highlights of our first quarter performance.

Mark Walsh: Let me start by giving you a few highlights of our first quarter performance. and then talk about the things we are doing to drive the business forward. We are pleased with the overall trends we saw in the first quarter. Our U.S. business remains strong, with nearly double-digit sales growth and healthy comps, given by increases in both transactions and average best. Our Canadian business saw continued sequential improvement, and we are pleased to report positive Canadian comp for the first time since the fourth quarter of 2020. We will continue to focus our execution to provide a compelling selection, a great value.

Speaker Change: Then talk about the things we are doing to drive the business forward.

We are pleased with the overall trends we saw in the first quarter. Our U S business remained strong with nearly double digit sales growth and healthy comps driven by increases in both transactions and average basket.

Speaker Change: Our Canadian business saw continued sequential improvement and we are pleased to report positive Canadian comp for the first time since the fourth quarter of 2023.

We will continue to focus our execution to provide a compelling selection.

Speaker Change: Great value.

Mark Walsh: to our Canadian customers as they work to stretch their dollars in the current economic climate. We have two new stores in the quarter and remain on track to deliver our 2025 new store targets. As a class, our new stores continue to perform in line with our expectations, delivering strong unit Our loyalty program also had strong growth, reaching nearly 6 million total active members at the end of the first quarter. Finally, we generated nearly $43 million of adjusted EBITDA on the quarter, where approximately 11.6% of... The first quarter was highlighted by strong U.S. trends and the return to positive comp in Canada.

Speaker Change: For our Canadian customers as they work to stretch their dollars in the current economic climate.

Speaker Change: We have two new stores in the quarter and remain on track to deliver our 2025, new store targets as a class are new stores continued to perform in line with our expectations delivering strong unit economics.

Speaker Change: Our loyalty program also had strong growth, reaching nearly 6 million total active members at the end of the first quarter.

Speaker Change: Finally, we generated nearly $43 million of adjusted EBITDA in the quarter were approximately 11, 6% of sales.

Speaker Change: The first quarter was highlighted by strong U S trends and the return to positive comp in Canada U S. As our key growth market with significant white space opportunities.

Mark Walsh: The U.S. is our key growth market with significant white space opportunities. beginning in 2025, accelerating to 2026. The new store portfolio will be much more U.S. centric to address this opportunity. In Canada, we still have work to do and macroeconomic conditions, while stable in the first quarter, remain challenging. Our strong execution is helping drive a fresh assortment and an exceptional value that resonates well with the Canadian community.

Speaker Change: Beginning in 2025 accelerating into 2026, new store portfolio will be much more U S centric to address this opportunity.

Speaker Change: In Canada, we still have work to do and macroeconomic conditions, while stable in the first quarter remained challenging.

Speaker Change: Our strong execution is helping drive a fresh assortment and an exceptional value that resonates well with the Canadian consumer.

Mark Walsh: Let me take a moment to talk about tariffs, which we know are subject of significant concern to the broader retail economy. As a reminder, our model is hyperlocal. The bulk of our supply, which consists of donations collected on behalf of our charitable partners, comes directly sourced from a 10 to 12 mile radius around our city. This means we virtually have no direct exposure to tariffs, giving us a unique position in the retail apparel sector, which we believe is a key competitive advantage. With an AUR around $5 and almost no direct exposure to tariffs, we continue to offer a strong value to our customers.

Speaker Change: Let me take a moment to talk about tariffs, which we know are subject of significant concern to the broader retail ecosystem.

Speaker Change: As a reminder, our model is hyperlocal.

Speaker Change: The bulk of our supply which consists of donations collected on behalf of our charitable partners directly sourced from a 10 to 12 mile radius around our store.

Speaker Change: This means we virtually have no direct exposure to tariffs, giving us a unique position in the retail apparel sector, which we believe is a key competitive advantage.

Speaker Change: With an AUR around $5 and almost no direct exposure to tariffs, we continue to offer a strong value to our customers.

Speaker Change: As part of our ongoing work on competitive pricing, we monitor our value proposition to ensure that we remain priced at a significant discount to traditional retailers, even before the effects of tariffs.

Mark Walsh: As part of our ongoing work on competitive pricing, we monitor our value proposition to ensure that we remain priced at a significant discount to traditional retailers, even before the effects of tariffs. On balance, macroeconomic conditions were generally stable in both the U.S. and Canada during the first quarter. Although we are mindful of volatility and consumer confidence in both countries, we are staying focused on what we can control, planning conservatively, and making our business stronger for the long term through continuous improvement and innovation. Given the nature of our operations, we are not required to order inventory from abroad.

Speaker Change: Our balance macroeconomic conditions were generally stable in both the U S and Canada during the first quarter.

Speaker Change: Although we are mindful of volatility in consumer confidence in both countries. We are staying focused on what we can control.

Speaker Change: Any conservatively and making our business stronger for the long term through continuous improvement and innovation.

Speaker Change: Given the nature of our operations, we are not required to order inventory from abroad. We can plan, our business and production levels much tighter windows the competitors in the retail industry.

Mark Walsh: We can plan our business and production levels in much tighter windows than competitors in the retail industry. Looking ahead, we remain very excited about our accelerating square footage growth. We opened two new stores in the first quarter and are on track to open 25 to 30 new stores this year. New stores have been performing in line with our expectations and remain our first and best use of capital to drive growth and compelling return.

Speaker Change: Looking ahead, we remain very excited about our accelerating square footage growth. We opened two new stores in the first quarter and are on track to open 25 to 30 new stores this year.

Speaker Change: New stores have been performing in line with our expectations and remain our first and best use of capital to drive growth and compelling returns.

Speaker Change: Moving onto the centralized processing centers or C. P. C's, we recently opened our sixth.

Mark Walsh: Moving on to Centralized Processing Centers, or CPCs. We recently opened our sixth CPC in Southern California, slightly earlier than our previously communicated plans. This CPC will help power our growth in that market. As a reminder, some form of off-site processing will supply more than half of our new stores going forward. And as previously communicated, our off-site processing is a critical enabler of our accelerated unit We are leveraging best practices across North America, enabling newer CPCs to scale more efficiently as we continue to make progress in converging on-site and off-site cost per unit. Furthermore, we continue to embrace innovation and are exploring new technologies and processes to optimize our business.

Speaker Change: See in southern California, slightly earlier than our previously communicated plans.

Speaker Change: C. P C will help power our growth in that market as a reminder, some form of off site processing will supply more than half of our new stores going forward and as previously communicated our off site processing is a critical enabler of our accelerated unit growth.

We are leveraging best practices across North America, enabling newer CPC is to scale more efficiently as we continue to make progress and converging onsite and offsite cost per unit.

Speaker Change: Furthermore, we continue to embrace innovation and are exploring new technologies and processes to optimize our business performed well.

Mark Walsh: We continue to roll out automated book processing after seeing strong financial returns. We've now expanded ABP support to 176.

Speaker Change: We continue to rollout automated book processing after seeing strong financial returns now expanded ABP support to 170 stores.

Mark Walsh: In closing, we have been faced with a challenging and ever-changing environment, and I want to thank our more than 22,000 team members for their commitment, exceptional performance, and dedication to our community. We've gotten 2025 off to a solid start. And while macroeconomic pressures persist in Canada, I believe that our strong execution Precious assortment and exceptional value positions us well for the current environment. I am more confident than ever in our long-term growth prospects and our mission to make second-hand second-hand.

Speaker Change: In closing, we have been faced with a challenging and ever changing environment and I want to thank our more than 22000 team members for their commitment and exceptional performance and dedication to our customers.

Speaker Change: We got in 2025 off to a solid start the wall macroeconomic pressures persist in Canada, I believe that our strong execution.

Speaker Change: Precious assortment and exceptional value positions us well for the current environment I.

Speaker Change: I am more confident than ever in our long term growth prospects and our mission to make secondhand second nature.

Michael Maher: I'll turn the call over to Michael to discuss our first quarter financial performance and the outlook for the remainder of 2025. Thank you, Mark, and good afternoon, everyone. As Mark indicated, we are pleased with our results for the first quarter. Total net sales increased 4.5% to $370 million. On a constant currency basis, net sales increased 7.1% and comparable store sales increased 2.8%. We are especially pleased with near double-digit sales growth in the U.S. despite consumer sentiment materially weakening year-to-date. We're also encouraged by our 310 basis point sequential comparable source sales improvement in Canada, resulting in positive comparable source sales for the quarter, even as the macroeconomic environment remains challenging.

Mike Walsh: I'll turn the call over to Mike will discuss our first quarter financial performance and the outlook for the remainder of 2025.

Mike Walsh: Thank you Mark and good afternoon, everyone as.

Speaker Change: As Mark indicated we are pleased with our results for the first quarter.

Total net sales increased four 5% to $370 million on.

Speaker Change: On a constant currency basis, net sales increased seven 1% and comparable store sales increased two 8%.

Speaker Change: We were especially pleased with near double digit sales growth in the U S. Despite consumer sentiment materially weakening year to date.

Speaker Change: We're also encouraged by our 310 basis point sequential comparable store sales improvement in Canada, resulting in positive comparable store sales for the quarter, even as the macroeconomic environment remains challenging.

Speaker Change: In the U S. Net sales increased nine 4% to $211 million and comparable store sales increased four 2% driven by growth in both transactions and average basket.

Michael Maher: In the U.S., net sales increased 9.4% to $211 million, and comparable store sales increased 4.2%, driven by growth in both transactions and average basket. In Canada, net sales declined 4.1%, reflecting a weaker Canadian dollar. On a constant currency basis, Canadian net sales increased 2.2% to $137 million, and comparable store sales increased 0.6%, primarily driven by an increase in average basket. Cost of merchandise sold as a percentage of net sales increased 80 basis points to 45.5%. with the increase reflecting the impact of new stores partially upset by strong growth in on-site donations. OSDs plus Green Drop accounted for 74% of supply versus 72% in the prior year period.

Speaker Change: In Canada net sales declined four 1%, reflecting a weaker Canadian dollar.

Speaker Change: On a constant currency basis Canadian net sales increased two 2% to $137 million and comparable store sales increased <unk>, 6%, primarily driven by an increase in average basket.

Speaker Change: Cost of merchandise sold as a percentage of net sales increased 80 basis points to 45, 5% with.

Speaker Change: With the increase reflecting the impact of new stores, partially offset by strong growth in onsite donations O.

Speaker Change: OSB is plus green dropped accounted for 74% of supply versus 72% in the prior year period.

Michael Maher: This growth ensures that we have fresh and compelling product for our customers and helps drive strong margins. Salaries, wages, and benefits expense was $85 million. Excluding IPO-related stock-based compensation, salaries, wages, and benefits as a percentage of net sales increased 190 basis points. 20.5%. The increase was driven primarily by new store growth and an increase in incentive compensation expenses. Selling general and administrative expenses as a percentage of net sales increased 160 basis points to 23.6 percent, primarily due to growth in our store base, rent and utilities, and routine maintenance costs. Depreciation and amortization increased 6 percent to $19 million, reflecting investments in new stores, off-site processing, and information technology.

Speaker Change: This growth ensures that we have fresh and compelling product for our customers and helps drive strong margins.

Speaker Change: Salaries wages and benefits expense was $85 million <unk>.

Speaker Change: Excluding IPO related stock based compensation salaries wages and benefits as a percentage of net sales increased 190 basis points to 25%.

Speaker Change: The increase was driven primarily by new store growth and an increase in incentive compensation expenses.

Speaker Change: Selling general and administrative expenses as a percentage of net sales increased 160 basis points to 23, 6%, primarily due to growth in our store base rent and utilities and routine maintenance costs.

Speaker Change: Depreciation and amortization increased 6% to $19 million, reflecting investments in new stores offset processing and information technology.

Michael Maher: Net interest expense decreased 8% to $15 million, primarily due to reduced debt and lower average interest rates. Gap net loss for the quarter was $4.7 million or $0.03 per diluted share. Our net loss included a $2.7 million pre-tax loss on debt extinguished. Adjusted net income was $3.6 million or $0.02 per diluted share. First quarter adjusted EBITDA was $43 million, and adjusted EBITDA margin was 11.6%. As we've previously mentioned, new stores are a headwind to adjusted EBITDA this year. as we have a substantial number of new stores which have not yet reached profitability compared to the prior year period.

Speaker Change: Net interest expense decreased 8% to $15 million, primarily due to reduced debt and lower average interest rates.

Speaker Change: GAAP net loss for the quarter was $4 $7 million or <unk> <unk> per diluted share.

Speaker Change: Our net loss included a $2 7 million pretax loss on debt extinguishment.

Speaker Change: Adjusted net income was $3 $6 million or <unk> <unk> per diluted share.

First quarter, adjusted EBITDA was $43 million and adjusted EBITDA margin was 11, 6% as we've previously mentioned new stores are a headwind to adjusted EBITDA This year as.

Speaker Change: As we have a substantial number of new stores, which have not yet reached profitability compared to the prior year period.

Speaker Change: Our new stores typically achieve profitability by their second year of operations.

Michael Maher: Our new stores typically achieve profitability by their second year of operation. As these new stores continue to mature, we expect the headwind to profitability to subside.

Speaker Change: As these new stores continue to mature.

Speaker Change: We expect the headwind to profitability to subside.

Speaker Change: U S segment profit was $39 million down $1 $6 million versus the prior year period, primarily due to new store growth and Preopening expenses, partially offset by an increase in profit from our comparable stores.

Michael Maher: U.S. segment profit was $39 million, down $1.6 million versus the prior year period primarily due to new store growth and pre-opening expenses, partially offset by an increase in profit from our comparable stores. Canada segment profit was $25.3 million. down $9.4 million versus the prior year period due primarily to the aforementioned weaker Canadian dollar and deleverage of expenses as a percentage of sales. Our balance sheet remains strong with $73 million in cash and cash equivalent. As we previously disclosed, we redeemed $44.5 million of our senior secured notes during the quarter, or 10% of the outstanding balance.

Speaker Change: Canada segment profit was $25 3 million down $9 $4 million versus the prior year period, due primarily to the aforementioned weaker Canadian dollar and deleverage of expenses as a percentage of sales.

Speaker Change: Our balance sheet remains strong with $73 million in cash and cash equivalents.

Speaker Change: As we previously disclosed we redeemed $44 $5 million of our senior secured notes during the quarter or 10% of the outstanding balance, leaving us with a net leverage ratio of two four times at the end of the quarter.

Michael Maher: leaving us with a net leverage ratio of 2.4 times at the end of the quarter. We repurchased approximately 1.4 million shares of our common stock during the quarter at a weighted average price of $8.43 per share. As of the end of the first quarter, we had approximately $6.3 million remaining on our share of purchase authorization.

Speaker Change: We repurchased approximately one 4 million shares of our common stock during the quarter at a weighted average price of $8 43 per share.

Speaker Change: As of the end of the first quarter, we had approximately $6 $3 million remaining on our share repurchase authorization.

Speaker Change: Finally, I'd like to discuss our outlook for the remainder of fiscal 2025.

Michael Maher: Finally, I'd like to discuss our outlook for the remainder of fiscal 2025. We're pleased with our results for the first quarter, although it's our smallest quarter of the year. Despite continued economic pressure and policy uncertainty, we remain confident in our ability to execute against our plan. We are therefore reaffirming our previous outlook for the year. As a reminder, let me reiterate some important context for our. First, we're at an inflection point in our long-term growth strategy. Between our 2024 and 2025 openings, we will have approximately 50 stores in their first year of operation in 2025.

Speaker Change: We're pleased with our results for the first quarter, although it is our smallest quarter of the year.

Speaker Change: Despite continued economic pressure and policy uncertainty, we remain confident in our ability to execute against our plans.

Speaker Change: We are therefore, reaffirming our previous outlook for the year.

Speaker Change: As a reminder, let me reiterate some important context for our outlook.

Speaker Change: First we're at an inflection point in our long term growth strategy.

Speaker Change: Between our 2024 and 2025 openings, we will have approximately 50 stores in their first year of operation in 2025.

Michael Maher: On average, new stores generate approximately $3 million in sales in their first year and achieve profitability by their second year. We therefore expect new stores to be a meaningful driver of revenue growth this year, but a net headwind of approximately $10 million to adjusted EBITDA in 2025. We expect an inflection in profitability by 2026 as these stores mature and drive both top and bottom line growth. Second, we continue to take a conservative approach to planning comparable store sales growth, with continued steady growth in the U.S. and a cautious approach in Canada. The Canadian economy had shown some signs of stabilization, but tariffs, while having almost no direct impact on our operations, have created additional uncertainty regarding consumer spending going forward.

Speaker Change: On average new stores generate approximately $3 million in sales in their first year and achieve profitability by their second year.

Speaker Change: We therefore expect new stores to be a meaningful driver of revenue growth this year, but a net headwind of approximately $10 million to adjusted EBITDA in 2025.

Speaker Change: We expect an inflection in profitability by 2026, as these stores mature and drive both top and bottom line growth.

Speaker Change: Second we continue to take a conservative approach to planning comparable store sales growth with continued steady growth in the U S and a cautious approach in Canada.

Speaker Change: The Canadian economy had shown some signs of stabilization.

Speaker Change: Tariffs will having almost no direct impact on our operations have created additional uncertainty regarding consumer spending going forward.

Speaker Change: On a related note our outlook for 2025 is based on an estimated exchange rate of 70 U S per Canadian dollar.

Michael Maher: On a related note, our outlook for 2025 is based on an estimated exchange rate of 70 cents U.S. per Canadian dollar, which negatively impacts our year-over-year comparisons for sales by approximately 1.7 percentage . and for adjusted EBITDA by approximately $6.5 million. Finally, 2025 is a 53-week fiscal year. We estimate the 53rd week will add approximately 1.5% to total sales growth with no significant impact on net income, adjusted net income, or adjusted EBITDA. There's also no impact on comparable store sales growth, which will be reported on a like-for-like 52-week basis.

Speaker Change: Which negatively impacts our year over year comparisons for sale by approximately one seven percentage points and.

Speaker Change: And for adjusted EBITDA by approximately $6 $5 million.

Speaker Change: Finally, 2025 is a 53 week fiscal year, we estimate the 50 <unk> week will add approximately one 5%. The total sales growth with no significant impact on net income adjusted net income or adjusted EBITDA.

Speaker Change: There is also no impact on comparable store sales growth, which will be reported on a like for like 52 week basis.

Speaker Change: With that context in mind, our full year outlook for 2025 includes the following.

Michael Maher: With that context in mind, our full year outlook for 2025 includes the following. 25 to 30, new store open. Net sales of $1.61 billion to $1.65 billion. Comparable store sales growth of 0.5% to 2.5% with the U.S. continuing to outperform Canada. Net income of $36 million to $52 million or $0.21 to $0.31 per diluted share. Adjusted net income of $62 million to $77 million, or $0.37 to $0.46 per diluted share. adjusted EBITDA of $245 million to $265 million. and Capital Expenditures of $125 million to $150 million. Our outlook for net income assumes net interest expense of approximately $66 million and an effective tax rate of approximately 35%.

Speaker Change: 25% to 30, new store openings.

Speaker Change: Net sales of $1 six 1 billion to $1 65 billion.

Speaker Change: Comparable store sales growth of 0.5% to two 5% with the U S continuing to outperform Canada.

Speaker Change: Net income of $36 million to $52 million or 21 to 31 per diluted share.

Speaker Change: Adjusted net income of $62 million to $77 million or <unk> 37 to <unk> 46 per diluted share.

Speaker Change: Adjusted EBITDA of $245 million to $265 million.

Speaker Change: And capital expenditures of $125 million to $150 million.

Speaker Change: Our outlook for net income assumes net interest expense of approximately $66 million and an effective tax rate of approximately 35%.

Speaker Change: For adjusted net income, we're assuming an effective tax rate of approximately 27%.

Michael Maher: For adjusted net income, we're assuming an effective tax rate of approximately 27%.

Speaker Change: I'd like to briefly touch on our expectations for the second quarter.

Michael Maher: I'd like to briefly touch on our expectations for the second quarter. We expect total sales growth in the second quarter to be roughly consistent with the first quarter in the low to mid-single-digit percentage range driven by low single-digit comparable store sales growth plus new stores partially offset by foreign exchange rate impact. We plan to open four new stores during the quarter. We expect profit margins for the balance of the year to be higher than they were in the first quarter due to normal seasonality and the continued maturing of our new stores. For the second quarter, we expect adjusted net income and adjusted EBITDA margins to be slightly higher than our full year outlook for those margins.

Speaker Change: We expect total sales growth in the second quarter to be roughly consistent with the first quarter in the low to mid single digit percentage range driven by low single digit comparable store sales growth plus new stores.

Speaker Change: Really offset by foreign exchange rate impacts we.

Speaker Change: We plan to open four new stores during the quarter.

Speaker Change: We expect profit margins for the balance of the year to be higher than they were in the first quarter due to normal seasonality and the continued maturing of our new stores.

Speaker Change: For the second quarter, we expect adjusted net income and adjusted EBITDA margins to be slightly higher than our full year outlook for those margins.

Speaker Change: We will provide more color on the second half during next quarter's call, but in general we expect comparable store sales growth to be higher in the third quarter than the fourth quarter due to the softer comparison last year.

Michael Maher: We will provide more color on the second half during next quarter's call, but in general, we expect comparable source sales growth to be higher in the third quarter than the fourth quarter due to the softer comparison last year. We expect adjusted net income and adjusted EBITDA to be roughly balanced between the third and fourth quarters. We plan to open roughly half of our new stores this year during the third quarter.

Speaker Change: We expect adjusted net income and adjusted EBITDA to be roughly balanced between the third and fourth quarters.

Speaker Change: We plan to open roughly half of our new stores this year during the third quarter.

Speaker Change: This concludes our prepared remarks, we would now like to open the call for questions operator.

Operator: This concludes our prepared remarks. We would now like to open the call for questions.

Operator: Operator? Thank you. Ladies and gentlemen, we will now begin the question and answer session. Should you have a question, please press star 4 by the 1 on your telephone keypad. You will hear a prompt that your hand has been raised, and should you wish to cancel your request, please press star 4 by the 2. If you are using a speakerphone, please lift your handset before pressing any keys. One moment, please, for your first question.

Speaker Change: Thank you.

Speaker Change: Ladies and gentlemen, we will now begin the question and answer session should you have a question. Please press star followed by the one on your telephone keypad you.

Speaker Change: You will hear a prompt that Johanna it's been raised and should you wish to cancel your request. Please press star followed by the two <unk>.

Speaker Change: What are you seeing your speaker phone please lift the handset before pressing any keys one moment. Please for your first question.

Speaker Change: Your first question comes from the line of Randy <unk> from Jefferies. Please go ahead.

Randy Konik: Your first question comes from the line of Randy Konik from Jeffries, please go ahead. I guess, Mark, first and foremost, can we kind of unpack a little bit more on the U.S. strength that you're seeing? Are you seeing some trade-down beneficiaries? Are you seeing any kind of interesting items, like more customers new to file? Anything there would be super helpful, and just a little bit more granularity on the traffic or transaction count versus basket would be super helpful on the U.S.

Speaker Change: I guess, Mark first and foremost can you kind of unpack a little bit more on the U S strength that youre seeing are you seeing.

Speaker Change: Some trade down beneficiaries are you seeing any kind of interesting items.

Speaker Change: More customers new to file anything there would be super helpful and just a little bit more granularity on the.

Speaker Change: Traffic or transaction count versus SaaS that would be super helpful. On the U S. And then on Canada, I, just just give us a little bit more clarity kind of said stable in the first quarter, but pressure.

Randy Konik: And then on Canada, just give us a little bit more clarity. You kind of said stable in the first quarter, but pressure persists, I guess, is the quote. Just give us a little more flavor of kind of how you see Canada unfolding from here. Are we kind of at the bottom? Are we going to bounce along that bottom for the next few quarters? Just kind of give us your flavor there. Thanks. Thanks, Randy.

Speaker Change: Persists I guess looking at the <unk>.

Speaker Change: Just give us a little more flavor and kind of how you see Canada unfolding.

Speaker Change: From here or are we kind of at the bottom we're going to bounce along enough problems for.

Speaker Change: For the next few quarters, just kind of give us your overall thanks.

Speaker Change: Thanks, Randy look why don't I start with Canada first and maybe the guys can jump in and help me with the U S piece of the.

Mark Walsh: Look, why don't I start with Canada first, and maybe the guys can jump in and help me with the U.S. piece of the answer. Look, I think on Canada, the team has done a great job of executing, Randy, I think, first and foremost. selection, that price value equation. And just as importantly, our donation flow remains very, very strong. You add to that what has been a first quarter with economic indicators moving modestly in a better direction. I think the results of those two factors really impacted. the outcome and our positive comp.

Speaker Change: Andrew look I think on Canada. The team has done a great job of executing Randy I think first and foremost.

Speaker Change: Selection that price value equation, and just as importantly, our donation flow remains very very strong you add to that.

Speaker Change: What has been a first quarter with economic indicators moving modestly in a better direction I think the result of the results of those two factors really impacted.

Speaker Change: The outcome and our positive comp that said I don't think Michael nor Djabran or I would say is we're ready to declare victory, but we're really encouraged by the sequential improvements in the Canadian business.

Mark Walsh: That said, I don't think Michael nor Jubran nor I would say we're ready to declare victory, but we're really encouraged by the sequential improvements in the Canadian business. Tariffs add certainly an unwelcome dimension around consumer sentiment, but, you know, what we see is donations continue to remain strong. There's been no meaningful change in demand trends since the beginning of the year, and that's rolled into April as well. And so I think it's too soon to call whether the change in consumer sentiment has had an impact on our business.

Speaker Change: Tariffs add certainly an unwelcome dimension.

Speaker Change: And consumer sentiment.

Speaker Change: What we see as donations continue to remain strong there has been no meaningful change in demand trends since the beginning of the year and that's rolled into.

Speaker Change: April as well and so I think it's too soon to call whether the changes in consumer sentiment has had an impact on our business and our approach is going to be straightforward and Canada, we're going to maintain production levels that provide that customer or our thrift or with the selection they expect and demand.

Mark Walsh: Our approach is going to be straightforward in Canada. We're going to maintain production levels that provide that customer or thrifter with the selection they expect and demand. going to stay sharp on price value. And we're going to continue to innovate operationally. And look, I think what we do really well is we stay connected with our consumers with offers that resonate. Remember, 72% of our sales comes from our loyalty program.

Speaker Change: I'm going to stay sharp on price value and <unk>.

Speaker Change: We're going to continue to innovate operationally and look I think what we do really well is we stay connected with our consumers with offers that threat that resonate and remember 72% of our sales comes from our loyalty program.

Speaker Change: On the U S side unpacking the basket.

Mark Walsh: On the U.S. side, you know, unpacking the basket. AUR items sold, solid, transactions solid. Again, we're seeing that same trend continue. We have not seen a degradation of that trend into the early part of the second quarter. So in both Canada and the U.S., we feel like we've got good momentum as we head into the second quarter and the trend line has continued in the aggregate.

Speaker Change: AUR items sold solid transaction solid.

Speaker Change: Again, we're seeing that same trend continue we have not seen a degradation of that trend into the early part of the second quarter. So in both Canada and the U S. We feel like we've got.

Speaker Change: Good momentum as we head into the second quarter and the trend line has continued in the aggregate Michael too Brian add anything to that.

Michael Maher: Michael, Jubran, anything to that? I think you covered it. Yeah, that's. Super helpful.

Speaker Change: Thank you.

Speaker Change: That's it.

Speaker Change: Super helpful. I guess, one more follow up maybe perhaps for Jeff.

Randy Konik: I guess one more follow-up, maybe perhaps for Jubran or Mark again. Just on the idea of continuous improvement process, you talked about that in the script.

Speaker Change: Brown or multiple just on the idea of a continuous improvement process, we talked about that in the script.

Jubran Tanious: Maybe kind of give us some perspective on what are some of the one, two, or three things you guys have been kind of working on across the field to improve kind of the way the stores operate and so on and so forth. Thanks, guys.

Speaker Change: Maybe kind of give us some perspective on what some of our one two or three quarters.

Guys.

Speaker Change: Kind of working on across the field to improve.

Speaker Change: Kind of the way the stores operate and so on and so forth. Thanks guys.

Speaker Change: Okay.

Jubran Tanious: Yeah, Randy, this is Jubran. It's a good question. Well, the first thing that I would say is automated book processing, ABP is our acronym for that, you know, that is currently servicing roughly half our fleet, 170 stores, real breakthrough in technology and processing, and we've loved the results. The question is, how do you continue to build on that? And so we are in the process of expanding that model. It may take a little bit different form, depending on how many stores you have clustered in a market, but clearly a technology that we can continue to leverage.

Speaker Change: Yes, Randy this is Brian it's a good it's a good question.

Speaker Change: Well the first thing that I would say is.

Speaker Change: Automated book processing.

Speaker Change: <unk> is our acronym for that that is currently servicing roughly half our fleet of 170 stores.

Speaker Change: Real breakthrough in technology and processing and we've loved the result.

Speaker Change: The question is how do you continue to build on that.

Speaker Change: And so we are we are in the process of expanding that model. It may take a little bit different form depending on how many stores you have clustered in a market. That's clearly a technology that we can continue to leverage and then inside the central processing centers and the smaller off site processing warehouses.

Jubran Tanious: And then inside the central processing centers and the smaller off-site processing warehouse. Randy, I'll be honest with you, it's tough to put our finger on one thing. I would tell you there's a whole basket of tactical improvements that have to do with mechanizing movement, economy of movement by our team members who do a great job. I mean, we're seeing our cost per item continue to fall in those locations. That's not a one-and-done. I mean, this is truly about year-on-year continuous improvement. in all things. And that's, well, that's on top of the unlock that those facilities.

Speaker Change: Randy I'll be honest with you it's tough to put our finger on one thing I would tell you theres a whole basket of tactical improvements that has to do with.

Speaker Change: Mechanized movement economy of movement by our team members, who do a great job I mean, we're seeing our cost per item continue to fall in those locations.

Speaker Change: That's not a one and done I mean this is this is truly about year on year continuous improvement in.

Speaker Change: And all things.

Speaker Change: And that's well that's on top of the unlock that those facilities provide in terms of new store growth, which I think mark mentioned earlier, so you're really getting a few different strands of goodness from that that we expect to continue into the future.

Jubran Tanious: provide in terms of new store growth, which I think Mark mentioned earlier. So you're really getting a few different strands of goodness from that that we expect to continue.

Speaker Change: Thanks, guys.

Randy Konik: Thanks, guys. Thanks, Randy.

Randy: Thanks Randy.

Speaker Change: Thank you and your next question comes from the line of Michael Lasser from UBS. Please go ahead.

Michael Lasser: Thank you. And your next question comes from the line of Michael Lasser from UBS. Please go ahead. Good evening. Thank you so much for taking my question.

Michael Lasser: Good evening. Thank you so much for taking my question.

Michael Lasser: It's likely that there's going to be significant pricing that will be taken across the retail sector, maybe not by all of the retailers that Savers typically benchmarks itself against, but maybe against many of them. Would Savers use that as an opportunity to raise prices selectively, or would it let the price gaps widen, and to what degree would widening price gaps drive incremental comp upside from here? Great question, Michael, and thanks for it. Look, I think I'll start by reiterating the fact that this is a business that is not exposed to tariff pressure. So we're unique in that perspective in the retail landscape.

Speaker Change: Likely that there's going to be significant pricing that will be taken across the retail sector, maybe not by all of the retailers.

Speaker Change: Savers, typically benchmark yourself against but maybe against many of them.

Speaker Change: Sievers and use that as an opportunity to raise prices selectively or would it let the price gaps widen and to what degree would widening price scrap price gaps drive incremental comp upside from here.

Speaker Change: A great question, Michael and Thanks, Robert look I think I'll start by reiterating the fact that this is a business that is not exposed to tariff pressure. So we're unique in that in that perspective in the retail landscape.

Mark Walsh: And yeah, the competitive analytics that we utilize are clear. We've got a great value proposition versus discount retailers pre-tariffs, and we're very confident in our positioning. If the tariffs do cause that value gap to widen, It represents obvious opportunities for us trial, loyalty growth, market share gains. I would not say we're going to we're going to put a pin on saying we're going to raise prices.

Speaker Change: Yeah, the competitive analytics that were we utilize our clear we've got a great value proposition versus discount retailers pre tariffs.

Speaker Change: And we're very confident in our positioning if the tariffs do cause that value gap to widen.

Speaker Change: It represents all these opportunities for us trial loyalty growth market share gains I would not say, we're going to we're going to put a P&L and saying we're going to raise prices. We think that if there is price gap widening so great opportunity for us to get that and build our customer base and add to our loyalty mix.

Michael Lasser: We think we that if there is price gap widening, it's a great opportunity for us to get that and build our customer base and add to our loyalty. Thank you very much for that.

Speaker Change: Thank you very much for that my second question is if indeed, there is a tougher macro environment.

Michael Lasser: My second question is, if indeed, there is a tougher macro environment and the labor market really starts to weaken, do you think A, that has an impact on some of the sourcing, meaning that consumers are simply going to be less likely to donate goods? Or B, if there's an inflationary environment, maybe? Thank you. So that means that you're going to have to pay your charity partners a bit more for the goods that they're getting for donation, and that could have some impact on your margins. Thank you very much. Yeah.

Speaker Change: The labor market really starts to weaken do you think a that has <unk>.

Speaker Change: Any impact on some of the sourcing meaning that consumers are simply going to be less likely to donate goods or b. If there is an inflationary environment.

Does that mean that youre going to have to pay you.

Speaker Change: Sure.

Speaker Change: <unk> partners a bit more for the goods that they're getting for donation and that could have some impact on your margins. Thank you very much.

Speaker Change: Yeah, Hi, Michael This is Joe Brian Good questions I'll take the the supply question first.

Jubran Tanious: Hi, Michael. This is Jubran. Good questions.

Jubran Tanious: I'll take the supply question first. And I think inside that question is the, and we've stated this in the past, our reliance on the onsite donation, right? These are donations that we're receiving on behalf of our nonprofit, our donation. The first thing I would say is we have seen robust growth and onsite donation across all countries so far year-to-date. We have not seen any change in the volume performance, and that's not. We've done enough research, we have enough surveys to know that what drives the donor is a donation experience that is reliably fast, friendly, and convenient.

Speaker Change: And I think inside that question is the <unk>.

Speaker Change: Stated this in the past our reliance on the on site donation by theater donations that were receiving on behalf of our nonprofit our donation centers.

Speaker Change: The first thing I would say is we have seen robust growth that onsite donation across all countries. So far year to date.

Speaker Change: We have not seen any change in the volume performance and that's not happened stance. We've done enough research we have enough surveys to know.

Speaker Change: That's what drives the donor is a donation experience that is reliably fast friendly and convenient.

Jubran Tanious: And so we strive to do that in every store. And if we do that well and execute it, we control that. we would expect onsite donations to continue to grow.

Speaker Change: And so we strive to do that in every store and if we do that well and executed we control that we.

Speaker Change: We would expect onsite donations to continue to grow as far as what some Mac.

Jubran Tanious: As far as what some macro environment could cause, that's a very difficult question to answer. I'd say, A, we haven't seen any evidence of that in our stores, and B, we know what we can control. That drives performance. with regard to an inflationary environment that could affect our staffing. First thing I would say is as we sit today, labor availability has not been an issue for us. Turnover has actually declined in both countries. Vacancies are low, as low as they've been over the last several years. So yes, wage increases are a normal part of our business.

Speaker Change: Macro environment could cause that's a very difficult question to answer I would say a we haven't seen any evidence of that in our stores and B. We know what we can control that drives performance.

Speaker Change: With regard to an inflationary environment that.

Speaker Change: Could affect our staffing the first thing I would say is as we sit today labor availability has not been an issue for US turnover has actually declined in both countries vacancies are low.

Speaker Change: As long as they've been over the last several years.

Speaker Change: So yes wage increases are a normal part of our business. The best thing that we can do is continue to stay ahead of it and if theres anything over the last few years, Michael that we've done with regarding competitive wage rates is how our internal team the frequency with which they assess each market.

Jubran Tanious: The best thing that we can do is continue to stay ahead of it. And if there's anything over the last few years, Michael, that we've done regarding competitive wage rates is how our internal team, the frequency with which they assess each market. so that we get ahead of that. We obviously place a tremendous premium on team member engagement in our stores. All those things work together. for Savers Value Village to be a compelling place to work.

Speaker Change: So that we get ahead of that we obviously place a tremendous premium on team member engagement at our stores all those things work together.

Speaker Change: For savers value village to be a compelling place to work.

Michael Lasser: So, can't predict the future precisely, but feel good on both fronts. Thank you very much and good luck.

Speaker Change: So can't predict the future precisely but feel good on both fronts.

Speaker Change: Thank you very much and good luck.

Speaker Change: Thank you. Thank you.

Speaker Change: Thank you and your next question comes from the line of Matthew Boss from Jpmorgan. Please go ahead.

Matthew Boss: And your next question comes from the line of Matthew Boss from J.P. Morgan. Please go ahead. Thanks and congrats on a nice quarter. Thanks Matt. Thanks Robert. So Mark, in the U.S.

Matthew Boss: Thanks, and congrats on a nice quarter.

Speaker Change: Thanks, Matt Thanks, Matt.

Speaker Change: So mark in the U S business, maybe if we think about the two straight quarters now of mid single digit comps could you breakdown. This inflection in business, maybe if we think about new customer acquisition relative to existing customer spend and also any noticeable change that you've seen in spending across <unk>.

Mark Walsh: business, maybe if we think about the two straight quarters now of mid-single-digit comps, could you break down this inflection in business? Maybe if we think about new customer acquisition relative to existing customer spend, and also any noticeable change that you've seen in spending across income co-pay. Well, we're I would say we're really pleased about the way our loyalty program is growing. another good quarter for us sequentially year over year. What's really fabulous about what we're seeing is our loyalty cohorts are growing at both the younger cohorts and the highest household income cohorts. I think in those two.

Speaker Change: Income cohorts.

Speaker Change: Well I would say, we're really pleased about the way our loyalty program is growing.

Speaker Change: Another good quarter for us sequentially year over year.

Speaker Change: What's really.

Speaker Change: Fabulous about what we're seeing is our loyalty cohorts are growing at both the younger cohorts and the highest household income cohorts. So I think in those two.

Speaker Change: Yes.

Michael Maher: Those that that's a that's the perfect storm for us moving forward. So we love what's happening in that regard in terms of basket AUR items sold again, we've seen continued sequential positive improvement in basket and transactions. It's driving that comp growth. And we've not seen any any particular things that are worrisome as we get into the second quarter for that trend continuing. Did I miss anything, Michael? Got it.

Speaker Change: That's that's the perfect storm for us moving forward. So we love what's happening in that regard in terms of.

Speaker Change: Basket AUR items sold again, we've seen.

Speaker Change: Continued sequential positive improvement in basket and transactions driving that comp growth.

Speaker Change: And we've not seen any any particular things that are worrisome as we get into the second quarter for that trend continuing.

Michael Lasser: Michael you got it.

Matthew Boss: Great and then maybe Michael two to follow up could you break down the drivers of first quarter gross margin contraction and then just walk through the gross margin puts and takes to consider in the second quarter relative to the back half.

Michael Maher: Great, and then maybe Michael, to follow up, could you break down the drivers of first quarter gross margin contraction and then just walk through the gross margin puts and takes to consider in the second quarter relative to the back? Yeah, you got it, Matt. So the de-leverage around 80 basis points that we saw in the first quarter was virtually entirely driven by de-leverage on the new stores. Remember that we've got a significant cohort of 2024 class new stores that opened in the back half of the year. They're still in their first year of operation. They weren't open at this time last year, and so that's creating pressure on the margins.

Matthew Boss: Yeah, you got it Matt so the deleverage around 80 basis points that we saw in the first quarter was virtually entirely driven by deleverage on the new stores remember that we've got a significant cohort of 2024 class new stores that opened in the back half of the year. They are still in their first year of operation.

Matthew Boss: They weren't open at this time last year and so that's creating pressure on the margins now offsetting that were two factors the biggest one being <unk>.

Michael Maher: Now, offsetting that were two factors, the biggest one being, as Jubran mentioned earlier, really healthy growth in our onsite donations. The metric we like to cite, onsite donations plus GreenDrop, combined with 74% of our total volume during the quarter, which was up from 72% a year ago, so that was a nice tailwind to our margins during the quarter that helped offset the new store de-leverage. And then, as Jubran also mentioned, just the continued improvements that we're making in onsite processing are helping to reduce the gaps between that and onsite. processing costs in stores.

Matthew Boss: Brian mentioned earlier really healthy growth in our onsite donations.

Matthew Boss: The metric, we like to cite onsite donations plus green dropped combined was 74% of our total volume during the quarter, which was up from 72% a year ago. So that was a nice tailwind to our margins during the quarter that helped offset the new store deleverage and then as you run also mentioned just the continued improvements that we're making an off site processing.

Matthew Boss: Are helping to reduce the.

Matthew Boss: The gaps between that and on site.

Matthew Boss: Assessing cost in stores.

Michael Maher: So as far as the looking ahead to the second quarter, I do expect that we'll continue to see deleverage and margin due to the new store openings. I think it's going to be most pronounced in the first half of the year, because again, of the nature of those 2024 openings that were back loaded. I think that deleverage probably will be slightly better in the second quarter than it was in the first, and then we expect to see continued improvement as we move into the back half.

Matthew Boss: As far as the looking ahead to the second quarter I do expect that we'll continue to see deleverage in margin due to the new store openings I think its going to be most pronounced in the first half of the year because again of the nature of those 2024 openings that were that were back loaded.

Matthew Boss: I think that deleverage probably will be slightly better in the second quarter than it was in the first and then we expect to see continued improvement as we move into the back half of the year.

Speaker Change: That's great color best of luck.

Matthew Boss: great caller, best of luck. Thanks Matt.

Matt: Thanks, Matt Thanks, Matt.

Speaker Change: Thank you and your next question comes from the line of Mike <unk> from Baird. Please go ahead.

Mark Altschwager: Thank you. And your next question comes from the line of Mark Altschwager from Baird. Please go ahead. Thank you. Good afternoon.

Speaker Change: Thank you good afternoon, I guess, just first on the guide maybe for Michael.

Michael Maher: First on the guide, maybe from Michael, the prior guide implied some comp acceleration through the year. The reaffirmed guide after the stronger Q1 now implies more consistency versus Q1 levels. Any change to your thinking regarding the drivers that could yield some acceleration in the upcoming quarter? Yeah, great question, Mark. I think what I would say, first of all, Just in terms of general context is that while we're pleased with the results so far, including, you know, our start to Q2, there's a lot of the year left to go and the macro pressures remain, especially in Canada.

Speaker Change: The prior guide implied some comp acceleration through the year. The reaffirmed guide after the stronger Q1, now implies more consistency versus Q1 levels.

Speaker Change: Any change to your thinking regarding the drivers that could yield some acceleration in the upcoming quarters.

Speaker Change: Yeah, Great question, Mark I think what I would say first of all.

Speaker Change: Just in terms of general context is that while we're pleased with the results so far including our start to Q2. There is a lot of the year left to go and the macro pressures remain especially in Canada. There is some additional policy uncertainty in both countries.

Michael Maher: There's some additional policy uncertainty in both countries. So, with all of that, we still feel really good about our ability to execute through that. And just given where we are in the year, we felt like it was appropriate for us to to hold guidance at this point as far as. You know, what's assumed in the comp range and what it would take for that to change? I guess what I would say is this, that while the macro thus far has generally been stable, The high end of our range would contemplate and be consistent with continued acceleration in the U.S.

Speaker Change: So with all of that and we still feel really good about our ability to execute through that and just given where we are in the year. We felt like it was appropriate for us to hold guidance at this point as far as you know.

Speaker Change: What's assumed in the in the comp range and what it would take for that to change I guess, what I would say is this that.

Speaker Change: While the macro thus far has generally been stable.

Speaker Change: The high end of our range would contemplate and be consistent with continued acceleration in the U S and strengthening in the U S economy and further recovery in our Canadian business.

Michael Maher: and strengthening in the U.S. economy and further recovery in our Canadian business. So thus far, like Mark said earlier, what we've seen generally has been some stability. There's, we are watching the consumer confidence, the potential impact of tariffs on consumer spending more broadly. Have not seen it thus far in our business, but that's what, that's sort of the context for the guidance.

Speaker Change: So thus far like Mark said earlier, what we've seen generally has been some stability. There is what we are watching the consumer confidence the potential impact of tariffs on consumer spending more broadly have not seen it thus far in our business.

Speaker Change: But that's what that's sort of the context for the guidance.

Speaker Change: Thank you and then thinking about supply.

Mark Altschwager: Thank you. And then thinking about supply. I think you flagged robust growth in on-site donations. Is that an acceleration in what you've seen, and if so, what's driving it? And then used sales yield is actually down a bit year over year.

Speaker Change: I think you flagged robust growth in onsite donations is that an acceleration and what you've seen and if so what's driving it.

Speaker Change: And then.

Speaker Change: Used sales yield is actually down a bit year over year help me understand is that primarily a function of the newer stores as well or just maybe give us some color on the quality of supply you're seeing and to what extent that's a factor there. Thank you.

Mark Altschwager: Help me understand, is that primarily a function of the newer stores as well, or just maybe give us some color on the quality of supply you're seeing and to what extent that's a factor there? Thank you.

Speaker Change: Yes, good questions Mark this djabran why don't I grab the first one around onsite donation and.

Jubran Tanious: Yeah, good questions, Mark.

Jubran Tanious: This is Jubran. Why don't I grab the first one around onsite donation and Michael can jump in on the second. would not describe our on-site donation growth across all the countries as an acceleration. I would say what we've seen is nice, healthy, stable growth. And that cuts across. multiple regions, multiple vintages of stores, I mean, even very mature stores, what you find is that if you do what I mentioned earlier, showing up to the donor in a reliably fast, friendly and convenient way, you remain the donation destination of choice. And you're much more likely to get the advocacy where that donor will tell their friend, family member, neighbor about us.

Michael Lasser: Michael can jump in on the second.

Speaker Change: I.

Speaker Change: I would not describe our onsite donation growth across all the countries as an acceleration I would say what we've seen.

Speaker Change: Is nice healthy stable growth.

Speaker Change: And that cuts across multiple regions multiple vintages of stores I mean, even very mature stores. What you find is that if you do what I mentioned earlier she.

Speaker Change: Selling up to the donor and reliably fast friendly and convenient way.

Speaker Change: You remain the donation destination of choice and you're much more likely to get the advocacy where that donor will tell their friends family member neighbor about us so.

Jubran Tanious: So I wouldn't describe it as an acceleration. I would say it's a continuation of good, stable, robust comp growth on onsite donations that frankly, we expect.

Speaker Change: So I wouldn't describe it as an acceleration I would say, it's a continuation of good stable robust comp growth on onsite donations that frankly.

Speaker Change: We expect to continue.

Speaker Change: So mark you asked about the sales yield and that's sort of a corollary to the healthy growth.

Michael Maher: So Mark, you asked about the sales yield and that's sort of a corollary to the healthy growth. in the onsite donations, we're able to process more volume, very cost effectively. And even if that means a marginal erosion, you know, in the in the sales yield, you'll also notice in that same table in the release where you see that improvement in the cost per pound processed. And so it's still profitable at the margins for us. And it helped us to drive some some healthy business at healthy margins during the quarter.

Speaker Change: And the onsite donations, we're able to process more volume.

Speaker Change: Cost effectively.

Speaker Change: And even if that means a marginal erosion.

Speaker Change: In the sales yield you'll also notice in that same table in the release, where you see that improvement.

Speaker Change: Improvement in the cost per pound processed and so it's still profitable at the margins for us and it helped us to drive some some healthy business at healthy margins during the quarter.

Michael Maher: Thank you.

Speaker Change: Thank you.

Speaker Change: Yeah.

Speaker Change: Thank you.

Brooke Roach: And your next question comes from the line of Brooke Roach from Goldman Sachs. Please go ahead. Good afternoon, and thank you for taking our question. Mark, you noted in the prepared remarks that new stores are performing in line with your expectations. How much variability versus the mean do you see in individual stores for those newly opened stores? And then longer term, how are you thinking about the EBITDA margin potential of the business? Is high teens still achievable?

Speaker Change: Your next question comes from the line of brokerage from Goldman Sachs. Please go ahead.

Speaker Change: Good afternoon, and thank you for taking our question Mark you noted in the prepared remarks that new stores are performing in line with your expectations, how much variability versus I mean, do you see an individual stores for those newly opened stores and then longer term. How are you thinking about the EBITDA margin potential of the business is high teens still itchy.

Speaker Change: Paul.

Hi, breakfast Djabran I could jump in on the variability question around new stores.

Jubran Tanious: Hi Brooke, this is Jubran. I can jump in on the variability question around new stores. It's one thing that that is challenging is that you don't necessarily have a trend. Again, as Mark, as Michael mentioned earlier, for Ponderance of Stores in 2024 opened in that back half. going through the winter months. Winter Sensitive Markets, but by and large, not seeing huge fluctuations. I mean, our model has gotten more and more precise about predicting. what transactions, sales, and on-site donations are going to do. So there's a little bit of variability here and there, but nothing that is outside of our expectations, particularly over the mid-range, multiple months in a row.

Speaker Change: It's one thing that is challenging is that you don't necessarily have a trend again as Marc as Michael mentioned earlier, the preponderance of stores in 2024 opened in that back half, including Q4. So you are going through the winter months, and some winter sensitive markets, but by and large not seeing.

Speaker Change: Huge fluctuations I mean, our model has gotten more and more precise about predicting.

Speaker Change: What transactions sales in onsite donations are going to do so is a little bit of variability here and there, but nothing that is outside of our expectations, particularly over the the mid range multiple.

Speaker Change: Months in a row.

Speaker Change: And then broke your question about the long term financial model. This is Michael we still see it.

Michael Maher: And then, Brooke, your question about the long-term financial model, this is Michael, we still see high teens EBITDA margins as our long-term financial algorithm. In the near term, as we've indicated before, there will be some pressure on that just by virtue of our accelerated growth and the impact of new stores. But as we continue to fill that new store pipeline, and those two- and three- and four-year-old stores are starting to contribute meaningful earnings growth, we think that'll counteract the impact of whatever the new store class is for any given year, and we should see a return to high teens EBITDA margins over the long term.

EBITDA margins as our long term financial algorithm in the near term as we've indicated before there will be some pressure on that just by virtue of our accelerated growth and the impact of new stores, but as we continue to fill that new store pipeline and those those two and three and four year old stores are starting to <unk>.

Speaker Change: Tribute meaningful earnings growth.

Speaker Change: We think that will counteract the impact of whatever the new store classes for any given year and we should see a return to high teens EBITDA margins over the longer term.

Speaker Change: Great. Thank you so much.

Brooke Roach: Great, thank you so much.

Brooke Roach: Got it.

Speaker Change: Got it.

Speaker Change: Thank you and your next question comes from the line of Peter Keith from Piper Sandler. Please go ahead.

Operator: Thank you.

Peter Keith: And your next question comes from the line of Peter Keith from Piper Sandler. Please go ahead. Hey, thank you very much. Nice quarter guys. This is a low mark. This could be a low mark for tariff questions on recent earnings calls. So kudos to you on that.

Peter Keith: Hey, Thank you very much nice quarter guys.

Speaker Change: But this is a low mark just can be a low mark for tariff questions on recent earnings calls so kudos to you on that.

Jubran Tanious: I was wondering, there's been quite a few retail bankruptcies and liquidations in recent quarters, and just as you're starting to look at real estate for 26 or perhaps even 27, what are you seeing out there in terms of availability and maybe rent dynamics? And also on a related note, could you give us an update on how the Two Peaches integration has been going? Yeah, sure.

Speaker Change: I was wondering if theres been quite a few retail bankruptcies and liquidations in recent quarters, just as Youre starting to look at real estate for 26, or perhaps even 27.

Speaker Change: What are you seeing out there in terms of availability and maybe rent dynamics and also on a related note can you give us an update on how the <unk> integration has been going.

Speaker Change: Yeah, sure Hey, Peter Djabran I'll kick us off guys can jump in if I Miss anything.

Jubran Tanious: Hey, Peter, Jubran. I'll kick us off. You guys can jump in if I miss anything. So your first question on, you know, really taking advantage of opportunities that may come our way. So First of all, we absolutely are looking. We are we are prospecting in every major market in North America. We are well aware of some of the boxes that have become available. Some of our peer retailers and we have acted on that. I can tell you currently we have some in our pipeline that are a direct result of that, and there will be more to come.

Speaker Change: So your first question on.

Speaker Change: Really taking advantage of opportunities that may come our way so.

Speaker Change: First of all we absolutely are looking we are we are prospecting in every major market in North America.

Speaker Change: We are well aware of some of the boxes that have come become available.

Speaker Change: Some of our peer retailers and we have acted on that I can tell you. Currently we have some in our pipeline that are a direct result of that and there will be more to come.

Speaker Change: So we very much like where our pipeline is that right.

Jubran Tanious: So we very much like where our pipeline is at, but I also want to be cautious. You know, we've always said that we're not going to open new stores to open new stores, that we've got to be smart. We've got to take a disciplined approach. We will not open a new store unless we feel very good about that supply equation. And that starts first and foremost with that onsite donation. Encouraged by what we have, our pipeline for 2026 looks fabulous. I will tell you we are in a better position as we sit right now than we were this time last year.

Speaker Change: I also want to be cautious we've always said that we're not going to open new stores to open new stores that we've got to be smart we've got to take a disciplined approach we will not open a new store unless we feel very good about that supply equation and that starts first and foremost with that onsite donation.

Speaker Change: So.

Speaker Change: Encouraged by what we have our pipeline for 2026.

Speaker Change: Looks fabulous I will tell you we are in a better position as we sit.

Speaker Change: Now than we were this time last year.

Jubran Tanious: We've talked about wanting to feather these new store openings in a more balanced way across the year. Last year the midpoint of our new store openings was September, this year it's improved into August. But ideally, we would be at June, July. So there's still more work to go. We're feeling very good about that in 2026. And then lastly... tone of the conversations with landlords it continues to be very very positive as they see us as a part of their mix. and as thrifting becomes more and more mainstream, particularly in the U.S. Okay.

Speaker Change: We've talked about wanting to further these new store openings and a more balanced way across the year.

Speaker Change: Last year, the midpoint of our new store openings was September.

Speaker Change: This year, it's improved into August.

Speaker Change: But ideally we would be at June July so theres still more work to go we're feeling very good about that in 2026.

Speaker Change: And then lastly, the tone of the conversations with landlords. It continues to be very very positive as they see us as a part of their mix and as drifting becomes more and more mainstream particularly in the U S.

Speaker Change: Okay, and then sorry, just slip in a second question. There are two pieces could you just give us an update on that has been going up sorry, Peter Yes. Two features so.

Jubran Tanious: And then, sorry, I did slip in a second question there on Two Peaches. Could you just give us an update on that? Oh, I'm sorry, Peter. Yes, Two Peaches. So, reminder to the group, Two Peaches is a small acquisition, small seven-store chain in Atlanta, Georgia that we made last year. So far, we're right on track with where we thought we were going to be. Our plan had always been to elevate. selection, value, atmospherics, and overall experience of the Savers model to those customers. We have done that in three of the stores. The results have been in line with what we expected.

Peter: Reminder, to the groups who features a small acquisition small southern store chain in Atlanta, Georgia that we made last year.

Peter: So far we're right on track with where we thought we were going to be our plan had always been too.

Peter: Elevate the selection value atmospheric and overall experience of the savers model to those customers.

Peter: We have done that in three of the stores the results have been.

Peter: In line with what we expected.

Jubran Tanious: And we're on a very good track. I will say those seven stores are relatively de minimis to our overall P&L, but what's important is this represents dedicated southeast region of the U.S. where we have tremendous white space opportunity and we are currently prospecting additional locations in the U.S. Southeast, and we're excited about that. So, going well. Okay, that's exciting.

Peter: And we're on a very good track I will say those seven stores are relatively de minimis to our overall P&L, but what's important is this represents a dedicated southeast region of the U S, where we have tremendous white space opportunity and we are currently prospecting additional locations in the U S South.

Peter: East and we're excited about that.

Peter: So going well.

Peter: Okay, that's exciting.

Mark Walsh: A separate question I had, because maybe for Mark, just looking forward, certainly it's an intriguing dynamic where retail prices for apparel and various items could go up quite a bit, you guys could see an improved value proposition. How are you thinking about that going after that opportunity, maybe from an advertising perspective? I know you work with a number of influencers, but is advertising a lever that you could pull in a short period of time to maybe put more focus on the value proposition that you have? That's a great question. Look, I think what we've done, and we've been very steadfast in our approach around marketing, we've been very productive.

Peter: A separate question I had because maybe for Marcus.

Peter: Looking forward, it's certainly intriguing dynamic where retail prices for apparel and various items could go up quite a bit you guys could see an improved value proposition.

Peter: How are you thinking about that going after that opportunity may be from an advertising perspective, I know you worked with a number of influencers, but is advertising a lever that you can pull in a short period of time to maybe put more focus on the on the value proposition that you have.

Peter: That's a great question.

Peter: I think what we've done and we've been very steadfast in our approach around marketing.

Peter: It's been very productive.

Mark Walsh: The influencer network we have continues to grow and is strong. We'll leverage that influencer network as we see fit, but I think it goes back to the comments I made earlier, as that value gap begins to widen, if it does, It does represent opportunities for us for trial, loyalty growth, market share gains. We will absolutely use our resources within the Influencer Network to drive that message home beyond that current following to maybe expand that following to drive more traffic. Okay, sounds great. Thanks so much and good luck. Thank you. Once again, should you have a question, please press star 4 by the 1 on your telephone keypad.

Peter: Influencer network, we have continues to grow and is strong.

Peter: We will leverage that Influencer network as we see fit but I think it goes back to the comments I made earlier as that value gap begins to widen if it does.

Peter: It does represent opportunities for us for trial loyalty growth market share gains and we will absolutely use our resources within the Influencer network.

Peter: That message home beyond that current.

Peter: Following to maybe expand that following to drive more traffic into the stores.

Peter: Okay. It sounds great. Thanks, so much and good luck.

Peter: Thanks Peter.

Speaker Change: Thank you once again should you have a question. Please press star followed by the one on your telephone Keypad. Your next question comes from the line of Anthony Chicken that from loop capital markets. Please go ahead.

Anthony Chukumba: Your next question comes from the line of Anthony Chukumba from Loop Capital Markets. Please go ahead. Thanks for taking my question. So you mentioned that you opened your sixth central processing center and their off-site processing is servicing half of their new store openings, if I heard that correctly, what's the total number of stores that are being serviced right now through the CPCs? Yeah, I got that for you. Give me one second for you. Right now it is 45, so about nine per. Got it. Okay.

Anthony Chicken: Thanks for taking my question. So you mentioned that you opened are six central processing center and the Offsite processing servicing half of their new store openings, if I heard that correctly.

Speaker Change: What's the total number of stores that are being serviced right now.

Anthony Chicken: The cpuc's.

Anthony Chicken: Yeah at that for you guys just give me one second for you.

Anthony Chicken: Right now it is 45, so about nine per existing CPC.

Anthony Chicken: Got it Okay and then.

Jubran Tanious: And then, so nine per existing CPC, what would you, like, what do you think is kind of the max for CPC? That's a good question, Anthony. I think that's actually a moving target because what we're finding is that as we get more and more efficient in these facilities, you're able to have more stores serviced on a single eight-hour shift. So, thank you. I hate to box us in with a ceiling on how many stores can be serviced by these because I think that number continues to grow. But again, you know, the key, and Mark mentioned this, and you just reiterated it, that it is really helping power our new store growth.

Anthony Chicken: So some nine persisting CPC what would you like what do you. What do you think is kind of a max for CPC.

Anthony Chicken: That's a good question Anthony I think that's actually a moving target because what we're finding is that as we get.

Anthony Chicken: More and more efficient in these facilities you were able to have more stores serviced on a single eight hour shift.

Anthony Chicken: So.

Anthony Chicken:

Anthony Chicken: I I hate to box us in with a ceiling on how many stores can be serviced by these because I think that number continues to grow.

Anthony Chicken: But again, the key and Mark mentioned this and you just reiterated that it is really helping power our new store growth new stores are being made possible that would not have existed without these off site.

Jubran Tanious: New stores are being made possible that would not have existed without these off-sites. production facilities. So, and that will continue into 2020. That's helpful. Thank you.

Anthony Chicken: Production facilities, so and that will continue into 2026 and beyond.

Speaker Change: That's helpful. Thank you.

Anthony Chicken: Thank you.

Anthony Chicken: Okay.

Thank you.

Operator: There are no further questions at this time.

Speaker Change: No further questions at this time I will now hand, the call back to Mr. Mike Walsh for any closing remarks.

Mark Walsh: I will now hand the call back to Mr. Mark Walsh for any closing remarks. I'd just like to thank all of you for your continued interest in Savers, and we're looking forward to recapping our second quarter in late July. Thanks again.

Speaker Change: I would just like to thank all of you for your continued interest in savers and we're looking forward to recapping our second quarter in late July Thanks again.

Speaker Change: This concludes today's call. Thank you for participating you may all disconnect.

Operator: This concludes today's call. Thank you for participating. You may all disconnect.

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Speaker Change: Yes.