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Pet Valu Holdings Ltd. — Management Reports 2025
Nov 4, 2025
48159_rns_2025-11-04_ed6844c6-ad43-41ca-b7d0-80a88eecfc33.pdf
Management Reports
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petvalu
PET VALU HOLDINGS LTD.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(Third Quarter Ended September 27, 2025)
The following Management's Discussion and Analysis ("MD&A") for Pet Valu Holdings Ltd. ("we", "Pet Valu" or the "Company") was prepared as at November 3, 2025 and provides information concerning the Company's financial condition and results of operations for the 13-week and 39-week periods ended September 27, 2025 and September 28, 2024, respectively. This MD&A should be read in conjunction with the Company's unaudited condensed interim consolidated financial statements for Q3 2025 (as hereinafter defined) and the Company's audited consolidated financial statements for Fiscal 2024 (as hereinafter defined) and the related MD&A. Additionally, readers should refer to the "Risk Factors" set forth in the Company's annual information form dated March 3, 2025 ("AIF") for further information. Additional information about Pet Valu Holdings Ltd. can be found on SEDAR+ at www.sedarplus.ca.
Basis of Presentation
The Company's audited consolidated financial statements and unaudited condensed interim consolidated financial statements (together, the "consolidated financial statements") have been prepared in accordance with IFRS Accounting Standards and International Accounting Standard 34, Interim Financial Reporting, respectively, using the accounting policies described therein. All amounts are presented in thousands of Canadian dollars unless otherwise indicated and per share amounts. The Company is managed based on one operating and reportable segment.
The Company operates on a 52- or 53-week fiscal year, concluding on the Saturday nearest to December 31. The Company's fiscal quarters conclude on the Saturday nearest to the end of each quarter. Each quarterly period has 13 weeks, except for a 53-week year when the fourth quarter will have 14 weeks. The 13-week and 39-week periods ended September 27, 2025 and September 28, 2024, represent the Company's results for its third quarter and the first three quarters of the relevant financial years.
All references in this MD&A to "Q3 2025" are to the 13-week period ended September 27, 2025, to "Q3 2024" are to the 13-week period ended September 28, 2024, to "YTD 2025" are to the 39-week period ended September 27, 2025, to "YTD 2024" are to the 39-week period ended September 28, 2024, to "Fiscal 2025" are to the 53-week period ending January 3, 2026, and to "Fiscal 2024" are to the 52-week period ended December 28, 2024. Figures presented in this MD&A are in thousands of Canadian dollars unless otherwise indicated.
The unaudited condensed interim consolidated financial statements for Q3 2025 and this MD&A were authorized for issue by the Company's Board of Directors.
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Non-IFRS and Other Financial Measures
This MD&A makes reference to certain non-IFRS measures and non-IFRS ratios. These measures and ratios are not recognized under IFRS and do not have a standardized meaning prescribed by IFRS. They are therefore unlikely to be comparable to similar measures presented by other companies. Rather, these measures are provided as additional information to complement IFRS measures by providing further understanding of the Company's results of operations from management's perspective. Accordingly, these measures should not be considered in isolation nor as a substitute for the Company's analysis of its financial information reported under IFRS. The Company uses non-IFRS measures, including "EBITDA", "Adjusted EBITDA", "Adjusted Net Income", "Free Cash Flow", and "Net Capital Expenditures", and non-IFRS ratios, including "Adjusted EBITDA margin", "Adjusted EBITDA as a percentage of revenue", "Adjusted Net Income as a percentage of revenue", and "Adjusted Net Income per Diluted Share". This MD&A also makes reference to certain supplementary financial measures that are commonly used in the retail industry, including "system-wide sales", "same-store sales growth (decline)", "same-store transaction growth (decline)", and "same-store average spend per transaction growth (decline)". These non-IFRS measures, non-IFRS ratios and supplementary financial measures are used to provide investors with supplemental measures of the Company's operating performance and thus highlight trends in its core business that may not otherwise be apparent when relying solely on IFRS measures. The Company also believes that securities analysts, investors and other interested parties frequently use such non-IFRS measures, non-IFRS ratios and supplementary financial measures in the evaluation of issuers. Management of the Company uses non-IFRS measures, non-IFRS ratios and supplementary financial measures in order to facilitate operating performance comparisons from period to period, to prepare annual operating budgets and to determine components of management compensation. Refer to "Selected Consolidated Financial Information and Industry Metrics" and "Selected Quarterly Results and Performance Measures" for a reconciliation of net income, an IFRS measure, to EBITDA, Adjusted EBITDA and Adjusted Net Income. Refer to "Liquidity and Capital Resources - Free Cash Flow" for a reconciliation of Free Cash Flow.
Forward-Looking Information
This MD&A contains forward-looking information. Forward-looking information is provided as at the date of this MD&A and is based on management's opinions, estimates and assumptions in light of its experience and perception of historical trends, current trends, current conditions and expected future developments, as well as other factors that management believes appropriate and reasonable in the circumstances. Such forward-looking information is intended to provide information about management's current expectations and plans, and may not be appropriate for other purposes. Pet Valu does not undertake to update any such forward-looking information whether as a result of new information, future events or otherwise, except as required under applicable Canadian securities laws.
Forward-looking information may relate to the Company's future financial outlook and anticipated events or results and may include information regarding our financial position, business strategy, growth strategies, store openings and enhancements, addressable markets, budgets, operations, financial results, taxes, dividend policy, plans and objectives. Particularly, information regarding our expectations of future results, performance, achievements, prospects or opportunities or the markets in which we operate is forward-looking information. In addition, any statements that refer to expectations, intentions, projections or other characterizations of future events or circumstances contain forward-looking information. Statements containing forward-looking information are not facts but instead represent management's expectations, estimates and projections regarding future events or circumstances.
Many factors could cause the Company's actual results, level of activity, performance or achievements or future events or developments to differ materially from those expressed or implied by the forward-looking information, including, without limitation, the factors discussed in the "Risk Factors" section of this MD&A and in our AIF. A copy of the AIF can be accessed under our profile on SEDAR+ at
www.sedarplus.ca. These factors are not intended to represent a complete list of the factors that could affect the Company; however, these factors should be considered carefully.
The purpose of the forward-looking information is to provide the reader with a description of management's current expectations regarding the Company's financial performance and may not be appropriate for other purposes. Readers should not place undue reliance on forward-looking information contained herein. To the extent any forward-looking information in this MD&A constitutes future-oriented financial information, within the meaning of applicable securities laws, such information is being provided to demonstrate the potential of the Company and readers are cautioned that this information may not be appropriate for any other purpose. Future-oriented financial information, as with forward-looking information generally, are based on current assumptions and subject to risks, uncertainties and other factors. The forward-looking statements contained in this MD&A are expressly qualified by this cautionary statement.
Financial Highlights
The following tables set forth the selected financial information and industry metrics for the periods indicated (in thousands, except system-wide stores or as otherwise noted). We refer the reader to the section entitled "How We Assess the Performance of Our Business" of this MD&A for the definition of the items in the following tables and, when applicable, to the section entitled "Selected Consolidated Financial Information and Industry Metrics" for reconciliations of non-IFRS measures with the most directly comparable IFRS measures.
Q3 2025 Compared to Q3 2024
| Quarters Ended | |||
|---|---|---|---|
| September 27, 2025 | September 28, 2024 | ||
| 13 weeks | 13 weeks | % Change | |
| Revenue | $ 289,462 | $ 276,030 | 4.9 % |
| Gross profit margin | 33.0 % | 32.4 % | n/a |
| Operating income | $ 41,928 | $ 40,356 | 3.9 % |
| Net income | $ 24,862 | $ 23,158 | 7.4 % |
| System-wide sales(1) | $ 373,859 | $ 358,195 | 4.4 % |
| System-wide stores | 849 | 805 | 5.5 % |
| Same-store sales growth (decline)(1) | 2.3 % | (2.5)% | n/a |
| Same-store transaction growth (decline)(1) | 0.3 % | (4.1)% | n/a |
| Same-store average spend per transaction growth(1) | 2.0 % | 1.7 % | n/a |
| EBITDA(2) | $ 60,059 | $ 56,987 | 5.4 % |
| Adjusted EBITDA(2) | $ 63,598 | $ 64,599 | (1.5)% |
| Adjusted Net Income(2) | $ 27,648 | $ 29,929 | (7.6)% |
| Adjusted Net Income per Diluted Share(3) | $ 0.40 | $ 0.41 | (2.4)% |
| Free Cash Flow(2) | $ 24,679 | $ 30,768 | (19.8)% |
(1) The notes have been presented beneath the table for "YTD 2025 Compared to YTD 2024".
YTD 2025 Compared to YTD 2024
Year to Date Ended
| September 27, 2025 | September 28, 2024 | ||
|---|---|---|---|
| 39 weeks | 39 weeks | % Change | |
| Revenue | $ 849,196 | $ 802,044 | 5.9 % |
| Gross profit margin | 33.1 % | 33.0 % | n/a |
| Operating income | $ 116,048 | $ 107,451 | 8.0 % |
| Net income | $ 68,434 | $ 58,515 | 17.0 % |
| System-wide sales(1) | $ 1,109,872 | $ 1,064,767 | 4.2 % |
| System-wide stores | 849 | 805 | 5.5 % |
| Same-store sales growth (decline)(1) | 2.1 % | (0.6)% | n/a |
| Same-store transaction decline(1) | 0.0 % | (3.0)% | n/a |
| Same-store average spend per transaction growth(1) | 2.1 % | 2.4 % | n/a |
| EBITDA(2) | $ 169,487 | $ 156,009 | 8.6 % |
| Adjusted EBITDA(2) | $ 182,511 | $ 178,910 | 2.0 % |
| Adjusted Net Income(2) | $ 79,210 | $ 81,144 | (2.4)% |
| Adjusted Net Income per Diluted Share(3) | $ 1.13 | $ 1.12 | 0.9 % |
| Free Cash Flow(2) | $ 67,128 | $ 61,609 | 9.0 % |
Notes:
(1) System-wide sales, same-store sales growth (decline), same-store transaction growth (decline), and same-store average spend per transaction growth are supplementary financial measures. For further information on supplementary financial measures, see "Non-IFRS and Other Financial Measures".
(2) EBITDA, Adjusted EBITDA, Adjusted Net Income, and Free Cash Flow are non-IFRS measures. Non-IFRS measures are not determined in accordance with IFRS, do not have standardized meanings and may not be comparable to similar financial measures presented by other companies. See "Selected Consolidated Financial Information and Industry Metrics" for a reconciliation of net income, an IFRS measure, to EBITDA, Adjusted EBITDA and Adjusted Net Income. See "– Liquidity and Capital Resources – Free Cash Flow" for a reconciliation of Free Cash Flow.
(3) Adjusted Net Income per Diluted Share is a non-IFRS ratio. Non-IFRS ratios are not determined in accordance with IFRS, do not have standardized meanings and may not be comparable to similar financial measures presented by other companies. For further information on non-IFRS ratios, see "Non-IFRS Measures and Other Financial Measures" and "How We Assess the Performance of our Business".
Overview
Our mission is to be Canada's preferred pet retailer delivering the products, care, expertise, and memorable moments that devoted pet lovers want...locally in stores and everywhere online.
Since opening our first store in 1976, Pet Valu has grown to become Canada's leading retailer of pet food and pet-related supplies. As at the end of Q3 2025, we operate 849 corporate-owned and franchised locations across the country, complemented by a full suite of e-commerce capabilities. Over our history, we have earned the trust and loyalty of devoted pet owners with our compassionate and knowledgeable service, our premium product offering which includes our award-winning proprietary brands, our in-store services and our expanding omni-channel capabilities. This winning strategy is underpinned by our highly flexible operating model which allows us to deliver superior unit economics and growth.
We and our franchisees operate the largest specialty pet store network in Canada, with more than three times the number of stores of our closest specialty pet competitor, putting our stores within five kilometres of approximately 76% of Canadians. Together with our e-commerce platform, our market presence generates significant brand awareness, provides our channels with access to millions of Canadian pet owners and enables us to earn the leading dollar share in the Canadian pet retail industry. We combine our scale with a highly localized retail strategy allowing us to offer our customers premium products at competitive prices while delivering personalized service. In addition to our nationally recognized and trusted Pet Valu banner, we also operate three banners in British Columbia (Bosley's by Pet Valu, Tisol, and Total Pet), the Paulmac's Pets banner in Ontario, and the Chico banner in Quebec.
These longstanding banners are deeply embedded in their respective communities and benefit from the scale of our national operating network.
Recent Developments
Fiscal 2025:
Share Repurchase
On May 12, 2025, the Company purchased for cancellation an aggregate of 2,079,000 common shares at a price of $28.85 per common share from PV Holdings S.à.r.l., Roark Capital Partners II AIV AG, L.P., RCPS Equity Cayman LP, and Roark Capital Partners Parallel II AIV AG, L.P. (collectively, the "principal shareholders"), each an entity controlled directly or indirectly by Roark Capital Management, LLC, for total cash consideration of $60.0 million (the "Share Repurchase").
2025 Secondary Offerings
On May 16, 2025, a secondary offering of the Company's common shares was completed by its principal shareholders on a bought deal basis and on May 21, 2025, the exercise in full of the over-allotment option granted to the underwriters in connection with the secondary offering was completed (collectively the "May 2025 Secondary Offering"). The May 2025 Secondary Offering of 5,980,000 common shares at an offering price of $28.85 per common share raised gross proceeds of $172.5 million for the principal shareholders. The Company did not issue additional common shares or receive any of the proceeds from the May 2025 Secondary Offering. Underwriting fees were paid by the principal shareholders, and other expenses related to the May 2025 Secondary Offering of approximately $0.3 million were paid by the Company and included in selling, general and administrative expenses in YTD 2025.
On June 9, 2025, a secondary offering (the "June 2025 Secondary Offering") of the Company's common shares was completed by its principal shareholders on a bought deal basis. The June 2025 Secondary Offering of 19,969,450 common shares at an offering price of $28.85 per common share raised gross proceeds of $576.1 million for the principal shareholders. The Company did not issue additional common shares or receive any of the proceeds from the June 2025 Secondary Offering. Underwriting fees and other expenses were paid by the principal shareholders. Following the completion of the June 2025 Secondary Offering, the principal shareholders no longer own any common shares of the Company.
Chief Executive Officer Succession Plan
On August 4, 2025, the Company announced that its Board of Directors had unanimously approved the recommendation of Chief Executive Officer Richard Maltsbarger to implement a senior leadership succession plan. Greg Ramier, the Company's then President and Chief Operating Officer, succeeded Mr. Maltsbarger as Chief Executive Officer and was appointed to the Company's Board of Directors effective September 21, 2025. Mr. Maltsbarger continued in his role as Chief Executive Officer until September 21, 2025, after which he moved into the role of Senior Advisor to the Chief Executive Officer to assist with the leadership transition until his retirement on April 4, 2026. Mr. Maltsbarger will also continue to serve as a member of Pet Valu's Board of Directors until his retirement date.
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6
Opening of the Calgary Distribution Centre
In July 2025, the Company officially commenced operation of its new Calgary distribution centre, a 295,000 square foot, LEED-Gold certified distribution centre in Calgary, Alberta, representing the final milestone in the Company's nationwide supply chain transformation.
Fiscal 2024:
2024 Secondary Offering
On May 15, 2024, a secondary offering (the "2024 Secondary Offering") of the Company's common shares was completed by its principal shareholders on a bought deal basis. The 2024 Secondary Offering of 5,903,000 common shares at an offering price of $29.65 per common share raised gross proceeds of $175.0 million for the principal shareholders. The Company did not issue additional common shares or receive any of the proceeds from the 2024 Secondary Offering. Underwriting fees were paid by the principal shareholders, and other expenses related to the 2024 Secondary Offering of approximately $0.2 million were paid by the Company and included in selling, general and administrative expenses in Fiscal 2024.
Opening of Metro Vancouver Region ("MVR") Distribution Centre
In July 2024, the Company officially commenced operation of its new MVR distribution centre, a 350,000 square foot, LEED-Gold certified distribution centre in Surrey, British Columbia, representing another key milestone in the Company's nationwide supply chain transformation.
New Calgary Distribution Centre
On October 18, 2024, the Company entered into a lease agreement for a new 300,000 square foot distribution centre in Calgary, Alberta.
Amendment of Credit Agreement
On October 31, 2024, the Company amended its credit agreement in order to, among other things, extend the term to October 31, 2029 and increase the borrowing capacity of the revolving facility to $175,000.
2024 Normal Course Issuer Bid
On November 28, 2024, the Company announced that the TSX had accepted its notice of intention to renew its normal course issuer bid ("2024 NCIB"). Pursuant to the 2024 NCIB, the Company may purchase for cancellation, up to an aggregate of 3,572,004 common shares, representing approximately 5% of the Company's issued and outstanding common shares as at November 18, 2024. The 2024 NCIB commenced on December 2, 2024, and will continue until the earliest of (a) the close of trading on December 1, 2025, (b) the date upon which the Company acquires the maximum number of common shares to be purchased under the 2024 NCIB, and (c) the date on which the Company provides written notice of termination of the 2024 NCIB to the TSX.
Effective December 2, 2024, the Company entered into an automatic share purchase plan ("2024 ASPP"), with a designated broker, in connection with the 2024 NCIB to facilitate the purchase of common shares during certain periods when the Company would not be permitted to purchase shares due to regulatory restrictions or a self-imposed blackout period. Before entering a blackout period, the Company may, but is not required to, instruct its designated broker to make purchases at the broker's sole discretion
and based on parameters set by the Company in accordance with the ASPP, NCIB, TSX rules, and applicable securities laws.
Selected Consolidated Financial Information and Industry Metrics
The following table summarizes the Company's recent results of operations and selected financial position data for the periods indicated. The selected consolidated financial information set out below has been derived from our unaudited condensed interim consolidated financial statements (in thousands unless otherwise noted).
| Quarters Ended | Year to Date Ended | |||
|---|---|---|---|---|
| September 27, 2025 | September 28, 2024 | September 27, 2025 | September 28, 2024 | |
| 13 weeks | 13 weeks | 39 weeks | 39 weeks | |
| Revenue | ||||
| Retail sales | $ 104,601 | $ 99,962 | $ 306,069 | $ 300,428 |
| Franchise and other revenues | 184,861 | 176,068 | 543,127 | 501,616 |
| Total revenue | 289,462 | 276,030 | 849,196 | 802,044 |
| Cost of sales | 193,900 | 186,651 | 567,937 | 537,621 |
| Gross profit | 95,562 | 89,379 | 281,259 | 264,423 |
| Selling, general and administrative expenses | 53,634 | 49,023 | 165,211 | 156,972 |
| Total operating income | 41,928 | 40,356 | 116,048 | 107,451 |
| Interest expenses, net | 7,884 | 8,326 | 22,463 | 25,551 |
| Loss (gain) on foreign exchange | 249 | (100) | (146) | 571 |
| Income before income taxes | 33,795 | 32,130 | 93,731 | 81,329 |
| Income tax expense | 8,933 | 8,972 | 25,297 | 22,814 |
| Net income and comprehensive income | $ 24,862 | $ 23,158 | $ 68,434 | $ 58,515 |
| Basic net income per common share | $ 0.36 | $ 0.32 | $ 0.99 | $ 0.82 |
| Diluted net income per common share | $ 0.36 | $ 0.32 | $ 0.97 | $ 0.81 |
| Fiscal Year Ended | ||||
| --- | --- | --- | ||
| September 27, 2025 | December 28, 2024 | |||
| Total assets | $ 1,010,309 | $ 970,931 | ||
| Total non-current liabilities | 741,480 | 690,762 |
The following table provides a reconciliation of net income to EBITDA and Adjusted EBITDA for the periods indicated (in thousands unless otherwise noted):
| Quarters Ended | Year to Date Ended | |||
|---|---|---|---|---|
| September 27, 2025 | September 28, 2024 | September 27, 2025 | September 28, 2024 | |
| 13 weeks | 13 weeks | 39 weeks | 39 weeks | |
| Reconciliation of net income to Adjusted EBITDA: | ||||
| Net income | $ 24,862 | $ 23,158 | $ 68,434 | $ 58,515 |
| Depreciation and amortization | 18,380 | 16,531 | 53,293 | 49,129 |
| Interest expenses, net | 7,884 | 8,326 | 22,463 | 25,551 |
| Income tax expense | 8,933 | 8,972 | 25,297 | 22,814 |
| EBITDA | 60,059 | 56,987 | 169,487 | 156,009 |
| Adjustments to EBITDA: | ||||
| Transformation costs(1) | 3,153 | 5,324 | 5,854 | 14,306 |
| Other professional fees(2) | 36 | 239 | 459 | 997 |
| Share-based compensation(3) | 101 | 2,149 | 6,857 | 7,027 |
| Loss (gain) on foreign exchange | 249 | (100) | (146) | 571 |
| Adjusted EBITDA | $ 63,598 | $ 64,599 | $ 182,511 | $ 178,910 |
| Adjusted EBITDA as a percentage of revenue(4) | 22.0% | 23.4% | 21.5% | 22.3% |
The following table provides a reconciliation of net income to Adjusted Net Income for the periods indicated (in thousands unless otherwise noted):
| Quarters Ended | Year to Date Ended | |||
|---|---|---|---|---|
| September 27, 2025 | September 28, 2024 | September 27, 2025 | September 28, 2024 | |
| 13 weeks | 13 weeks | 39 weeks | 39 weeks | |
| Reconciliation of net income to Adjusted Net Income: | ||||
| Net income | $ 24,862 | $ 23,158 | $ 68,434 | $ 58,515 |
| Adjustments to net income: | ||||
| Transformation costs(1) | 3,511 | 6,358 | 7,074 | 20,628 |
| Other professional fees(2) | 36 | 239 | 459 | 997 |
| Share-based compensation(3) | 101 | 2,149 | 6,857 | 7,027 |
| Loss (gain) on foreign exchange | 249 | (100) | (146) | 571 |
| Tax effect of adjustments to net income | (1,111) | (1,875) | (3,468) | (6,594) |
| Adjusted Net Income | $ 27,648 | $ 29,929 | $ 79,210 | $ 81,144 |
| Adjusted Net Income as a percentage of revenue(5) | 9.6% | 10.8% | 9.3% | 10.1% |
| Adjusted Net Income per Diluted Share | $ 0.40 | $ 0.41 | $ 1.13 | $ 1.12 |
Notes:
(1) Represents: (i) discrete, project-based implementation costs associated with new information technology systems and discrete Software-as-a-Service ("SaaS") arrangements for transformational initiatives supporting e-commerce and omni-channel capabilities, customer relationship management and other key processes; (ii) costs associated with supply chain and merchandise transformation initiatives, such as duplicative warehousing and distribution costs, implementation costs associated with new information technology systems, other transition costs incurred during the transition to a new distribution centre; and for Adjusted Net Income, duplicative depreciation expense on property and equipment and right-of-use assets, and interest expense on lease liabilities; and (iii) severance expenses associated with restructuring activities in certain business support functions and expenses related to a reorganization of the senior leadership team.
For Adjusted EBITDA, the transformation costs included in cost of sales in Q3 2025 and YTD 2025 were $1.2 million and $1.7 million, respectively (Q3 2024 and YTD 2024 - $2.3 million and $4.4 million, respectively) and in selling, general, and administrative expenses, $2.0 million and $4.1 million, respectively (Q3 2024 and YTD 2024 - $3.0 million and $9.9 million, respectively). For Adjusted Net Income, the transformation costs included in cost of sales in Q3 2025 and YTD 2025 were $1.5 million and $2.6 million, respectively (Q3 2024 and YTD 2024 - $3.0 million and $8.4 million, respectively) and in selling, general, and administrative expenses, $2.0 million and $4.1 million, respectively (Q3 2024 and YTD 2024 - $3.0 million and $9.9 million, respectively). For Adjusted Net Income, the interest expense on the lease liability in Q3 2025 and YTD 2025 was $0.1 million and $0.3 million, respectively (Q3 2024 and YTD 2024 - $0.3 million and $2.3 million, respectively).
(2) Represents professional fees primarily incurred with respect to: (i) the May 2025 Secondary Offering and 2024 Secondary Offering; and (ii) the Canada Revenue Agency's ("CRA") examination of the Company's Canadian tax filings discussed in the "Income Taxes" section. These fees are included in selling, general and administrative expenses.
(3) Represents share-based compensation in respect of our amended and restated share option plan, long-term incentive plan, and deferred share unit plan which is included in selling, general and administrative expenses.
(4) Adjusted EBITDA as a percentage of revenue is a non-IFRS ratio. Non-IFRS ratios are not determined in accordance with IFRS, do not have standardized meanings and may not be comparable to similar financial measures presented by other companies. For further information on non-IFRS ratios, see "Non-IFRS Measures and Other Financial Measures" and "How We Assess the Performance of Our Business".
(5) Adjusted Net Income as a percentage of revenue is a non-IFRS ratio. Non-IFRS ratios are not determined in accordance with IFRS, do not have standardized meanings and may not be comparable to similar financial measures presented by other companies. For further information on non-IFRS ratios, see "Non-IFRS Measures and Other Financial Measures" and "How We Assess the Performance of Our Business".
Supplemental Information on Leased Premises
The table below provides additional information on expenses for leased premises associated with the application of IFRS 16, Leases.
| Quarters Ended | Year to Date Ended | |||
|---|---|---|---|---|
| September 27, 2025 | September 28, 2024 | September 27, 2025 | September 28, 2024 | |
| 13 weeks | 13 weeks | 39 weeks | 39 weeks | |
| Depreciation expense on right-of-use assets(1) | $ 9,644 | $ 8,839 | $ 27,914 | $ 26,415 |
| Interest expense on lease liabilities(1) | 6,249 | 5,804 | 18,469 | 17,307 |
| Interest income on lease receivables(1) | (2,514) | (2,527) | (7,678) | (7,406) |
| Net depreciation and interest expense associated to leased premises | $ 13,379 | $ 12,116 | $ 38,705 | $ 36,316 |
Note:
(1) Represents income and expenses for leased premises included in the unaudited condensed interim consolidated statements of financial position related to the application of IFRS 16, Leases. Specifically, this includes depreciation on right-of-use assets for leased premises, interest expense on lease liabilities for leased premises and interest income on lease receivables. For additional information, refer to the unaudited condensed interim consolidated financial statements for the periods ended September 27, 2025 and September 28, 2024.
Summary of Factors Affecting Performance
We believe that our performance and future success depends on a number of factors that present significant opportunities for us. These factors are also subject to, and may pose, a number of inherent risks and challenges. Refer to "Risk Factors" in our AIF for additional information.
Store Expansion and Enhancement
Between 2022 and 2024, we grew our store network at a compound annual growth rate of 9.2%, having opened 45 net new stores and acquired 66 franchised stores as part of the Chico acquisition in 2022, 39 net new stores in 2023, and 41 net new stores in 2024. In Fiscal 2025, the Company plans to open approximately 40 new stores, including both corporate-owned and franchised stores. In addition to opening new stores, the Company has increased sales and operating results by enhancing elements of its existing stores by enlarging square footage, adding in-store services, and relocating or renovating stores. From 2022 to 2024, we and our franchisees expanded, renovated, or relocated an average of 38 stores per year. The Company and its franchisees plan to expand, renovate or relocate between 140 to 150 stores in Fiscal 2025, including renovations to culinary departments across approximately 120 corporate stores.
The following table summarizes the change in the Company's store count for the periods indicated:
| Quarters Ended | Year to Date Ended | |||
|---|---|---|---|---|
| September 27, 2025 | September 28, 2024 | September 27, 2025 | September 28, 2024 | |
| 13 weeks | 13 weeks | 39 weeks | 39 weeks | |
| Corporate-owned stores: | ||||
| Beginning of period | 228 | 223 | 220 | 222 |
| New stores opened | 14 | 2 | 21 | 10 |
| Re-franchised(1) | (3) | (11) | (5) | (19) |
| Franchise acquisition(1) | 2 | — | 6 | 1 |
| Stores closed | — | — | (1) | — |
| Corporate-owned stores end of period | 241 | 214 | 241 | 214 |
| Franchised stores: | ||||
| Beginning of period | 605 | 576 | 604 | 561 |
| New stores opened | 2 | 4 | 5 | 12 |
| Re-franchised(1) | 3 | 11 | 5 | 19 |
| Franchise acquisition(1) | (2) | — | (6) | (1) |
| Franchised stores end of period | 608 | 591 | 608 | 591 |
| System-wide stores | 849 | 805 | 849 | 805 |
| Stores renovated, expanded or relocated(2) | 72 | 9 | 91 | 25 |
Notes:
(1) Re-franchised means a store previously run as a corporate-owned store and now owned and operated by a franchisee. Franchise acquisition means a store previously run by a franchisee now owned and operated by the Company as a corporate-owned store.
(2) During Q3 2025, Q3 2024, YTD 2025, and YTD 2024, the Company renovated, expanded, or relocated a total of 65, five, 78, and 12 corporate-owned stores, respectively. During Q3 2025, Q3 2024, YTD 2025, and YTD 2024, there were seven, four, 13, and 13 franchised stores renovated, expanded, or relocated, respectively.
How We Assess the Performance of Our Business
Revenue. The Company's revenue is comprised of retail sales and franchise and other revenues.
The following is a brief description of the components of our revenue:
- The Company's retail sales include corporate-owned retail store and e-commerce merchandise sales as well as in-store grooming and dog wash services. Retail sales are net of sales tax collected from the customer on behalf of government authorities.
- Franchise and other revenues include both one-time and ongoing amounts, consisting of initial and renewal franchise fees, royalties, percentage rent and common area maintenance and realty tax revenues from properties subleased to franchisees, wholesale merchandise sales, promotion fees, and fees for other services. Franchise royalties, promotion fees and percentage rent are based on a percentage of the franchisees' retail sales. Percentage rent represents the Company's variable participation in sales performance when such figure is in excess of a contractual minimum base rent. The portion in excess of base rent is included in royalties and sublease revenues.
Cost of sales. Cost of sales reflects inventory and product-related costs, warehousing and distribution costs, depreciation expense for store right-of-use assets and distribution centre assets and occupancy costs related to store operations, such as variable lease payments, common area maintenance, utilities and general store maintenance.
Gross profit. Gross profit reflects our revenue less cost of sales.
Gross profit margin. Gross profit margin is defined as gross profit as a percentage of revenue and is impacted by components of cost of sales, product mix and markdowns.
Selling, general and administrative expenses. Selling, general and administrative expenses ("SG&A") are predominantly comprised of wages, benefits, share-based compensation, franchise development expenses, travel, marketing, professional fees and other expenses related to the corporate infrastructure required to support our corporate-owned and franchised stores. SG&A expenses also include depreciation and amortization expenses for all property and equipment at corporate-owned stores and the corporate office, intangible assets, and corporate office right-of-use assets.
Operating income. Operating income is defined as gross profit less selling, general and administrative expenses.
EBITDA. EBITDA is defined as net income before interest expense (net), income tax expense (recovery) and depreciation and amortization.
Adjusted EBITDA. Adjusted EBITDA is defined as net income before interest expense (net), income tax expense (recovery) and depreciation and amortization adjusted for the impact of certain expenses, costs or benefits incurred which in management's view are not indicative of the underlying business performance, including transformation costs, other professional fees, share-based compensation expense, asset impairments, gain or loss on foreign exchange, and investment in associate. Refer to the sections entitled "Selected Consolidated Financial Information and Industry Metrics" and "Selected Quarterly Results and Performance Measures" for additional information on these items. We believe Adjusted EBITDA is a useful measure of operating performance as it provides a more relevant picture of operating results by facilitating a comparison of our performance on a consistent basis from period-to-period and provides a more complete understanding of factors and trends affecting our business.
Adjusted EBITDA as a percentage of revenue or Adjusted EBITDA margin. Adjusted EBITDA as percentage of revenue or Adjusted EBITDA margin is defined as Adjusted EBITDA divided by revenue. We believe Adjusted EBITDA as a percentage of revenue or Adjusted EBITDA margin is a useful measure to assess performance as it facilitates a comparison of our operating performance on a consistent basis from period-to-period and to provide for a more complete understanding of factors and trends affecting our business.
Adjusted Net Income. Adjusted Net Income is defined as net income, adjusted for the impact of certain expenses, costs or benefits incurred which in management's view are not indicative of the underlying business performance, including transformation costs, other professional fees, share-based compensation expense, asset impairments, gain on modification of debt, gain or loss on foreign exchange, and investment in associate. Refer to the sections entitled "Selected Consolidated Financial Information and Industry Metrics" and "Selected Quarterly Results and Performance Measures" for additional information on these items. We believe Adjusted Net Income is a useful measure of performance, as it provides a more relevant picture of results and facilitates a comparison of our performance on a consistent basis from period-to-period and provides a more complete understanding of factors and trends affecting our business.
Adjusted Net Income as a percentage of revenue. Adjusted Net Income as a percentage of revenue is defined as Adjusted Net Income divided by revenue. We believe Adjusted Net Income as a percentage of revenue is a useful measure to assess performance as it facilitates a comparison of our operating performance on a consistent basis from period-to-period and provides a more complete understanding of factors and trends affecting our business.
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Adjusted Net Income per Diluted Share. Adjusted Net Income per Diluted Share is defined as Adjusted Net Income divided by the total weighted average number of outstanding diluted common shares at the end of the most recently completed quarter for the relevant period. We believe Adjusted Net Income per Diluted Share is a useful measure to assess the performance of the Company.
Free Cash Flow. Free Cash Flow is defined as net cash generated from operating activities, and investing activities, plus tenant allowances, less repayments of principal on lease liabilities, interest on lease liabilities and notes receivables. It is a key metric as an indicator of how much cash is available for debt repayment, shareholder distributions, re-investment in the Company and other financing activities. Our ability to generate Free Cash Flow is an indicator of the financial strength of our business, as we require capital expenditures to build and maintain stores and purchase new equipment to improve our business and infrastructure.
Net Capital Expenditures. Net Capital Expenditures represents purchases of property and equipment, purchases of intangible assets, and proceeds on disposal of property and equipment as disclosed under investing activities in the Company's unaudited condensed interim consolidated statements of cash flows, as well as tenant allowances as disclosed under financing activities in the Company's unaudited condensed interim consolidated statements of cash flows. Net Capital Expenditures is used by management as an indicator of investment in long-term growth and operational capacity.
System-wide stores. System-wide stores reflects the number of total stores, including corporate-owned and franchised stores, open across the system at the end of a particular reporting period. The number of corporate-owned and franchised stores along with the number of operating weeks is used by management to evaluate new store growth, system-wide sales, franchise revenues and store performance.
System-wide sales. System-wide sales reflects the aggregation of retail sales at corporate-owned stores, e-commerce sales, plus the franchise retail sales occurring at franchised stores to their customers. This measure allows management to assess changes in the Company's overall system performance, the health of its brand and the strength of its market position relative to its competitors. System-wide sales are driven by the number of system-wide stores open in any period and their respective growth. For clarity, franchise retail sales are not included in the total revenue figure. The Company's revenue reflects retail sales and franchise and other revenue as defined under the definition of revenue above.
Same-store sales growth (decline). Same-store sales growth (decline) is defined as the percentage change in retail sales generated by system-wide stores, that have been opened for at least 52 weeks and e-commerce sales relative to the same period in the prior fiscal year. Stores that are renovated, expanded, or relocated are included in the metric on the first day of operation if the original store was open for at least 52 weeks. Stores that are acquired through business acquisitions are excluded from this metric for at least 52 weeks from the date of the acquisition. The primary drivers of same-store sales growth (decline) are changes in the transaction count and the average spend per transaction. Same-store sales growth (decline) is used by management to better understand our business as it explains what portion of the sales change is attributable to established stores and what portion can be attributed to the opening of new stores.
Same-store transaction growth (decline). Same-store transaction growth (decline) is defined as the percentage change in the number of store transactions generated by system-wide stores, that have been opened for at least 52 weeks and e-commerce sales relative to the same period in the prior fiscal year. Stores that are renovated, expanded, or relocated are included in the metric on the first day of operation if the original store was open for at least 52 weeks. Stores that are acquired through business acquisitions are excluded from this metric for at least 52 weeks from the date of the acquisition.
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Same-store average spend per transaction growth (decline). Same-store average spend per transaction growth (decline) is defined as retail sales generated by system-wide stores, that have been opened for at least 52 weeks and e-commerce sales relative to the same period in the prior fiscal year divided by the number of same-store transactions generated by system-wide stores, unless otherwise noted, that have been opened for at least 52 weeks and e-commerce sales relative to the same period in the prior fiscal year. Stores that are acquired through business acquisitions are excluded from this metric for at least 52 weeks from the date of the acquisition.
Changes during YTD 2025
During Q1 2025, a change was made to the composition of non-IFRS measures Adjusted EBITDA and Adjusted Net Income. Specifically, the "information technology transformation costs" and "business transformation costs" captions were combined, for presentation purposes into "transformation costs". This change was made to simplify presentation given that significant projects have (and are expected to continue to have) a combination of information technology costs and business costs. Comparative information was restated to be presented on this basis and the change had no overall impact on these non-IFRS measures.
During Q3 2025, we revised our definition of Free Cash Flow to include tenant allowances as a stand-alone adjustment separate from net cash generated from investing activities. This change aligned with the reclassification of tenant allowances from investing activities to financing activities in the Company's unaudited condensed interim consolidated statements of cash flows. Comparative amounts have also been reclassified to ensure consistency with current period presentation, however the change had no overall impact on Free Cash Flow.
During Q3 2025, we revised our definition of Net Capital Expenditures to specify that tenant allowances are presented separately within net cash generated from financing activities, rather than being included in net cash generated from investing activities. This change aligned with the reclassification of tenant allowances from investing activities to financing activities in the Company's unaudited condensed interim consolidated statements of cash flows. There was no change to the comparative information and the change had no overall impact on Net Capital Expenditures.
Results of Operations
Analysis of Results for Q3 2025 compared to Q3 2024
Revenue. Total revenue was $289.5 million in Q3 2025, an increase of $13.4 million, or 4.9%, compared to $276.0 million in Q3 2024. The increase in revenue was mostly driven by growth in retail sales, and franchise and other revenues, as described in more detail below.
Retail sales. Retail sales were $104.6 million in Q3 2025, an increase of $4.6 million, or 4.6%, as compared to $100.0 million in Q3 2024. The increase was primarily attributable to same-store sales growth, and retail sales from stores opened or acquired in the last 12 months, partially offset by re-franchised stores.
Franchise and other revenues. Franchise and other revenues were $184.9 million in Q3 2025, an increase of $8.8 million, or 5.0%, as compared to $176.1 million in Q3 2024. The increase was primarily attributable to higher wholesale merchandise sales of $8.2 million and higher royalties and sub-lease revenues of $1.5 million due to the growth in wholesale penetration and same-store sales growth as well as a higher number of new and re-franchised stores.
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Same-store sales growth (decline). Same-store sales growth was 2.3% in Q3 2025, primarily driven by a 2.0% increase in same-store average spend per transaction growth and by a 0.3% increase in same-store transaction growth. This is compared to a 2.5% same-store sales decline in Q3 2024, which was primarily driven by a 4.1% same-store transaction decline partially offset by a 1.7% increase in same-store average spend per transaction growth.
Gross profit. Gross profit increased by $6.2 million, or 6.9%, to $95.6 million in Q3 2025, compared to $89.4 million in Q3 2024. Gross profit margin was 33.0% in Q3 2025, compared to 32.4% in Q3 2024. Excluding costs related to the supply chain transformation of 0.5% in Q3 2025 and 1.1% in Q3 2024, the gross profit margin was 33.5% in Q3 2025 and Q3 2024, respectively. The consistent gross profit margin between periods was primarily driven by: (i) distribution efficiencies from the new distribution centres offset by (ii) higher occupancy costs.
SG&A expenses. SG&A expenses were $53.6 million in Q3 2025, an increase of $4.6 million, or 9.4%, compared to $49.0 million in Q3 2024. SG&A expenses represented 18.5% and 17.8% of total revenue for Q3 2025 and Q3 2024, respectively. The increase of $4.6 million in SG&A expenses was primarily due to: (i) higher compensation costs; (ii) a lower gain on sale of assets for re-franchised stores; (iii) increased SaaS fees; (iv) higher professional fees; and (v) higher depreciation and amortization from store growth.
Operating income. Operating income increased by $1.6 million to $41.9 million in Q3 2025, compared to $40.4 million in Q3 2024. The increase in operating income is explained by the factors impacting gross profit and SG&A expenses described above.
Net interest expense. Net interest expense was $7.9 million in Q3 2025, a decrease of $0.4 million, or 5.3%, compared to $8.3 million in Q3 2024. The decrease was mainly driven by lower interest expense on the term facility primarily due to lower interest rates compared to Q3 2024.
Income taxes. Income taxes were $8.9 million in Q3 2025 compared to $9.0 million in Q3 2024. The slight decrease was primarily due to a reduction in non-deductible share-based compensation, which lowered the effective tax rate in the current quarter, partially offset by higher taxable earnings in Q3 2025. The effective income tax rate was 26.4% in Q3 2025 compared to 27.9% in Q3 2024. The Q3 2025 effective tax rate was lower than the blended statutory rate of 26.5%, primarily due to a downward revision in the estimated non-deductible share-based compensation for the full fiscal year, which resulted in a favourable adjustment to the tax expense. The Q3 2024 effective tax rate was higher than the statutory rate due to non-deductible expenses.
Net income. Net income increased by $1.7 million to $24.9 million in Q3 2025, compared to $23.2 million in Q3 2024. The increase in net income was primarily driven by higher operating income and lower net interest expense, partially offset by a loss on foreign exchange, as described above.
Diluted net income per common share. Diluted net income per common share increased by $0.04 to $0.36 in Q3 2025, compared to $0.32 in Q3 2024. The 12.5% period over period increase was primarily driven by higher net income, as explained by the factors described above, and a lower weighted average number of common shares outstanding as a result of share repurchases.
Adjusted EBITDA. Adjusted EBITDA decreased by $1.0 million, or 1.5%, to $63.6 million in Q3 2025, compared to $64.6 million in Q3 2024. The decrease is explained by higher SG&A expenses after excluding share-based compensation and costs not indicative of business performance, driven by higher compensation costs, a lower gain on sale of assets for re-franchised stores, and increased SaaS fees, partially offset by higher gross profit excluding costs related to the supply chain transformation. Adjusted EBITDA as a percentage of revenue was 22.0% and 23.4% in Q3 2025 and Q3 2024, respectively.
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Adjusted Net Income. Adjusted Net Income decreased by $2.3 million to $27.6 million in Q3 2025, compared to $29.9 million in Q3 2024. Adjusted Net Income as a percentage of revenue was 9.6% in Q3 2025 and 10.8% in Q3 2024, respectively. The decrease was primarily due to higher SG&A expenses after excluding share-based compensation and costs not indicative of business performance, driven by higher compensation costs, a lower gain on sale of assets for re-franchised stores, and increased SaaS fees, partially offset by higher gross profit excluding costs related to the supply chain transformation, and lower income taxes as described above.
Adjusted Net Income per Diluted Share. Adjusted Net Income per Diluted Share decreased by $0.01 to $0.40 in Q3 2025, compared to $0.41 in Q3 2024. The 2.4% period over period decrease was primarily due to lower Adjusted Net Income, partially offset by a lower weighted average number of common shares outstanding as a result of share repurchases.
Analysis of Results for YTD 2025 compared to YTD 2024
Revenue. Total revenue was $849.2 million in YTD 2025, an increase of $47.2 million, or 5.9%, compared to $802.0 million in YTD 2024. The increase in revenue was mostly driven by the growth in retail sales, and franchise and other revenues, as described in more detail below.
Retail sales. Retail sales were $306.1 million in YTD 2025, an increase of $5.6 million, or 1.9%, as compared to $300.4 million in YTD 2024. The increase was primarily attributable to same-store sales growth, and retail sales from stores opened or acquired in the last 12 months, partially offset by re-franchised stores.
Franchise and other revenues. Franchise and other revenues were $543.1 million in YTD 2025, an increase of $41.5 million, or 8.3%, as compared to $501.6 million in YTD 2024. The increase in franchise and other revenues was primarily attributable to higher wholesale merchandise sales of $38.1 million and higher sub-lease revenues and royalties of $5.4 million due to the growth in wholesale penetration and same-store sales growth as well as a higher number of new and re-franchised stores.
Same-store sales growth (decline). Same-store sales growth was 2.1% in YTD 2025 primarily driven by a 2.1% increase in same-store average spend per transaction growth and flat same-store transaction growth. This is compared to same-store sales decline of 0.6% in YTD 2024, which was primarily driven by a 3.0% same-store transaction decline partially offset by a 2.4% increase in same-store average spend per transaction growth.
Gross profit. Gross profit increased by $16.8 million, or 6.4%, to $281.3 million in YTD 2025, compared to $264.4 million in YTD 2024. Gross profit margin was 33.1% of revenue in YTD 2025 compared to 33.0% in YTD 2024. Excluding the costs related to the supply chain transformation of 0.3% in YTD 2025 and 1.0% in YTD 2024, the gross profit margin was 33.4% and 34.0% in YTD 2025 and YTD 2024, respectively, and decreased by 0.6%. The decrease was primarily driven by: (i) higher wholesale merchandise sales; and (ii) higher occupancy costs.
SG&A expenses. SG&A expenses were $165.2 million in YTD 2025, an increase of $8.2 million, or 5.2%, compared to $157.0 million in YTD 2024. SG&A expenses represented 19.5% and 19.6% of total revenue for YTD 2025 and YTD 2024, respectively. The increase of $8.2 million in SG&A expenses was mostly due to: (i) higher compensation costs; (ii) lower gain on sale of assets for re-franchised stores and other leasing costs; (iii) higher marketing and advertising expenses; (iv) higher depreciation and amortization from store growth; and (v) higher professional fees; partially offset by (vi) lower technology expenditures related to our investment in e-commerce tools.
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Operating income. Operating income increased by $8.6 million to $116.0 million in YTD 2025, compared to $107.5 million in YTD 2024. The increase in operating income is explained by the factors impacting gross profit and SG&A expenses described above.
Net interest expense. Net interest expense was $22.5 million in YTD 2025, a decrease of $3.1 million, or 12.1%, compared to $25.6 million in YTD 2024. The decrease was mainly driven by lower interest expense on the term facility primarily due to lower interest rates compared to YTD 2024.
Income taxes. Income taxes were $25.3 million in YTD 2025 compared to $22.8 million in YTD 2024, an increase of $2.5 million year over year. The increase in income taxes was primarily the result of higher taxable earnings in YTD 2025. The effective income tax rate was 27.0% in YTD 2025 compared to 28.1% in YTD 2024. The YTD 2025 and YTD 2024 effective tax rates were higher than the blended statutory rate of 26.5% primarily because of non-deductible expenses.
Net income. Net income increased by $9.9 million to $68.4 million in YTD 2025, compared to $58.5 million in YTD 2024. The increase in net income was primarily driven by higher operating income, lower net interest expense, and a gain on foreign exchange, partially offset by higher income tax expense, as described above.
Diluted net income per common share. Diluted net income per common share increased by $0.16 to $0.97 in YTD 2025, compared to $0.81 in YTD 2024. The 19.8% year over year increase results primarily from the increase in net income, as explained by the factors described above, and a lower weighted average number of common shares outstanding as a result of share repurchases.
Adjusted EBITDA. Adjusted EBITDA increased by $3.6 million, or 2.0%, to $182.5 million in YTD 2025, compared to $178.9 million in YTD 2024. The increase was primarily due to higher gross profit after excluding costs related to the supply chain transformation, partially offset by SG&A expenses after excluding share-based compensation and costs not indicative of business performance, driven by higher compensation costs, lower gain on sale of assets for re-franchised stores and other leasing costs and higher marketing and advertising expenses. Adjusted EBITDA as a percentage of revenue was 21.5% and 22.3% in YTD 2025 and YTD 2024, respectively.
Adjusted Net Income. Adjusted Net Income decreased by $1.9 million to $79.2 million in YTD 2025, compared to $81.1 million in YTD 2024. Adjusted Net Income as a percentage of revenue was 9.3% in YTD 2025 and 10.1% in YTD 2024, respectively. The decrease was primarily due to higher SG&A expenses after excluding share-based compensation and costs not indicative of business performance, driven by higher compensation costs, lower gain on sale of assets for re-franchised stores and other leasing costs, and higher marketing and advertising expenses, partially offset by higher gross profit excluding costs related to the supply chain transformation, lower income taxes and lower net interest expense as described above.
Adjusted Net Income per Diluted Share. Adjusted Net Income per Diluted Share increased by $0.01 to $1.13 in YTD 2025, compared to $1.12 in YTD 2024. The 0.9% year over year increase was primarily driven by lower weighted average number of common shares outstanding as a result of share repurchases, partially offset by the impact of lower Adjusted Net Income.
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Total Assets
Q3 2025 compared to Fiscal 2024
Total assets were $1,010.3 million at Q3 2025, an increase of $39.4 million or 4.1%, compared to $970.9 million at Fiscal 2024. The increase was primarily driven by an increase in right-of-use assets of $29.5 million primarily due to the new Calgary distribution centre, lease renewals, and store count growth, an increase in property and equipment of $19.4 million primarily due to the new Calgary distribution centre and store leasehold improvements, and an increase in inventory of $16.6 million to support the growth of our store network and wholesale penetration, partially offset by a decrease in cash of $20.4 million (refer to "Liquidity and Capital Resources"), and a decrease in trade and other receivables of $5.6 million primarily due to the timing of franchise receivables.
Total Non-Current Liabilities
Q3 2025 compared to Fiscal 2024
Total non-current liabilities were $741.5 million at Q3 2025, an increase of $50.7 million or 7.3%, compared to $690.8 million at Fiscal 2024. The increase was primarily driven by an increase in long-term lease liabilities of $33.9 million resulting from the new Calgary distribution centre, lease renewals, and store count growth, and an increase in long-term debt of $15.7 million resulting from activity on the Company's revolving facility, including $32.0 million that was initially drawn in connection with the Share Repurchase, of which $17.0 million was subsequently repaid.
Selected Quarterly Results and Performance Measures
The following table summarizes selected results of the Company's operations for the last eight most recently completed quarters (information is in thousands of Canadian dollars unless otherwise noted). The unaudited quarterly results, excluding other performance measures, have been prepared in accordance with IFRS Accounting Standards. Due to seasonality, the results of operations for any quarter are not necessarily indicative of the results of operations for the fiscal year. In general, the fourth quarter has the strongest volume due to the holiday season. Additionally, quarterly performance can be impacted by the timing of holidays and significant weather changes.
| Fiscal 2025 | Fiscal 2024 | Fiscal 2023 | ||||||
|---|---|---|---|---|---|---|---|---|
| Q3 | Q2 | Q1 | Q4 | Q3 | Q2 | Q1 | Q4 | |
| 13 weeks | 13 weeks | 13 weeks | 13 weeks | 13 weeks | 13 weeks | 13 weeks | 13 weeks | |
| IFRS Measures | ||||||||
| Revenue | $289,462 | $280,647 | $279,087 | $295,149 | $276,030 | $265,228 | $260,786 | $286,908 |
| Gross profit | $95,562 | $93,642 | $92,055 | $100,216 | $89,379 | $87,693 | $87,351 | $98,501 |
| Gross profit margin | 33.0% | 33.4% | 33.0% | 34.0% | 32.4% | 33.1% | 33.5% | 34.3% |
| Operating Income | $41,928 | $36,748 | $37,372 | $47,872 | $40,356 | $33,796 | $33,299 | $48,265 |
| Net income | $24,862 | $21,810 | $21,762 | $28,905 | $23,158 | $17,839 | $17,518 | $28,765 |
| Weighted average number of common shares (in thousands) | 68,476 | 69,242 | 70,592 | 71,334 | 71,679 | 71,495 | 71,464 | 71,464 |
| Weighted average number of diluted common shares (in thousands) | 69,235 | 69,856 | 71,056 | 71,858 | 72,423 | 72,461 | 72,514 | 72,296 |
| Basic net income per common share | $0.36 | $0.31 | $0.31 | $0.41 | $0.32 | $0.25 | $0.25 | $0.40 |
| Diluted net income per common share | $0.36 | $0.31 | $0.31 | $0.40 | $0.32 | $0.25 | $0.24 | $0.40 |
| Non-IFRS Measures and Supplementary Financial Measures | ||||||||
| System-wide sales | $373,859 | $369,894 | $366,119 | $388,094 | $358,195 | $353,692 | $352,881 | $379,013 |
| System-wide stores | 849 | 833 | 830 | 824 | 805 | 799 | 794 | 783 |
| Same-store sales growth (decline) | 2.3% | 2.6% | 1.4% | (0.2%) | (2.5%) | 0.0% | 0.8% | 1.9% |
| EBITDA | $60,059 | $55,040 | $54,388 | $63,391 | $56,987 | $50,001 | $49,021 | $63,520 |
| Adjusted EBITDA | $63,598 | $60,175 | $58,738 | $68,173 | $64,599 | $57,731 | $56,580 | $71,256 |
| Adjusted Net Income | $27,648 | $26,208 | $25,354 | $32,183 | $29,929 | $25,881 | $25,334 | $39,096 |
| Adjusted Net Income per Diluted Share | $0.40 | $0.38 | $0.36 | $0.45 | $0.41 | $0.36 | $0.35 | $0.54 |
The following table provides a reconciliation of net income to EBITDA and Adjusted EBITDA for the periods indicated (in thousands unless otherwise noted):
| Fiscal 2025 | Fiscal 2024 | Fiscal 2023 | ||||||
|---|---|---|---|---|---|---|---|---|
| Q3 | Q2 | Q1 | Q4 | Q3 | Q2 | Q1 | Q4 | |
| 13 weeks | 13 weeks | 13 weeks | 13 weeks | 13 weeks | 13 weeks | 13 weeks | 13 weeks | |
| Reconciliation of net income to Adjusted EBITDA: | ||||||||
| Net income | $ 24,862 | $ 21,810 | $ 21,762 | $ 28,905 | $ 23,158 | $ 17,839 | $ 17,518 | $ 28,765 |
| Depreciation and amortization | 18,380 | 17,658 | 17,255 | 16,784 | 16,531 | 16,479 | 16,119 | 14,999 |
| Interest expenses, net | 7,884 | 7,447 | 7,132 | 6,552 | 8,326 | 8,670 | 8,555 | 8,456 |
| Income tax expense | 8,933 | 8,125 | 8,239 | 11,150 | 8,972 | 7,013 | 6,829 | 11,300 |
| EBITDA | 60,059 | 55,040 | 54,388 | 63,391 | 56,987 | 50,001 | 49,021 | 63,520 |
| Adjustments to EBITDA: | ||||||||
| Transformation costs(1) | 3,153 | 1,266 | 1,435 | 2,376 | 5,324 | 5,345 | 3,637 | 4,901 |
| Other professional fees(2) | 36 | 405 | 18 | 221 | 239 | 302 | 456 | 225 |
| Share-based compensation(3) | 101 | 4,098 | 2,658 | 176 | 2,149 | 1,809 | 3,069 | 2,866 |
| Asset impairments(4) | — | — | — | 744 | — | — | — | — |
| Loss (gain) on foreign exchange | 249 | (634) | 239 | 1,265 | (100) | 274 | 397 | (256) |
| Adjusted EBITDA | $ 63,598 | $ 60,175 | $ 58,738 | $ 68,173 | $ 64,599 | $ 57,731 | $ 56,580 | $ 71,256 |
The following table provides a reconciliation of net income to Adjusted Net Income for the periods indicated (in thousands unless otherwise noted):
| Fiscal 2025 | Fiscal 2024 | Fiscal 2023 | ||||||
|---|---|---|---|---|---|---|---|---|
| Q3 | Q2 | Q1 | Q4 | Q3 | Q2 | Q1 | Q4 | |
| 13 weeks | 13 weeks | 13 weeks | 13 weeks | 13 weeks | 13 weeks | 13 weeks | 13 weeks | |
| Reconciliation of net income to Adjusted Net Income: | ||||||||
| Net income | $ 24,862 | $ 21,810 | $ 21,762 | $ 28,905 | $ 23,158 | $ 17,839 | $ 17,518 | $ 28,765 |
| Adjustments to net income: | ||||||||
| Transformation costs(1) | 3,511 | 1,920 | 1,643 | 2,496 | 6,358 | 7,982 | 6,288 | 10,422 |
| Other professional fees(2) | 36 | 405 | 18 | 221 | 239 | 302 | 456 | 225 |
| Share-based compensation(3) | 101 | 4,098 | 2,658 | 176 | 2,149 | 1,809 | 3,069 | 2,866 |
| Asset impairments(4) | — | — | — | 744 | — | — | — | — |
| Gain on modification of debt(5) | — | — | — | (1,019) | — | — | — | — |
| Loss (gain) on foreign exchange | 249 | (634) | 239 | 1,265 | (100) | 274 | 397 | (256) |
| Tax effect of adjustments to net income | (1,111) | (1,391) | (966) | (605) | (1,875) | (2,325) | (2,394) | (2,926) |
| Adjusted Net Income | $ 27,648 | $ 26,208 | $ 25,354 | $ 32,183 | $ 29,929 | $ 25,881 | $ 25,334 | $ 39,096 |
Notes:
(1) Represents discrete, project-based implementation costs associated with new information technology systems and discrete SaaS arrangements for transformational initiatives supporting e-commerce and omni-channel capabilities, merchandise planning, customer relationship management and other key processes. Also, represents expenses associated with supply chain (Fiscal 2025, Fiscal 2024 and Fiscal 2023) and merchandise transformation initiatives (Fiscal 2025 and Fiscal 2024), such as duplicative warehousing and distribution costs, implementation costs associated with new information technology systems, and other transition costs incurred during the transition to a new distribution centre. For Adjusted Net Income, this also includes duplicative depreciation expense on property and equipment and right-of-use assets, and interest expense on lease liabilities. Additionally, transformation costs include severance related expenses associated with restructuring activities in certain business support functions (Fiscal 2024 and Fiscal 2023) and reorganization in the senior leadership team (Fiscal 2025 and Fiscal 2024).
(2) Represents professional fees primarily incurred with respect to: (i) the May 2025 Secondary Offering and 2024 Secondary Offering; and (ii) the CRA's examination of the Company's Canadian tax filings discussed in the "Income Taxes" section. These fees are included in selling, general and administrative expenses.
(3) Represents share-based compensation in respect of our amended and restated share option plan, long-term incentive plan, and deferred share unit plan which is included in selling, general and administrative expenses.
(4) Represents a non-cash impairment charge primarily related to the right-of-use asset and certain other assets for a corporate store which was included in selling, general and administrative expenses.
(5) Represents a gain on debt modification recognized in interest expenses, net in connection with the third amendment of the credit agreement completed on October 31, 2024.
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Liquidity and Capital Resources
Overview
Our primary sources of liquidity and capital resources are cash generated from operating activities and borrowings under our credit facility. Our principal uses of funds are operating expenses, working capital, capital expenditures, and debt service requirements.
As at the end of Q3 2025, available liquidity is approximately $155.0 million, as compared to $210.1 million as at the end of Fiscal 2024, and is comprised of:
- Cash of $14.8 million, as compared to $35.1 million as at the end of Fiscal 2024; and
- Available borrowings of $140.2 million under the revolving facility, as compared to $175.0 million as at the end of Fiscal 2024.
We believe that our cash combined with the expected cash flow from operations and liquidity to be available under the credit facilities will be sufficient to finance our continued operations for at least the next 12 months, including our operating expenses, capital expenditures, debt service and return to shareholders. In addition, we believe that our capital structure provides us with significant financial flexibility to pursue our future growth strategies and provide returns to shareholders, including through repurchases of common shares and increases, where appropriate, in our targeted dividend policy. However, our ability to fund operating expenses, capital expenditures, future debt service requirements, future growth strategies and return to shareholders will depend on, among other things, our future operating performance, which will be affected by general economic, financial and other factors, including factors beyond our control. See "Risk Factors" and "Summary of Factors Affecting Performance" in this MD&A.
Credit Facilities
Credit Agreement
During Q2 2025, the Company drew down $32.0 million under the revolving facility in connection with the Share Repurchase. Subsequently, during Q3 2025, $17.0 million of the revolving facility was repaid.
Under the revolving facility, standby letters of credit, not in excess of $20.0 million, may be advanced to the Company in Canadian or U.S. dollars. As at Q3 2025, the Company has outstanding standby letters of credit of $19.8 million (Fiscal 2024 — $nil). The standby letters of credit were advanced in relation to income tax matters with the CRA. See "Income Taxes" section in this MD&A.
As at the end of Q3 2025, the aggregate amount outstanding under the Company's term facility and revolving facility (together, the "Credit Facilities") was $282.6 million and $15.0 million, respectively. Borrowings under the Credit Facilities will bear interest, according to the type of borrowing advanced, at short-term floating rates based on a reference rate (CORRA, the U.S. base rate, the Canadian prime rate, or SOFR as applicable), plus a margin per annum depending on the Company's net total leverage ratio. As at the end of Q3 2025, the interest rate in effect on the Credit Facilities is 4.50% (Q3 2024 — 6.60%).
The obligations under the Credit Facilities are unconditionally guaranteed by the Company and are secured by a charge over substantially all of the property and assets of the Company.
The Company's credit agreement contains affirmative and negative covenants customary for credit facilities of this nature, subject to certain exceptions. The credit agreement also contains certain financial covenants to be complied with over the term of the Credit Facilities, which includes a net leverage ratio, a net first lien leverage coverage ratio, and an interest coverage ratio. As at Q3 2025, the
Company is in full compliance with all of its financial covenants, and there are no facts or circumstances that would suggest that the Company will be unable to comply with its covenants over the next 12 months.
Deferred financing costs
In connection with the Company's credit agreement and subsequent amendments, total deferred financing costs of $7.6 million were incurred. The total unamortized deferred financing costs are $3.1 million as at the end of Q3 2025 and are being amortized using the effective interest method. These amounts were included as interest expenses.
Cash Flows
The following table presents cash flows for the periods indicated:
| Quarters Ended | Year to Date Ended | |||
|---|---|---|---|---|
| September 27, 2025 | September 28, 2024 | September 27, 2025 | September 28, 2024 | |
| 13 weeks | 13 weeks | 39 weeks | 39 weeks | |
| Net cash provided by operating activities | $ 45,674 | $ 55,699 | $ 134,812 | $ 132,339 |
| Net cash used in financing activities | (37,244) | (41,839) | (149,663) | (119,265) |
| Net cash used in investing activities | (4,785) | (2,548) | (5,436) | (5,669) |
| Effect of exchange rate changes on cash | (263) | 31 | (96) | (419) |
| Net increase (decrease) in cash | $ 3,382 | $ 11,343 | $ (20,383) | $ 6,986 |
Analysis of Cash Flow for Q3 2025 and YTD 2025
Net cash provided by operating activities:
For Q3 2025, net cash provided by operating activities totalled $45.7 million, a decrease of $10.0 million, compared to net cash provided by operating activities of $55.7 million in Q3 2024. The decrease is due to a $9.6 million net change in operating working capital explained by: (i) higher prepaid expenses due to the timing of lease payments; and (ii) higher trade receivables due to the timing of payments; partially offset by (iii) higher trade and other payables due to the timing of payments and higher non-trade related payables. The remaining decrease was due to higher income tax payments of $3.0 million partially offset by higher net income of $2.6 million (adjusted for items not involving cash).
For YTD 2025, net cash provided by operating activities totalled $134.8 million, an increase of $2.5 million, compared to net cash provided by operating activities of $132.3 million in YTD 2024. The increase is explained by $15.1 million higher net income (adjusted for items not involving cash) partially offset by higher income tax payments of $3.1 million and a combined $9.6 million net change in operating working capital explained by: (i) higher prepaid expenses due to the timing of lease payments; (ii) higher net change in inventory due to the timing of purchases, and greater distribution capacity utilization to support store and wholesale penetration growth; (iii) lower trade and other payables due to the timing of payments for non-trade related payables partially offset by higher trade payables; and (iv) lower receivables related to franchisee billings and trade receivables due to the timing of payments.
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Net cash used in financing activities:
For Q3 2025, net cash used in financing activities totalled $37.2 million, compared to net cash used in financing activities of $41.8 million in Q3 2024. The decrease is primarily driven by: (i) higher tenant allowances primarily related to the new Calgary distribution centre; (ii) lower interest payments on the term facility primarily due to lower interest rates compared to Q3 2024; (iii) no quarterly principal repayment on the term facility in the current period as a result of the amended credit agreement; (iv) higher proceeds from the exercise of share options; and (v) no shares repurchased for cancellation; partially offset by (vi) repayments on the revolving facility.
For YTD 2025, net cash used in financing activities totalled $149.7 million, compared to net cash used in financing activities of $119.3 million in YTD 2024. The increase is primarily driven by: (i) shares repurchased for cancellation; and (ii) higher principal and interest payments on lease liabilities due to store network expansion; partially offset by (iii) net drawings on the revolving facility, (iv) no quarterly principal repayments on the term facility in the current period as a result of the amended credit agreement; (v) lower interest payments on the term facility primarily due to lower interest rates compared to YTD 2024; (vi) higher tenant allowances primarily related to the new Calgary distribution centre; and (vii) higher proceeds from the exercise of share options.
Net cash used in investing activities:
For Q3 2025, net cash used in investing activities totalled $4.8 million, compared to net cash used in investing activities of $2.5 million in Q3 2024. The increase is explained by: (i) lower proceeds on disposal of property and equipment from the sale of corporate-owned stores to franchisees; (ii) higher initial direct costs associated with new lease agreements; and (iii) increased expenditures on intangible assets, property and equipment, and the repurchase of franchises; partially offset by (iv) higher principal payments collected on lease receivables.
For YTD 2025, net cash used in investing activities totalled $5.4 million, compared to net cash used in investing activities of $5.7 million in YTD 2024. This decrease is explained by: (i) higher principal payments collected on lease receivables; and (ii) lower expenditures on property and equipment associated with the construction in progress for the new distribution centres; partially offset by (iii) lower proceeds on disposal of property and equipment from the sale of corporate-owned stores to franchisees; (iv) the repurchase of franchises; and (v) higher initial direct costs associated with new lease agreements.
Free Cash Flows
The following table presents free cash flows for the periods indicated (in thousands unless otherwise noted).
| Quarters Ended | Year to Date Ended | |||
|---|---|---|---|---|
| September 27, 2025 | September 28, 2024 | September 27, 2025 | September 28, 2024 | |
| 13 weeks | 13 weeks | 39 weeks | 39 weeks | |
| Cash provided by operating activities | $ 45,674 | $ 55,699 | $ 134,812 | $ 132,339 |
| Cash used in investing activities | (4,785) | (2,548) | (5,436) | (5,669) |
| Tenant allowances | 7,921 | 177 | 8,871 | 1,046 |
| Repayment of principal on lease liabilities | (18,158) | (16,541) | (53,029) | (48,108) |
| Interest paid on lease liabilities | (5,878) | (5,865) | (17,737) | (17,494) |
| Notes receivable | (95) | (154) | (353) | (505) |
| Free Cash Flow | $ 24,679 | $ 30,768 | $ 67,128 | $ 61,609 |
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Analysis of Free Cash Flow for Q3 2025 and YTD 2025
Free cash flows amounted to $24.7 million in Q3 2025 compared to $30.8 million in Q3 2024, a decrease of $6.1 million primarily driven by: (i) a decrease in cash from operating activities due to an unfavourable net change in operating working capital; (ii) an increase in cash used for investing activities due to lower proceeds on the sale of corporate-owned stores to franchisees; and (iii) an increase in payments of principal and interest on lease liabilities due to store network expansion; partially offset by (iv) higher tenant allowances primarily related to the new Calgary distribution centre.
Free cash flows amounted to $67.1 million in YTD 2025 compared to $61.6 million in YTD 2024, an increase of $5.5 million primarily driven by: (i) higher tenant allowances primarily related to the new Calgary distribution centre; and (ii) an increase in cash from operating activities due to higher net income (adjusted for items not involving cash) partially offset by higher income tax payments and a favourable net change in operating working capital; partially offset by (iii) an increase in payments of principal and interest on lease liabilities due to store network expansion.
Net Capital Expenditures
The following table provides a reconciliation of Net Capital Expenditures for the periods indicated (in thousands unless otherwise noted):
| Quarters Ended | Year to Date Ended | |||
|---|---|---|---|---|
| September 27, 2025 | September 28, 2024 | September 27, 2025 | September 28, 2024 | |
| 13 weeks | 13 weeks | 39 weeks | 39 weeks | |
| Purchases of property and equipment | $ (16,837) | $ (16,661) | $ (39,790) | $ (43,139) |
| Purchases of intangible assets | (478) | (254) | (1,231) | (1,518) |
| Proceeds on disposal of property and equipment | 1,071 | 2,848 | 1,747 | 6,104 |
| Tenant allowances | 7,921 | 177 | 8,871 | 1,046 |
| Net Capital Expenditures(1) | $ (8,323) | $ (13,890) | $ (30,403) | $ (37,507) |
Notes:
(1) Net Capital Expenditures is a non-IFRS measure. Non-IFRS measures are not determined in accordance with IFRS, do not have standardized meanings and may not be comparable to similar financial measures presented by other companies. See "How We Assess the Performance of Our Business" for the definition of Net Capital Expenditures.
Analysis of Net Capital Expenditures for Q3 2025 and YTD 2025
Net Capital Expenditures amounted to $8.3 million in Q3 2025 compared to $13.9 million in Q3 2024, a decrease of $5.6 million primarily driven by higher tenant allowances primarily related to the new Calgary distribution centre, partially offset by lower proceeds on disposal of property and equipment from the sale of corporate-owned stores to franchisees.
Net Capital Expenditures amounted to $30.4 million in YTD 2025 compared to $37.5 million in YTD 2024, a decrease of $7.1 million primarily driven by higher tenant allowances primarily related to the new Calgary distribution centre, and lower expenditures on property and equipment associated with the construction in progress for the new distribution centres, partially offset by lower proceeds on disposal of property and equipment from the sale of corporate-owned stores to franchisees.
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Contractual Obligations, Guarantees, and Contingencies
The following table summarizes our significant undiscounted payment maturities of our contractual obligations and commitments as at the end of Q3 2025.
| Fiscal 2025 | Fiscal 2026 | Fiscal 2027 | Fiscal 2028 | Fiscal 2029 | Thereafter | Total | |
|---|---|---|---|---|---|---|---|
| Trade and other payables | $ 105,595 | $ — | $ — | $ — | $ — | $ — | $ 105,595 |
| Long-term debt | — | — | — | — | 282,625 | — | 282,625 |
| Lease liabilities | 33,028 | 96,932 | 88,115 | 73,324 | 73,926 | 246,890 | 612,215 |
| Lease commitments with future commencement dates(1) | 167 | 1,369 | 1,650 | 1,604 | 1,663 | 9,589 | 16,042 |
| Purchase obligations(2) | 689 | 7,056 | 6,273 | 4,859 | 2,604 | 533 | 22,014 |
| Total contractual obligations | $ 139,479 | $ 105,357 | $ 96,038 | $ 79,787 | $ 360,818 | $ 257,012 | $1,038,491 |
Notes:
(1) Represents lease commitments for future corporate-owned or franchised stores based on an initial lease term of approximately 10 years.
(2) Represents certain significant commitments associated to service agreements where the contract prescribes significant terms including fixed or minimum pricing or payments, and provisions for payment upon termination of services without cause. These obligations are estimates of financial commitments under these arrangements and the actual payment may vary. These purchase obligations also do not include purchase orders issued or agreements made in the normal course of business which are solely for goods meant for resale nor do they include any contracts that may be terminated under short notice or with a relatively insignificant cost or liability to the Company.
Bank comfort letters
The Company has provided comfort letters to certain financial institutions at their request when these financial institutions provide financing to new franchisees. In the comfort letters, the Company has agreed that for three years from the date of the letter, if the bank is forced to realize on its security, including inventory held by the franchisee, the Company will repurchase the inventory previously sold to the franchisee at a stated discount of 15%, provided that such inventory can be sold by the bank to the Company free and clear of any and all liens, charges and encumbrances or rights of others.
Standard practice is for the Company to realize its rights under the franchise agreement prior to the franchisee reaching default under their finance arrangement; therefore, the risk associated with being required to repurchase inventory under these comfort letters is considered remote. Accordingly, no amount has been provided for in the accompanying consolidated financial statements.
Litigation
The Company may, from time to time, be named as a defendant in legal proceedings that arise from its normal course of business. Although the amount of any liability that could arise with respect to any pending claims cannot be estimated, the Company believes that any such liability is not reasonably likely to have a material adverse effect on its financial position, operating results, or liquidity.
Income Taxes
The Company is subject to routine audits of its tax filing positions by the CRA. In September 2023, the CRA reassessed the Company approximately $6.0 million of additional income tax plus interest for the 2018 taxation year, citing the non-deductibility of certain interest expenses ("2018 reassessment"). In April 2024, the CRA issued proposal letters indicating its intent to deny similar interest expense deductions for the Company's 2019 and 2020 taxation years, consistent with the 2018 reassessment, and accordingly, in June 2024, the CRA reassessed the Company approximately $6.4 million of additional income tax plus interest for the 2019 taxation year ("2019 reassessment").
In January 2025, the CRA issued a further proposal to deny the deduction of certain intercompany dividends for the Company's 2016, 2017, and 2018 taxation years. This proposal also confirmed that the CRA would not proceed with the April 2024 proposal regarding interest deductions for the Company's 2020 taxation year. In March 2025, the CRA reassessed the Company approximately $18.4 million of additional income tax plus interest based on the January 2025 proposal ("2016-2018 reassessments").
The Company had previously filed objections with the CRA in relation to the 2018 reassessment and the 2019 reassessment. In August 2025, the CRA notified the Company that it would allow the objections in full, and subsequently, it reversed both the 2018 reassessment and the 2019 reassessment.
The Company has filed objections to, and intends to vigorously contest, the 2016-2018 reassessments. The Company and its tax advisors believe that the Company's tax filing positions are appropriate. Accordingly, no amount or provision has been recorded in the interim financial statements in respect of the 2016-2018 reassessments.
The Company has outstanding standby letters of credit related to the notice of objections for the 2019 reassessment and the 2016-2018 reassessments (refer to "Liquidity and Capital Resources" in this MD&A). The Company has requested that the letter of credit related to the 2019 reassessment be released by the CRA.
Share Information
The Company's authorized share capital consists of an unlimited number of common shares and an unlimited number of preferred shares, issuable in series. The holders of common shares are entitled to receive dividends as declared from time to time by the Board of Directors. Shareholders are entitled to one vote per common share at shareholder meetings of the Company.
Preferred shares of each series, if and when issued, will, with respect to the payment of dividends, be entitled to preference over common shares. Except as provided in any special rights or restrictions attaching to any series of preferred shares issued from time to time, the holders of preferred shares will not be entitled to vote at any shareholder meetings of the Company.
During YTD 2025, under the 2024 NCIB and the Share Repurchase, the Company repurchased an aggregate of 2,785,996 common shares for cancellation for cash consideration of $78.0 million.
As at November 3, 2025, there are 68,754,168 common shares and 2,314,166 share options, each exercisable for one common share, issued and outstanding.
For further details concerning the rights, privileges and restrictions attached to the common shares, please refer to the section entitled "Description of Share Capital" in the AIF.
Dividends
Subject to financial results, capital requirements, available cash flow, the need for funds to finance ongoing operations and other factors that the Board of Directors may consider relevant, it is the intention of the Board of Directors to declare a quarterly cash dividend. It is expected that future cash dividend payments will be made to common shareholders of record as at a date to be determined by the Board of Directors. The actual payment, amount and timing of any dividends are not guaranteed and are subject to the discretion of our Board of Directors. See "Risk Factors" in this MD&A.
During YTD 2025, the Company paid $24.9 million in dividends to holders of common shares (YTD 2024 — $23.6 million) or $0.36 per common share (YTD 2024 — $0.33 per common share).
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Critical Accounting Estimates and Judgments
The critical accounting estimates and judgments as disclosed in the Company's audited consolidated financial statements for Fiscal 2024 have been applied consistently in the preparation of this MD&A.
Risk Factors
For a detailed description of risk factors relating to the Company, please refer to the "Risk Factors" section of the Company's AIF, which is available on SEDAR+ at www.sedarplus.ca.
The Company's activities expose it to a variety of financial risks: credit risk, liquidity risk, foreign currency risk, and interest rate risk. The Company's overall risk management program and business practices seek to minimize any potential adverse effects on the Company's consolidated financial performance. Risk management is carried out by the senior management team under policies approved by the Company's Board of Directors.
Foreign Currency Risk
The Company is exposed to currency risk related to some of its purchases. Specifically, the Company sources some of its merchandise in U.S. dollars. Inventory purchases sourced outside Canada and primarily denominated in U.S. dollars represented approximately 22% on a trailing 12-month basis as at the end of Q3 2025.
The Company is also exposed to currency risks on financial assets and liabilities denominated in foreign currencies. These assets and liabilities are of a short-term nature and management does not believe they represent a significant risk to the Company. As a result of the revaluation of these financial assets and liabilities, a five-percentage point change in the Canadian dollar against the U.S. dollar, assuming that all other variables are constant, would have changed income before income taxes for YTD 2025 by $0.3 million (YTD 2024 — $0.4 million) as a result of the revaluation on these financial assets and liabilities.
Interest Rate Risk
Interest rate risk is the risk the fair value or future cash flows of a financial instrument will fluctuate because of changes in market interest rates. The term facility is at variable interest rates. Changes in short-term floating rates can cause fluctuations in interest payments and cash flows.
A one percentage point change in the applicable interest rate in the credit agreement based on the debt outstanding as at YTD 2025 would have changed income before taxes for YTD 2025 by $2.2 million (YTD 2024 — $2.1 million).
Credit Risk
Credit risk is the risk of financial loss to the Company if a customer or counterparty to a financial instrument fails to meet its contractual obligations and arises principally from the Company's cash and cash equivalents, accounts and other receivables, and lease receivables. The risk on cash and cash equivalents is mitigated by the fact that its deposits are with various high-quality financial institutions. The Company has receivables from its suppliers and from the Company's franchise operators. The credit risk on its receivables from suppliers is managed by the ability to offset any monies owed by the supplier against amounts owed to the suppliers. The management of credit risk on the Company's franchisee accounts receivable and lease receivable is maintained by having short settlement terms on these receivables and prior to accepting a franchisee, the Company undertakes a detailed screening process that includes the requirement that a franchisee has sufficient financing.
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Liquidity Risk
Liquidity risk is the risk the Company will not be able to meet its financial obligations as they come due. The Company mitigates liquidity risk by the management of working capital and cash flows, and by maintaining various financing sources, including bank debt and finance leases. Adequate availability is maintained on the operating loan component of the Company's credit facility to minimize this risk. The Company's trade and other payables are all due within 12 months of each reporting period.
Disclosure Controls and Procedures and Internal Controls Over Financial Reporting
Disclosure controls and procedures are designed to provide reasonable assurance that information required to be disclosed by the Company in its annual filings, interim filings or other reports filed or submitted by it under securities legislation is recorded, processed, summarized and reported within the time periods specified in the securities legislation and include controls and procedures designed to ensure that information required to be disclosed by the Company is accumulated and communicated to the Company's management, including its certifying officers, namely the Chief Executive Officer ("CEO") and Chief Financial Officer ("CFO"), as appropriate to allow timely decisions regarding public disclosure. An evaluation of the design of the Company's disclosure controls and procedures, as defined under National Instrument 52-109 - Certification of Disclosure in Issuers' Annual and Interim Filings ("NI 52-109"), was carried out under the supervision of the CEO and CFO and with the participation of the Company's management. Based on that evaluation, the CEO and CFO have concluded that the design of these controls were effective as at September 27, 2025.
The Company also maintains a system of internal controls over financial reporting designed under the supervision of the Company's CEO and CFO to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with IFRS. As required by NI 52-109, the CEO and the CFO have caused the effectiveness of the internal controls over financial reporting to be evaluated using the framework (2013) established by the Committee of Sponsoring Organizations of the Treadway Commission ("COSO"). Based on that evaluation, the CEO and the CFO have concluded that the design and operation of the Company's internal controls over financial reporting, as defined by NI 52-109, were effective as at September 27, 2025.
Subsequent Events
On November 3, 2025, the Board of Directors of the Company declared a dividend of $0.12 per common share payable on December 15, 2025 to holders of common shares of record as at the close of business on November 28, 2025.
Outlook
Fiscal 2025 will be a 53-week fiscal year for Pet Valu, compared to a 52-week fiscal year in Fiscal 2024. Factoring in YTD 2025 performance, together with market conditions and the impact of the 53rd week of operation in Fiscal 2025, the Company expects:
- Revenue between $1.175 and $1.185 billion, supported by approximately 40 new store openings, approximately 2% same-store sales growth and higher wholesale merchandise sales penetration;
- Adjusted EBITDA between $257 and $260 million, which incorporates continued price investments and normalization of operating expenses;
- Adjusted Net Income per Diluted Share between $1.63 and $1.66, which incorporates approximately $12 million pre-tax, or $0.12 per diluted share, of incremental depreciation and lease liability interest expense associated with the new distribution centres;
- Transformation costs of approximately $11 million pre-tax, and share-based compensation of approximately $10 million pre-tax, both of which are excluded from Adjusted EBITDA and Adjusted Net Income per Diluted Share; and
- Net Capital Expenditures of approximately $45 million.
The Company continues to monitor the evolving governmental foreign trade environment and believes it has the appropriate mechanisms in place to adapt, as necessary. The above Outlook is based on several assumptions, including, but not limited to, governmental foreign trade policies currently in place as of this release.
Additional Information
Additional information relating to the Company, including the Company's AIF, is available on SEDAR+ at www.sedarplus.ca. The Company's common shares are listed for trading on the Toronto Stock Exchange under the symbol "PET".
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