Why Pet Valu Stock Fell on Tuesday

Pet Valu (TSX:PET) stock fell as the stock reported earnings that demonstrated slower growth and profitability during the first quarter.

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The days of Pet Valu Holdings (TSX:PET) holding value seem to be pretty far behind us. Pet Valu stock soared in share price during the pandemic, having a perfectly timed initial public offering as well. However, since then, inflation and interest rates have hurt the company fairly severely. And this was seen again during earnings.

What happened?

Shares of Pet Valu stock were down by almost 5% on Tuesday as the company came out with first-quarter earnings. The pet food retailer reported first-quarter profit of $17.5 million, which alone was a decrease from the $18.7 million it reported the year before.

Revenue for Pet Valu stock totalled $260.8 million, which was an increase from the $250.3 million the stock saw the year before. Same-store sales rose slightly as well, which was helped by a 3.2% increase in same-store average spend per transaction. However, overall, it was a muted report for the company.

Even so, management was positive about the future. The company expects to advance “several key strategic initiatives” that should go live during the second quarter. The question is, will it be too late?

Earnings momentum

Whether positive or negative, earnings momentum can demonstrate what’s going on with Pet Valu stock for investors. So, let’s take a look back at the third or fourth quarters to see if they can shed any light on whether there have been improvements for the company.

In the third quarter, Pet Valu reported net income of $18 million, with revenue totalling $262.3 million. Furthermore, same-store sales gains hit 4.2%, with the average spend per transaction increasing as well.

The fourth quarter also demonstrated strength, with revenue at $286.9 million, showing that the company was climbing from the third quarter. Net income rose to $28.8 million as well, with same-store sales growth rising 1.9%. So, as we can see, net income and revenue both fell quarterly.

Looking ahead

So, now, we need to look to the future and what Pet Valu stock expects to happen during 2024. Furthermore, we need to determine whether the current earnings are misses or falling in line with expectations.

The outlook for 2024 stated that the stock expects revenue between $1.11 and $1.14 billion during the year. This would be supported by same-store sales growth between 2% and 5% and the opening of 40 to 50 new stores. Furthermore, net income should be between $1.57 and $1.63 per diluted share.

This guidance was reaffirmed during the first quarter once again. So, while the company showed results that weren’t exactly exciting for investors, it seems that Pet Valu stock is still convinced it can achieve its 2024 guidance.

Even so, it will be interesting to learn more about these “strategic initiatives” alluded to during the first quarter report. Until then, it’s likely investors will remain on the sidelines for Pet Valu stock. However, I would still keep an eye on this company, as who knows what these strategic initiatives might entail.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Amy Legate-Wolfe has no position in any of the stocks mentioned. The Motley Fool recommends Pet Valu. The Motley Fool has a disclosure policy.

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