What would you do for your pet? My dog Teddy gets the best of everything. Not because I have to spoil him, but because he is a cherished member of our family – one that we sacrifice both time and money for in order to keep him healthy and happy. Pet Valu Holdings Ltd. (TSX: PET), the retail stock that I’ll discuss in this article, understands this sentiment.
Here’s why I like this consumer discretionary stock that’s actually down 22% from its 2023 highs despite steadily improving revenue and a positive outlook.
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What is Pet Valu Holdings?
Pet Valu is a Canadian specialty retailer of pet food and pet-related supplies, with a total of 830 stores from coast to coast across Canada. The stores are mostly franchised and are among the best franchisee opportunities in Canada. This store network is complemented by a digital presence and a growing wholesale business.
This, in a nutshell, is the opportunity. Pet Valu is a retail stock that is considered to be a consumer discretionary stock. Yet, is it really a consumer discretionary stock when it’s selling food to keep our beloved pets alive? Do we really consider that discretionary? Isn’t there plenty of spending that we could and would gladly forgo in order to keep our pets alive and well?
This takes me to my next point. A quick fundamental analysis leads me to a bullish view of Pet Valu. The retailer is benefitting from what seems to be a renewed focus from society on not only keeping our pets alive, but keeping them in top condition. This means healthy and happy. I think many of us would spend a lot of money to achieve these goals. It reminds me of the mindset parents often have – highly motivated to keep our kids happy and willing to spend ridiculous amounts of money to make it happen.
A retail stock with heart
Against this backdrop, I see a lot of opportunity for a retailer like Pet Valu. And this is evident in the company’s results in the last four years. Since 2020, revenue has increased 69% to $1.1 billion in 2024. That equates to a compound annual growth rate (CAGR) of 14%. Also, net income increased 312% to $87 million in 2024. That’s a CAGR of 42.5%.
The opportunity comes in the demand from pet owners and what I expect will be their continued willingness to spend on their beloved pets. It also comes from more company-specific reasons such as Pet Valu’s continued expansion and operational initiatives that are driving cash flows and efficiencies.
For example, the retailer continues to expand its footprint. In the first quarter of 2025, seven new stores were opened. In the full year, the company plans to open 40 new stores to bring its store count 5% higher.
Beyond this, an expanded loyalty program and promotional program should continue to bring in customers. These initiatives have already resulted in record loyalty penetration, and increased traffic and basket size. We can expect these trends to continue.
Finally, PetValu is focused on key growth areas such as key consumables. For example, the dog culinary category is food for dogs that involves fresh, balanced meals with human-grade ingredients. It includes frozen, raw, and freeze-dried foods. Sales in this category increased 20% in the last quarter – evidence of the lengths that pet families are willing to go to keep their pets happy and healthy.
The bottom line
In closing, Pet Valu is a consumer discretionary stock that I would bet on. Changing attitudes towards pets are driving increased consumer investment in everything pet-related. Pets like my Teddy are increasingly seen as true members of our families and this has opened up consumers’ wallets. In turn, this has increased demand for high-quality pet food and products and has sparked a bullish secular trend for pet retailers like Pet Valu.
