Savers Value Village, Inc. 10-K Analysis & Summary – 2/21/2025

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Savers Value Village, Inc.

10-K

Annual report

Filing date:

02/21/2025

TLDR:

Savers Value Village’s 10-K filing for fiscal year 2024 shows a slight increase in net sales but a decrease in comparable store sales in Canada and a material weakness in internal controls. The company faces risks related to sourcing, labor costs, and economic conditions.

ELI5:

Savers Value Village, a thrift store company, made a little more money overall, but sales in Canada went down. They also found a problem with their computer systems. They have to worry about getting good stuff to sell, paying their workers, and the economy.

Accession #:

0001883313-25-000013

Published on

March 16, 2025

Analyst Summary

Net Sales increased by 2.5% to $1,537.6 million.
Comparable Store Sales decreased by 0.1% overall, with a 2.7% increase in the U.S. offset by a 4.0% decrease in Canada.
Gross Product Margin decreased from 58.7% to 56.4%.
Operating Income decreased from $141.9 million to $130.2 million.
Net Income decreased from $53.1 million to $29.0 million.
Sales Yield decreased slightly from $1.48 to $1.46.
Pounds Processed increased from 984 million to 1,012 million.
Material Weakness in Internal Controls related to IT general controls was identified.
Gross Profit Margin decreased from 58.70% to 56.44%.
Operating Profit Margin decreased from 9.46% to 8.46%.
Net Profit Margin decreased from 3.54% to 1.89%.
Return on Assets (ROA) decreased from 2.84% to 1.54%.
Return on Equity (ROE) decreased from 14.12% to 6.88%.
Basic EPS decreased from $0.35 to $0.18.
Diluted EPS decreased from $0.34 to $0.17.
Current Ratio decreased from 1.068 to 0.996.
Quick Ratio decreased from 0.932 to 0.848.
Cash Ratio decreased from 0.745 to 0.649.
Debt-to-Equity Ratio decreased from 3.97 to 3.47.
Debt-to-Assets Ratio decreased from 0.798 to 0.776.
Interest Coverage Ratio increased from 1.60 to 2.08.
Inventory Turnover increased from 19.34 to 20.0.
Days Sales Outstanding (DSO) increased from 2.86 days to 3.98 days.
Days Payable Outstanding (DPO) decreased from 54.54 days to 45.26 days.
Asset Turnover increased from 0.803 to 0.815.
Price-to-Earnings Ratio (P/E) is 53.35.
Price-to-Book Ratio (P/B) is 3.58.
Price-to-Sales Ratio (P/S) is 0.98.
Enterprise Value to EBITDA (EV/EBITDA) is 7.49.
Revenue Growth is 2.5%.
Net Income Growth is -45.35%.
EPS Growth is -50%.
Adjusted EBITDA decreased by 11.3%.

Opportunities and Risks

Risks: Dependence on obtaining quality secondhand items at attractive prices.
Risks: Rising wage rates and potential unionization could increase labor costs.
Risks: Global economic conditions and consumer spending trends can impact both supply and demand.
Risks: Increasing competition in the secondhand market and from traditional retailers.
Risks: Risk of cyberattacks and data breaches.
Risks: Exposure to various laws and regulations, including those related to the sale of secondhand items and advertising practices.
Risks: Inability to maintain effective internal control over financial reporting.
Opportunities: Strategic growth of the store base in existing and new markets.
Opportunities: Implementation of CPC and ABP technologies to improve operational efficiency.
Opportunities: Expanding engagement with loyalty program members to drive sales.
Opportunities: Utilizing brand marketing to improve brand awareness and drive new customer acquisition.
Opportunities: Capitalizing on the growing demand for sustainable and socially responsible products.

Potential Implications

Company Performance

Prioritize Remediation of Material Weakness: Address the IT general control deficiencies promptly to ensure accurate financial reporting and compliance.
Monitor Canadian Market Performance: Closely monitor sales trends and implement strategies to address the challenges in the Canadian market.
Manage Labor Costs: Implement strategies to mitigate the impact of rising wage rates and potential unionization.
Strengthen Cybersecurity: Invest in cybersecurity measures to protect against data breaches and cyberattacks.
Focus on improving profitability and managing its debt levels to enhance its financial health.

Savers Value Village, Inc. (SVV) – 10-K Filing Analysis – Fiscal Year 2024

Executive Summary

This report analyzes Savers Value Village, Inc.’s 10-K filing for the fiscal year ended December 28, 2024. SVV operates in the secondhand retail market, purchasing goods from non-profits and selling them in its stores. Key findings include a slight increase in net sales, a decrease in comparable store sales in Canada, and a material weakness in internal controls. The company faces risks related to sourcing quality goods, managing labor costs, and economic conditions. While SVV is expanding its store base and implementing efficiency initiatives, the identified material weakness and challenging macroeconomic conditions in Canada warrant a cautious outlook.

Company Overview

Savers Value Village, Inc. is a for-profit thrift operator in the U.S., Canada, and Australia. The company operates 351 stores under various banners (Savers, Value Village, etc.). SVV purchases secondhand goods from non-profit partners (NPPs) and sells them in a treasure-hunt shopping environment. The company also sells unsold items to wholesale customers. SVV’s business model emphasizes sustainability and community involvement.

Detailed Analysis

Financial Statement Analysis

Key Metrics and Trends:

Net Sales: Increased by 2.5% to $1,537.6 million.
Comparable Store Sales: Decreased by 0.1% overall, with a 2.7% increase in the U.S. offset by a 4.0% decrease in Canada.
Gross Product Margin: Decreased from 58.7% to 56.4%.
Operating Income: Decreased from $141.9 million to $130.2 million.
Net Income: Decreased from $53.1 million to $29.0 million.
Sales Yield: Decreased slightly from $1.48 to $1.46.
Pounds Processed: Increased from 984 million to 1,012 million.

Key Ratios:

Gross Profit Margin: 56.4% (Net Sales – Cost of Merchandise Sold / Net Sales)
Operating Margin: 8.5% (Operating Income / Net Sales)
Net Profit Margin: 1.9% (Net Income / Net Sales)

Balance Sheet Highlights:

Total Assets increased slightly.
Cash and Cash Equivalents decreased.
Long-term debt decreased.

Cash Flow Analysis:

Net cash provided by operating activities decreased significantly.
Net cash used in investing activities decreased.
Net cash used in financing activities increased.

Management’s Discussion and Analysis (MD&A) Insights

Management acknowledges challenging macroeconomic conditions in Canada impacting consumer spending.
The company is focused on strategic initiatives to drive efficiency and expand margins, including increasing OSDs (On-Site Donations) and implementing CPC (Centralized Processing Centers) and ABP (Automated Book Processing) technologies.
The company plans to open 25-30 new stores in 2025.

Red Flags and Uncommon Metrics

Material Weakness in Internal Controls: The company identified a material weakness related to IT general controls. This is a significant concern and requires remediation.
Decreased Comparable Store Sales in Canada: This indicates potential challenges in the Canadian market.
Increased Cost of Merchandise Sold: This could be due to increased labor, transportation, and storage costs.

Risk and Opportunity Assessment

Risks:

Sourcing Risk: Dependence on obtaining quality secondhand items at attractive prices.
Labor Costs: Rising wage rates and potential unionization could increase labor costs.
Economic Conditions: Global economic conditions and consumer spending trends can impact both supply and demand.
Competition: Increasing competition in the secondhand market and from traditional retailers.
Cybersecurity: Risk of cyberattacks and data breaches.
Regulatory Compliance: Exposure to various laws and regulations, including those related to the sale of secondhand items and advertising practices.
Material Weakness: Inability to maintain effective internal control over financial reporting.

Opportunities:

Store Expansion: Strategic growth of the store base in existing and new markets.
Efficiency Initiatives: Implementation of CPC and ABP technologies to improve operational efficiency.
Loyalty Program: Expanding engagement with loyalty program members to drive sales.
Brand Marketing: Utilizing brand marketing to improve brand awareness and drive new customer acquisition.
ESG Focus: Capitalizing on the growing demand for sustainable and socially responsible products.

Conclusion and Actionable Insights

Overall Assessment: Hold. While Savers Value Village demonstrates growth potential through store expansion and efficiency initiatives, the material weakness in internal controls and the challenging macroeconomic environment in Canada present significant risks.

Recommendations:

Prioritize Remediation of Material Weakness: Address the IT general control deficiencies promptly to ensure accurate financial reporting and compliance.
Monitor Canadian Market Performance: Closely monitor sales trends and implement strategies to address the challenges in the Canadian market.
Manage Labor Costs: Implement strategies to mitigate the impact of rising wage rates and potential unionization.
Strengthen Cybersecurity: Invest in cybersecurity measures to protect against data breaches and cyberattacks.

Financial Ratio and Metric Analysis for Savers Value Village (SVV) – 2024 vs 2023

Profitability Ratios

Gross Profit Margin
- Ratio/Metric: Gross Profit = Net Sales – Cost of Merchandise Sold = $1,537,617 – $669,744 = $867,873. Gross Profit Margin = $867,873 / $1,537,617 = 56.44%
- Trend: 2023 Gross Profit = $1,500,249 – $619,671 = $880,578. Gross Profit Margin = $880,578 / $1,500,249 = 58.70%. Percentage Change = (56.44% – 58.70%) / 58.70% = -3.85%
- Industry: The retail industry typically has gross profit margins ranging from 30% to 50%. SVV’s gross profit margin is above average for the industry.
Operating Profit Margin
- Ratio/Metric: Operating Income / Net Sales = $130,189 / $1,537,617 = 8.46%
- Trend: 2023 Operating Profit Margin = $141,857 / $1,500,249 = 9.46%. Percentage Change = (8.46% – 9.46%) / 9.46% = -10.57%
- Industry: The retail industry typically has operating profit margins ranging from 3% to 7%. SVV’s operating profit margin is above average for the industry.
Net Profit Margin
- Ratio/Metric: Net Income / Net Sales = $29,030 / $1,537,617 = 1.89%
- Trend: 2023 Net Profit Margin = $53,115 / $1,500,249 = 3.54%. Percentage Change = (1.89% – 3.54%) / 3.54% = -46.61%
- Industry: The retail industry typically has net profit margins ranging from 1% to 5%. SVV’s net profit margin is below average for the industry.
Return on Assets (ROA)
- Ratio/Metric: Net Income / Total Assets = $29,030 / $1,885,495 = 1.54%
- Trend: 2023 ROA = $53,115 / $1,867,405 = 2.84%. Percentage Change = (1.54% – 2.84%) / 2.84% = -45.77%
- Industry: The retail industry typically has ROA ranging from 2% to 6%. SVV’s ROA is below average for the industry.
Return on Equity (ROE)
- Ratio/Metric: Net Income / Total Stockholders’ Equity = $29,030 / $421,680 = 6.88%
- Trend: 2023 ROE = $53,115 / $376,055 = 14.12%. Percentage Change = (6.88% – 14.12%) / 14.12% = -51.27%
- Industry: The retail industry typically has ROE ranging from 10% to 20%. SVV’s ROE is below average for the industry.
Earnings Per Share (EPS)
- Ratio/Metric:
  - Basic EPS: $0.18
  - Diluted EPS: $0.17
- Trend:
  - 2023 Basic EPS: $0.35. Percentage Change = (0.18 – 0.35) / 0.35 = -48.57%
  - 2023 Diluted EPS: $0.34. Percentage Change = (0.17 – 0.34) / 0.34 = -50%
- Industry: EPS varies widely in the retail industry.

Liquidity Ratios

Current Ratio
- Ratio/Metric: Total Current Assets / Total Current Liabilities = $230,224 / $231,100 = 0.996
- Trend: 2023 Current Ratio = $257,924 / $241,452 = 1.068. Percentage Change = (0.996 – 1.068) / 1.068 = -6.74%
- Industry: A current ratio of 1.5 to 2.0 is generally considered healthy. SVV’s current ratio is below the healthy range.
Quick Ratio (Acid-Test Ratio)
- Ratio/Metric: (Total Current Assets – Inventories) / Total Current Liabilities = ($230,224 – $34,288) / $231,100 = 0.848
- Trend: 2023 Quick Ratio = ($257,924 – $32,820) / $241,452 = 0.932. Percentage Change = (0.848 – 0.932) / 0.932 = -9.01%
- Industry: A quick ratio of 1.0 or greater is generally considered ideal. SVV’s quick ratio is below the ideal range.
Cash Ratio
- Ratio/Metric: (Cash and Cash Equivalents) / Total Current Liabilities = $149,967 / $231,100 = 0.649
- Trend: 2023 Cash Ratio = $179,955 / $241,452 = 0.745. Percentage Change = (0.649 – 0.745) / 0.745 = -12.89%
- Industry: A cash ratio of 0.5 or greater is generally considered acceptable. SVV’s cash ratio is above the acceptable range.

Solvency/Leverage Ratios

Debt-to-Equity Ratio
- Ratio/Metric: Total Liabilities / Total Stockholders’ Equity = $1,463,815 / $421,680 = 3.47
- Trend: 2023 Debt-to-Equity Ratio = $1,491,350 / $376,055 = 3.97. Percentage Change = (3.47 – 3.97) / 3.97 = -12.6%
- Industry: A debt-to-equity ratio of 1.0 to 2.0 is generally considered healthy. SVV’s debt-to-equity ratio is above the healthy range.
Debt-to-Assets Ratio
- Ratio/Metric: Total Liabilities / Total Assets = $1,463,815 / $1,885,495 = 0.776
- Trend: 2023 Debt-to-Assets Ratio = $1,491,350 / $1,867,405 = 0.798. Percentage Change = (0.776 – 0.798) / 0.798 = -2.76%
- Industry: A debt-to-assets ratio below 0.6 is generally considered healthy. SVV’s debt-to-assets ratio is above the healthy range.
Interest Coverage Ratio (Times Interest Earned)
- Ratio/Metric: Operating Income / Interest Expense, Net = $130,189 / $62,444 = 2.08
- Trend: 2023 Interest Coverage Ratio = $141,857 / $88,500 = 1.60. Percentage Change = (2.08 – 1.60) / 1.60 = 30%
- Industry: An interest coverage ratio of 3.0 or greater is generally considered healthy. SVV’s interest coverage ratio is below the healthy range.

Activity/Efficiency Ratios

Inventory Turnover
- Ratio/Metric: Cost of Merchandise Sold / Average Inventory = $669,744 / (($34,288 + $32,820) / 2) = 20.0
- Trend: 2023 Inventory Turnover = $619,671 / (($32,820 + $31,288) / 2) = 19.34. Percentage Change = (20.0 – 19.34) / 19.34 = 3.41%
- Industry: Inventory turnover varies widely in the retail industry.
Days Sales Outstanding (DSO)
- Ratio/Metric: (Accounts Receivable / Net Sales) * 365 = ($16,761 / $1,537,617) * 365 = 3.98 days
- Trend: 2023 DSO = ($11,767 / $1,500,249) * 365 = 2.86 days. Percentage Change = (3.98 – 2.86) / 2.86 = 39.16%
- Industry: DSO varies widely in the retail industry.
Days Payable Outstanding (DPO)
- Ratio/Metric: (Accounts Payable / Cost of Merchandise Sold) * 365 = ($83,039 / $669,744) * 365 = 45.26 days
- Trend: 2023 DPO = ($92,550 / $619,671) * 365 = 54.54 days. Percentage Change = (45.26 – 54.54) / 54.54 = -17.01%
- Industry: DPO varies widely in the retail industry.
Asset Turnover
- Ratio/Metric: Net Sales / Total Assets = $1,537,617 / $1,885,495 = 0.815
- Trend: 2023 Asset Turnover = $1,500,249 / $1,867,405 = 0.803. Percentage Change = (0.815 – 0.803) / 0.803 = 1.49%
- Industry: Asset turnover varies widely in the retail industry.

Valuation Ratios

Price-to-Earnings Ratio (P/E)
- Ratio/Metric: Stock Price / EPS (Diluted) = $9.07 / $0.17 = 53.35
- Industry: The average P/E ratio for the retail industry is around 20. SVV’s P/E ratio is above average for the industry.
Price-to-Book Ratio (P/B)
- Ratio/Metric: Market Cap / Total Stockholders’ Equity = (166,706 * $9.07) / $421,680 = 3.58
- Industry: The average P/B ratio for the retail industry is around 2. SVV’s P/B ratio is above average for the industry.
Price-to-Sales Ratio (P/S)
- Ratio/Metric: Market Cap / Net Sales = (166,706 * $9.07) / $1,537,617 = 0.98
- Industry: The average P/S ratio for the retail industry is around 1. SVV’s P/S ratio is around average for the industry.
Enterprise Value to EBITDA (EV/EBITDA)
- Ratio/Metric: (Market Cap + Total Debt – Cash) / Adjusted EBITDA = ((166,706 * $9.07) + $761,256 – $149,967) / $272,579 = 7.49
- Industry: The average EV/EBITDA ratio for the retail industry is around 10. SVV’s EV/EBITDA ratio is below average for the industry.

Growth Rates

Revenue Growth
- Ratio/Metric: (2024 Revenue – 2023 Revenue) / 2023 Revenue = ($1,537,617 – $1,500,249) / $1,500,249 = 2.5%
- Industry: The average revenue growth for the retail industry is around 3%. SVV’s revenue growth is around average for the industry.
Net Income Growth
- Ratio/Metric: (2024 Net Income – 2023 Net Income) / 2023 Net Income = ($29,030 – $53,115) / $53,115 = -45.35%
- Industry: The average net income growth for the retail industry is around 5%. SVV’s net income growth is below average for the industry.
EPS Growth
- Ratio/Metric: (2024 EPS – 2023 EPS) / 2023 EPS = ($0.17 – $0.34) / $0.34 = -50%
- Industry: The average EPS growth for the retail industry is around 7%. SVV’s EPS growth is below average for the industry.

Other Relevant Metrics

Adjusted EBITDA: The company presents Adjusted EBITDA as a non-GAAP metric. In 2024, Adjusted EBITDA was $272,579k, compared to $307,326k in 2023. This is a decrease of 11.3%. The adjustments made to net income to arrive at Adjusted EBITDA include adding back interest expense, income tax expense, depreciation and amortization, loss on extinguishment of debt, stock-based compensation expense, non-cash occupancy-related costs, pre-opening expenses, store closing expenses, executive transition costs, transaction costs, dividend-related bonus, loss (gain) on foreign currency, net, and other adjustments. These adjustments are intended to provide a clearer picture of the company’s underlying operating performance.
Comparable Store Sales: Comparable store sales decreased by 0.1% in 2024, compared to an increase of 4.7% in 2023. This indicates a slowdown in sales growth at existing stores.
Sales Yield: Sales yield decreased from $1.48 in 2023 to $1.46 in 2024.
Cost of Merchandise Sold per Pound Processed: Cost of merchandise sold per pound processed increased from $0.63 in 2023 to $0.66 in 2024.

Commentary

Savers Value Village’s financial performance in 2024 shows a mixed picture. While revenue increased slightly, profitability metrics such as net profit margin, ROA, and ROE declined significantly. The company’s leverage ratios remain high, indicating a reliance on debt financing. The decrease in comparable store sales and sales yield, coupled with an increase in cost of merchandise sold per pound processed, suggests operational challenges. Overall, SVV needs to focus on improving profitability and managing its debt levels to enhance its financial health.