Shares of Pet Valu Holdings Ltd. (PET-TSX) climbed 8% on Tuesday following a strong second-quarter performance and positive outlook, according to a research note by Stifel analyst Martin Landry. The firm increased its 12-month price target from C$33 to C$40, maintaining a Buy rating on the stock, citing accelerating same-store sales, improving customer traffic, and strategic investments in high-growth categories.
The upgraded outlook comes as Pet Valu reported its first quarter of positive store traffic in six quarters, signalling a turnaround for Canada’s largest specialty pet retailer. Stifel noted that management commentary indicates momentum is continuing into the third quarter, with expectations for same-store sales growth to accelerate through the second half of the year.
Quarterly Results Beat Expectations
For Q2 2025, Pet Valu posted earnings per share of $0.38, a 5% year-over-year increase and ahead of both Stifel’s and consensus estimates of $0.33. Same-store sales rose 2.6%, beating projections of 2%. This improvement follows a period of declining traffic and reflects the success of recent merchandising initiatives.
Revenues reached $280.6 million, up 5.8% from Q2 2024, while operating income increased to $43.2 million. Adjusted EBITDA grew 4.2% to $60.2 million, resulting in an adjusted EBITDA margin of 21.4%.
Given the strong performance, the company revised its 2025 EPS guidance to a range of $1.63 to $1.68, up from prior estimates. Stifel adjusted its forecast to $1.69 for 2025 and $1.89 for 2026, reflecting sustained operational improvements.
Target Price Increased to $40
Stifel attributes the higher price target to stronger forecasts and slightly expanded valuation multiples. The firm’s valuation model averages three methods:
- A 12x multiple applied to 2026 estimated EBITDA
- A 21x multiple on 2026 EPS
- A discounted cash flow analysis using a 9% discount rate
This approach suggests upside potential from the current share price of C$35.92, which is near its 52-week high of C$36.
Leadership Transition Announced
In addition to the earnings release, Pet Valu announced a leadership change. Current CEO Richard Maltsbarger, who guided the company through its 2021 IPO, will step down on September 21, 2025, transitioning to a Senior Advisor role until April 2026. Greg Ramier, President and COO, will assume the CEO role earlier than expected.
Stifel views the timing as favourable, given the company’s positive trajectory. Ramier, credited with introducing merchandising and promotional planning tools, has played a key role in reversing traffic declines.
Focus on High-Growth Culinary Category
Pet Valu is investing in its culinary category, which includes frozen raw and gently cooked pet foods. The company is rolling out a new store format with additional freezer space, enhanced displays, and employee training to improve product knowledge. According to Stifel, this initiative targets a faster replenishment cycle—customers purchasing fresh pet foods typically return every two weeks, compared to monthly visits for dry kibble—supporting ongoing traffic growth.
Supply Chain Upgrades Near Completion
The retailer is also finalizing a $100 million supply chain modernization project. The last phase, involving its Calgary distribution centre, is expected to be completed in early Q3. While these upgrades will create temporary cost pressures of about $0.12 per share in 2025, management expects the investments to drive efficiency and earnings growth in 2026 and beyond.
A Defensive Sector with Long-Term Appeal
Stifel emphasized Pet Valu’s positioning in a resilient industry. The Canadian pet food market has declined only once in the past 30 years, making it a defensive play during economic uncertainty. Although valuation multiples have risen modestly, they remain within historical norms. Further share price expansion will likely hinge on sustained same-store sales growth in the mid-single-digit range.
