Savers Value Village - Earnings Call - Q1 2025

Executive Summary

• Q1 2025 delivered steady top-line growth and improved comps: net sales rose 4.5% to $370.1M (+7.1% constant currency) and total comp sales rose 2.8% (U.S. +4.2%; Canada +0.6%), with Adjusted EBITDA of $42.8M (11.6% margin) as new-store deleverage and FX headwinds weighed on margins.
• Results vs S&P Global consensus: revenue modestly beat ($370.1M vs $366.2M*) and EPS exceeded ($0.02 vs ~$0.00*), while consensus EBITDA (EBITDA, not Adjusted EBITDA) appears mismatched to company’s reported Adjusted EBITDA; definition differences limit usefulness of this comparison. Values retrieved from S&P Global.*
• Guidance reaffirmed: FY25 outlook maintained (net sales $1.61B–$1.65B; Adjusted EBITDA $245M–$265M; Adjusted EPS $0.37–$0.46), underscoring management confidence despite Canada macro and FX drag.
• Strategic/catalyst items: continued U.S. strength, return to positive Canada comp, loyalty base nearing 6M, share repurchases (~1.4M shares at $8.43) and $44.5M note redemption; management emphasized minimal tariff exposure due to hyperlocal supply chain.

What Went Well and What Went Wrong

What Went Well

• U.S. momentum: net sales +9.4% to $210.8M; U.S. comps +4.2% on transactions and basket growth. “Our U.S. business remains strong with nearly double-digit sales growth and healthy comps” — Mark Walsh.
• Canada sequential improvement: positive comp (+0.6%) and constant-currency net sales +2.2% despite FX pressure. “Return to positive comp in Canada… macroeconomic conditions… remain challenging” — Mark Walsh.
• Operating execution and innovation: expanded centralized processing centers (sixth CPC opened; ~45 stores serviced), scaling automated book processing to 170 stores, improving off-site cost per unit.

What Went Wrong

• Margin compression: Adjusted EBITDA margin fell to 11.6% from 16.0% in Q1 2024 (new store deleverage, FX); cost of merchandise sold rose 80 bps to 45.5% of sales.
• Canada segment profit down 27.1% YoY (FX and expense deleverage), highlighting sensitivity to CAD weakness and pressured low-income cohorts.
• SG&A burden and new-store headwind: SG&A rose to 23.6% of sales and management reiterated 2025 ~$10M adjusted EBITDA headwind from accelerated 2024/2025 openings.

Transcript

Operator (participant)

Good afternoon, and welcome to Savers Value Village's conference call to discuss financial results for the first quarter ending March 29, 2025. At this time, all participants are in the listen-only mode. Later, we will conduct a question-and-answer session, and instructions will follow at that time. Please note that this call is being recorded, and a replay of this call and related materials will be available on the company's investor relations website. The comments made during this call and the Q&A that follows are copyrighted by the company and cannot be reproduced without written authorization from the company. Certain comments made during this call may constitute forward-looking statements, which are subject to significant risks and uncertainties that could cause the company's actual results to differ materially from expectations or historical performance.

Please review the disclosure on forward-looking statements included in the company's earnings release and filings with the SEC for discussion of these risks and uncertainties. Please be advised that statements are current only as of the date of this call, and while the company may choose to update these statements in the future, it is under no obligation to do so unless required by applicable law or regulation. The company may also discuss certain non-GAAP financial measures. A reconciliation of each of these non-GAAP measures to the most directly comparable GAAP financial measure can be found in today's earnings release and SEC filings. Joining from management on today's call are Mark Walsh, Chief Executive Officer, Jubran Tanious, President and Chief Operating Officer, Michael Maher, Chief Financial Officer, and Ed Yruma, Vice President of Investor Relations and Treasury. Mr. Walsh, you may go ahead, sir.

Mark Walsh (CEO)

Thank you, and good afternoon, everyone. We appreciate you joining us today. Let me start by giving you a few highlights of our first-quarter performance and then talk about the things we are doing to drive the business forward. We are pleased with the overall trends we saw in the first quarter. Our U.S. business remained strong with nearly double-digit sales growth and healthy comps, driven by increases in both transactions and average basket. Our Canadian business saw continued sequential improvement, and we are pleased to report positive Canadian comp for the first time since the fourth quarter of 2023. We will continue to focus our execution to provide a compelling selection and great value to our Canadian customers as they work to stretch their dollars in the current economic climate. We opened two new stores in the quarter and remain on track to deliver our 2025 new store targets.

As a class, our new stores continue to perform in line with our expectations, delivering strong unit economics. Our loyalty program also had strong growth, reaching nearly 6 million total active members at the end of the first quarter. Finally, we generated nearly $43 million of adjusted EBITDA in the quarter, or approximately 11.6% of sales. The first quarter was highlighted by strong U.S. trends and the return to positive comp in Canada. The U.S. is our key growth market with significant white space opportunities. Beginning in 2025, accelerating into 2026, the new store portfolio will be much more U.S.-centric to address this opportunity. In Canada, we still have work to do, and macroeconomic conditions, while stable in the first quarter, remain challenging. Our strong execution is helping drive a fresh assortment and an exceptional value that resonates well with the Canadian consumer.

Let me take a moment to talk about tariffs, which we know are a subject of significant concern to the broader retail ecosystem. As a reminder, our model is hyperlocal. The bulk of our supply, which consists of donations collected on behalf of our charitable partners, comes directly sourced from a 10-12 mi radius around our store. This means we virtually have no direct exposure to tariffs, giving us a unique position in the retail apparel sector, which we believe is a key competitive advantage. With an AUR around $5 and almost no direct exposure to tariffs, we continue to offer a strong value to our customers. As part of our ongoing work on competitive pricing, we monitor our value proposition to ensure that we remain priced at a significant discount for traditional retailers, even before the effects of tariffs.

On balance, macroeconomic conditions were generally stable in both the U.S. and Canada during the first quarter. Although we are mindful of volatility and consumer confidence in both countries, we are staying focused on what we can control, planning conservatively, and making our business stronger for the long term through continuous improvement and innovation. Given the nature of our operations, we are not required to order inventory from abroad. We can plan our business and production levels in much tighter windows than competitors in the retail industry. Looking ahead, we remain very excited about our accelerating square footage growth. We opened two new stores in the first quarter and are on track to open 25-30 new stores this year. New stores have been performing in line with our expectations and remain our first and best use of capital to drive growth and compelling returns.

Moving on to centralized processing centers, or CPCs. We recently opened our sixth CPC in Southern California slightly earlier than our previously communicated plans. This CPC will help power our growth in that market. As a reminder, some form of offsite processing will supply more than half of our new stores going forward. As previously communicated, our offsite processing is a critical enabler of our accelerated unit growth. We are leveraging best practices across North America, enabling newer CPCs to scale more efficiently as we continue to make progress in converging onsite and offsite cost per unit. Furthermore, we continue to embrace innovation and are exploring new technologies and processes to optimize our business performance. We continue to roll out automated book processing after seeing strong financial returns. We've now expanded ABP support to 170 stores.

In closing, we have been faced with a challenging and ever-changing environment, and I want to thank our more than 22,000 team members for their commitment, exceptional performance, and dedication to our customers. We have gotten 2025 off to a solid start. While macroeconomic pressure is persistent in Canada, I believe that our strong execution, fresh assortment, and exceptional value positions us well for the current environment. I am more confident than ever in our long-term growth prospects and in our mission to make secondhand second nature. I will turn the call over to Michael to discuss our first-quarter financial performance and the outlook for the remainder of 2025.

Michael Maher (CFO)

Thank you, Mark, and good afternoon, everyone. As Mark indicated, we are pleased with our results for the first quarter. Total net sales increased 4.5% to $370 million. On a constant currency basis, net sales increased 7.1%, and comparable store sales increased 2.8%. We are especially pleased with near double-digit sales growth in the U.S., despite consumer sentiment materially weakening year to date. We are also encouraged by our 310 basis point sequential comparable store sales improvement in Canada, resulting in positive comparable store sales for the quarter, even as the macroeconomic environment remained challenging. In the U.S., net sales increased 9.4% to $211 million, and comparable store sales increased 4.2%, driven by growth in both transactions and average basket. In Canada, net sales declined 4.1%, reflecting a weaker Canadian dollar.

On a constant currency basis, Canadian net sales increased 2.2% to $137 million, and comparable store sales increased 0.6%, primarily driven by an increase in average basket. Cost of merchandise sold as a percentage of net sales increased 80 basis points to 45.5%, with the increase reflecting the impact of new stores, partially offset by strong growth in on-site donations. OSDs plus Greendrop accounted for 74% of supply versus 72% in the prior year period. This growth ensures that we have fresh and compelling product for our customers and helps drive strong margins. Salaries, wages, and benefits expense was $85 million. Excluding IPO-related stock-based compensation, salaries, wages, and benefits as a percentage of net sales increased 190 basis points to 20.5%. The increase was driven primarily by new store growth and an increase in incentive compensation expenses.

Selling, general and administrative expenses as a percentage of net sales increased 160 basis points to 23.6%, primarily due to growth in our store base, rent and utilities, and routine maintenance costs. Depreciation and amortization increased 6% to $19 million, reflecting investments in new stores, offsite processing, and information technology. Net interest expense decreased 8% to $15 million, primarily due to reduced debt and lower average interest rates. GAAP net loss for the quarter was $4.7 million, or $0.03 per diluted share. Our net loss included a $2.7 million pre-tax loss on debt extinguishment. Adjusted net income was $3.6 million, or $0.02 per diluted share. First-quarter adjusted EBITDA was $43 million, and adjusted EBITDA margin was 11.6%.

As we have previously mentioned, new stores are a headwind to adjusted EBITDA this year, as we have a substantial number of new stores which have not yet reached profitability compared to the prior year period. Our new stores typically achieve profitability by their second year of operations. As these new stores continue to mature, we expect the headwind to profitability to subside. U.S. segment profit was $39 million, down $1.6 million versus the prior year period, primarily due to new store growth and pre-opening expenses, partially offset by an increase in profit from our comparable stores. Canada segment profit was $25.3 million, down $9.4 million versus the prior year period, due primarily to the aforementioned weaker Canadian dollar and deleverage of expenses as a percentage of sales. Our balance sheet remained strong with $73 million in cash and cash equivalents.

As we previously disclosed, we redeemed $44.5 million of our senior secured notes during the quarter, or 10% of the outstanding balance, leaving us with a net leverage ratio of 2.4x at the end of the quarter. We repurchased approximately 1.4 million shares of our common stock during the quarter at a weighted average price of $8.43 per share. As of the end of the first quarter, we had approximately $6.3 million remaining on our share repurchase authorization. Finally, I'd like to discuss our outlook for the remainder of fiscal 2025. We're pleased with our results for the first quarter, although it's our smallest quarter of the year. Despite continued economic pressure and policy uncertainty, we remain confident in our ability to execute against our plans. We are therefore reaffirming our previous outlook for the year. As a reminder, let me reiterate some important context for our outlook.

First, we're at an inflection point in our long-term growth strategy. Between our 2024 and 2025 openings, we will have approximately 50 stores in their first year of operation in 2025. On average, new stores generate approximately $3 million in sales in their first year and achieve profitability by their second year. We therefore expect new stores to be a meaningful driver of revenue growth this year, but a net headwind of approximately $10 million to adjusted EBITDA in 2025. We expect an inflection in profitability by 2026 as these stores mature and drive both top and bottom line growth. Second, we continue to take a conservative approach to planning comparable store sales growth, with continued steady growth in the U.S. and a cautious approach in Canada.

The Canadian economy had shown some signs of stabilization, but tariffs, while having almost no direct impact on our operations, have created additional uncertainty regarding consumer spending going forward. On a related note, our outlook for 2025 is based on an estimated exchange rate of $0.70 U.S. per Canadian dollar, which negatively impacts our year-over-year comparisons for sales by approximately 1.7 percentage points and for adjusted EBITDA by approximately $6.5 million. Finally, 2025 is a 53-week fiscal year. We estimate the 53rd week will add approximately 1.5% to total sales growth, with no significant impact on net income, adjusted net income, or adjusted EBITDA. There's also no impact on comparable store sales growth, which will be reported on a like-for-like 52-week basis.

With that context in mind, our full-year outlook for 2025 includes the following: 25-30 new store openings, net sales of $1.61 billion-$1.65 billion, comparable store sales growth of 0.5%-2.5%, with the U.S. continuing to outperform Canada, net income of $36 million-$52 million, or $0.21-$0.31 per diluted share, adjusted net income of $62 million-$77 million, or $0.37-$0.46 per diluted share, adjusted EBITDA of $245 million-$265 million, and capital expenditures of $125 million-$150 million. Our outlook for net income assumes net interest expense of approximately $66 million and an effective tax rate of approximately 35%. For adjusted net income, we're assuming an effective tax rate of approximately 27%. I'd like to briefly touch on our expectations for the second quarter.

We expect total sales growth in the second quarter to be roughly consistent with the first quarter, in the low to mid-single-digit % range, driven by low single-digit comparable store sales growth plus new stores, partially offset by foreign exchange rate impacts. We plan to open four new stores during the quarter. We expect profit margins for the balance of the year to be higher than they were in the first quarter due to normal seasonality and the continued maturing of our new stores. For the second quarter, we expect adjusted net income and adjusted EBITDA margins to be slightly higher than our full-year outlook for those margins. We will provide more color on the second half during next quarter's call, but in general, we expect comparable store sales growth to be higher in the third quarter than the fourth quarter due to the softer comparison last year.

We expect adjusted net income and adjusted EBITDA to be roughly balanced between the third and fourth quarters. We plan to open roughly half of our new stores this year during the third quarter. This concludes our prepared remarks. We would now like to open the call for questions. Operator?

Operator (participant)

Thank you. Ladies and gentlemen, we will now begin the question and answer session. Should you have a question, please press star four by the one on your telephone keypad. You will hear a prompt that your hand has been raised. Should you wish to cancel your request, please press star four by the two. If you're using a speakerphone, please lift the handset before pressing any keys. One moment, please, for your first question. Your first question comes from the line of Randy Konik from Jefferies. Please go ahead.

Randal Konik (Managing Director)

I guess, Mark, first and foremost, can we kind of unpack a little bit more on the U.S. strength that you're seeing? Are you seeing some trade-down beneficiaries? Are you seeing any kind of interesting items, like more customers new to file? Anything there would be super helpful. Just a little bit more granularity on the traffic or transaction count versus basket would be super helpful on the U.S. On Canada, just give us a little bit more clarity. You kind of said stable in the first quarter, but pressure persists, I guess, is the quote. Just give us a little more flavor of kind of how you see Canada unfolding from here. Are we kind of at the bottom? We're going to bounce along that bottom for the next few quarters. Just kind of give us your flavor there. Thanks.

Mark Walsh (CEO)

Thanks, Randy. Look, why don't I start with Canada first, and maybe the guys can jump in and help me with the U.S. piece of the answer. Look, I think on Canada, the team has done a great job of executing, Randy, I think, first and foremost, selection, that price-value equation, and just as importantly, our donation flow remains very, very strong. You add to that what has been a first quarter with economic indicators moving modestly in a better direction. I think the results of those two factors really impacted the outcome and our positive comp. That said, I don't think Michael nor Jubran nor I would say we're ready to declare victory, but we're really encouraged by the sequential improvements in the Canadian business. Tariffs add certainly an unwelcome dimension around consumer sentiment. What we see is donations continue to remain strong.

There's been no meaningful change in demand trends since the beginning of the year, and that's rolled into April as well. I think it's too soon to call whether the change in consumer sentiment has had an impact on our business. Our approach is going to be straightforward in Canada. We're going to maintain production levels that provide that customer, our thrifter, with the selection they expect and demand. We're going to stay sharp on price value, and we're going to continue to innovate operationally. Look, I think what we do really well is we stay connected with our consumers with offers that resonate. Remember, 72% of our sales comes from our loyalty program. On the U.S. side, unpacking the basket, AUR, item sold, solid, transaction solid. Again, we're seeing that same trend continue.

We have not seen a degradation of that trend into the early part of the second quarter. In both Canada and the U.S., we feel like we've got good momentum as we head into the second quarter, and the trend line has continued in the aggregate. Michael, Jubran, add anything to that? Thank you. Yeah, that's it.

Randal Konik (Managing Director)

Super helpful. I guess one more follow-up, maybe perhaps for Jubran or Mark again. Just on the idea of continuous improvement process, you talked about that in the script. Maybe kind of give us some perspective on what are some of the one, two, or three things you guys have been kind of working on across the field to improve kind of the way the stores operate and so on and so forth. Thanks, guys.

Jubran Tanious (President and COO)

Yeah, Randy, this is Jubran. It's a good question. The first thing that I would say is automated book processing, ABP is our acronym for that. That is currently servicing roughly half our fleet, 170 stores. Real breakthrough in technology and processing, and we've loved the result. The question is, how do you continue to build on that? We are in the process of expanding that model. It may take a little bit different form depending on how many stores you have clustered in a market, but clearly a technology that we can continue to leverage. Then inside the central processing centers and the smaller off-site processing warehouses. Randy, I'll be honest with you, it's tough to put our finger on one thing.

I would tell you there's a whole basket of tactical improvements that have to do with mechanizing movement, economy of movement by our team members who do a great job. I mean, we're seeing our cost per item continue to fall in those locations. That's not a one-and-done. I mean, this is truly about year-on-year continuous improvement in all things. That's on top of the unlock that those facilities provide in terms of new store growth, which I think Mark mentioned earlier. You're really getting a few different strands of goodness from that that we expect to continue into the future.

Randal Konik (Managing Director)

Thanks, guys.

Jubran Tanious (President and COO)

Thanks, Randy.

Operator (participant)

Thank you. Your next question comes from the line of Michael Lasser from UBS. Please go ahead.

Michael Lasser (Equity Research Analyst)

Good evening. Thank you so much for taking my question. It's likely that there's going to be significant pricing that will be taken across the retail sector, maybe not by all of the retailers that Savers typically benchmarks itself against, but maybe against many of them. Would Savers use that as an opportunity to raise prices selectively, or would it let the price gaps widen? To what degree would widening price gaps drive incremental comp upside from here?

Mark Walsh (CEO)

A great question, Michael. Thanks for it. Look, I think I'll start by reiterating the fact that this is a business that is not exposed to tariff pressure. We're unique in that perspective in the retail landscape. The competitive analytics that we utilize are clear. We've got a great value proposition versus discount retailers pre-tariffs. We're very confident in our positioning. If the tariffs do cause that value gap to widen, it represents obvious opportunities for us: trial, multi-growth, market share gains. I would not say we're going to put a pin in on saying we're going to raise prices. We think that if there is price gap widening, it's a great opportunity for us to get that and build our customer base and add to our loyalty mix.

Michael Lasser (Equity Research Analyst)

Thank you very much for that. My second question is, if indeed there is a tougher macro environment and the labor market really starts to weaken, do you think, A, that has an impact on some of the sourcing, meaning that consumers are simply going to be less likely to donate goods? Or, B, if there's an inflationary environment, could that mean that you're going to have to pay your charity partners a bit more for the goods that they're getting for donation, and that could have some impact on your margins? Thank you very much.

Jubran Tanious (President and COO)

Yeah. Hi, Michael. This is Jubran. Good questions. I'll take the supply question first. I think inside that question is, and we've stated this in the past, our reliance on the on-site donation. These are donations that we're receiving on behalf of our nonprofit, our donation centers. The first thing I would say is we have seen robust growth in on-site donation across all countries so far year to date. We have not seen any change in the volume performance, and that's not happenstance. We've done enough research. We have enough surveys to know that what drives the donor is a donation experience that is reliably fast, friendly, and convenient. You know, we strive to do that in every store. If we do that well and execute, and we control that, we would expect on-site donations to continue to grow.

As far as what some macro environment could cause, that's a very difficult question to answer. I'd say, A, we haven't seen any evidence of that in our stores. B, we know what we can control. That drives performance. With regard to an inflationary environment that could affect our staffing, the first thing I would say is, as we sit today, labor availability has not been an issue for us. Turnover has actually declined in both countries. Vacancies are low, as low as they've been over the last several years. Yes, wage increases are a normal part of our business. The best thing that we can do is continue to stay ahead of it. If there's anything over the last few years, Michael, that we've done regarding competitive wage rates, it is how our internal team, the frequency with which they assess each market.

We obviously place a tremendous premium on team member engagement in our stores. All those things work together for Savers Value Village to be a compelling place to work. Can't predict the future precisely, but feel good on both fronts.

Michael Lasser (Equity Research Analyst)

Thank you very much and good luck.

Jubran Tanious (President and COO)

Thank you.

Mark Walsh (CEO)

Thank you.

Operator (participant)

Thank you. Your next question comes from the line of Matthew Boss from JPMorgan. Please go ahead.

Matt Boss (Equity Reseach Analyst)

Thanks. Congrats on a nice quarter.

Jubran Tanious (President and COO)

Thanks, Matt.

Mark Walsh (CEO)

Thanks, Matt.

Matt Boss (Equity Reseach Analyst)

Mark, in the U.S. business, maybe if we think about the two straight quarters now of mid-single-digit comps, could you break down this inflection in business, maybe if we think about new customer acquisition relative to existing customer spend, and also any noticeable change that you've seen in spending across income cohorts?

Mark Walsh (CEO)

I would say we're really pleased about the way our loyalty program is growing. Another good quarter for us, sequentially year-over-year. What's really fabulous about what we're seeing is our loyalty cohorts are growing in both the younger cohorts and the highest household income cohorts. I think in those two, that's the perfect storm for us moving forward. We love what's happening in that regard. In terms of basket, AUR, item sold again, we've seen continued sequential positive improvement in basket and transactions. It's driving that comp growth. We've not seen any particular things that are worrisome as we get into the second quarter for that trend continuing. Did I miss anything, Michael?

Matt Boss (Equity Reseach Analyst)

Got it. Great. Maybe Michael, to follow up, could you break down the drivers of first quarter gross margin contraction and then just walk through the gross margin puts and takes to consider in the second quarter relative to the back half?

Michael Maher (CFO)

Yeah, you got it, Matt. The deleverage around 80 basis points that we saw in the first quarter was virtually entirely driven by deleverage on the new stores. Remember that we've got a significant cohort of 2024-class new stores that opened in the back half of the year. They're still in their first year of operation. They weren't open at this time last year. That is creating pressure on the margins. Now, offsetting that were two factors. The biggest one being, as Jubran mentioned earlier, really healthy growth in our on-site donations. The metric we like to cite, on-site donations plus GreenDrop combined was 74% of our total volume during the quarter, which was up from 72% a year ago. That was a nice tailwind to our margins during the quarter that helped offset the new store deleverage.

As Jubran also mentioned, just the continued improvements that we're making in off-site processing are helping to reduce the gaps between that and on-site processing costs in stores. As far as looking ahead to the second quarter, I do expect that we'll continue to see deleverage in margin due to the new store openings. I think it's going to be most pronounced in the first half of the year because, again, of the nature of those 2024 openings that were backloaded. I think that deleverage probably will be slightly better in the second quarter than it was in the first. We expect to see continued improvement as we move into the back half of the year.

Matt Boss (Equity Reseach Analyst)

That's great color. Best of luck.

Jubran Tanious (President and COO)

Thanks, Matt.

Mark Walsh (CEO)

Thanks, Matt.

Operator (participant)

Thank you. Your next question comes from the line of Mark Altschwager from Baird. Please go ahead.

Mark Altschwager (Senior Research Analyst)

Thank you. Good afternoon. I guess first on the guide, maybe for Michael, the prior guide implied some comp acceleration through the year. The reaffirmed guide after the stronger Q1 now implies more consistency versus Q1 levels. Any change to your thinking regarding the drivers that could yield some acceleration in the upcoming quarters?

Michael Maher (CFO)

Yeah. Great question, Mark. I think what I would say, first of all, just in terms of general context, is that while we're pleased with the results so far, including our start to Q2, there's a lot of the year left to go. The macro pressures remain, especially in Canada. There's some additional policy uncertainty in both countries. With all of that, we still feel really good about our ability to execute through that. Just given where we are in the year, we felt like it was appropriate for us to hold guidance at this point.

As far as what's assumed in the comp range and what it would take for that to change, I guess what I would say is this: while the macro thus far has generally been stable, the high end of our range would contemplate and be consistent with continued acceleration in the U.S. and strengthening in the U.S. economy and further recovery in our Canadian business. Thus far, like Mark said earlier, what we've seen generally has been some stability. We are watching the consumer confidence, the potential impact of tariffs on consumer spending more broadly. I have not seen it thus far in our business. That's sort of the context for the guidance.

Mark Altschwager (Senior Research Analyst)

Thank you. Thinking about supply, I think you flagged robust growth in on-site donations. Is that an acceleration in what you've seen? If so, what's driving it? Used sales yield is actually down a bit year over year. Help me understand. Is that primarily a function of the newer stores as well? Maybe give us some color on the quality of supply you're seeing and to what extent that's a factor there. Thank you.

Jubran Tanious (President and COO)

Yeah. Good questions, Mark. This is Jubran. Why don't I grab the first one around on-site donation? Michael can jump in on the second. Would not describe our on-site donation growth across all the countries as an acceleration. I would say what we've seen is nice, healthy, stable growth. That cuts across multiple regions, multiple vintages of stores. I mean, even very mature stores, what you find is that if you do what I mentioned earlier, showing up to the donor in a reliably fast, friendly, and convenient way, you remain the donation destination of choice. You're much more likely to get the advocacy where that donor will tell their friend, family member, neighbor about us. I wouldn't describe it as an acceleration. I would say it's a continuation of good, stable, robust comp growth on on-site donations that, frankly, we expect to continue.

Michael Maher (CFO)

Mark, you asked about the sales yield. That is sort of a corollary to the healthy growth in the on-site donations. We are able to process more volume very cost-effectively. Even if that means a marginal erosion in the sales yield, you will also notice in that same table in the release where you see that improvement in the cost per pound processed. It is still profitable at the margins for us. It helped us to drive some healthy business at healthy margins during the quarter.

Mark Altschwager (Senior Research Analyst)

Thank you.

Operator (participant)

Thank you. Your next question comes from the line of Brooke Roach from Goldman Sachs. Please go ahead.

Brooke Roach (VP Equity Research)

Good afternoon. Thank you for taking our question. Mark, you noted in the prepared remarks that new stores are performing in line with your expectations. How much variability versus the mean do you see in individual stores for those newly opened stores? Longer term, how are you thinking about the EBITDA margin potential of the business? Is high teens still achievable?

Jubran Tanious (President and COO)

Hi, Brooke. This is Jubran. I can jump in on the variability question around new stores. One thing that is challenging is that you do not necessarily have a trend. Again, as Michael mentioned earlier, the preponderance of stores in 2024 opened in that back half, including Q4. You are going through the winter months and some winter-sensitive markets. By and large, not seeing huge fluctuations. I mean, our model has gotten more and more precise about predicting what transactions, sales, and on-site donations are going to do. There is a little bit of variability here and there, but nothing that is outside of our expectations, particularly over the mid-range multiple months in a row.

Michael Maher (CFO)

Brooke, your question about the long-term financial model, this is Michael. We still see high teens EBITDA margins as our long-term financial algorithm in the near term, as we have indicated before.

There will be some pressure on that just by virtue of our accelerated growth and the impact of new stores. As we continue to fill that new store pipeline and those two and three and four-year-old stores are starting to contribute meaningful earnings growth, we think that'll counteract the impact of whatever the new store class is for any given year. We should see a return to high teens EBITDA margins over the longer term.

Brooke Roach (VP Equity Research)

Great. Thank you so much.

Michael Maher (CFO)

Got it.

Operator (participant)

Thank you. Your next question comes from the line of Peter Keith from Piper Sandler. Please go ahead.

Peter Keith (Managing Director)

Hey, thank you very much. Nice quarter, guys. I hope that this is a low mark. This could be a low mark for tariff questions on recent earnings calls. Kudos to you on that. I was wondering, there's been quite a few retail bankruptcies and liquidations in recent quarters. Just as you're starting to look at real estate for 2026 or perhaps even 2027, what are you seeing out there in terms of availability and maybe rent dynamics? Also, on a related note, could you give us an update on how the Two Peaches integration has been going?

Jubran Tanious (President and COO)

Yeah, sure. Hey, Peter, Jubran. I'll kick us off. Guys can jump in if I miss anything. Your first question on really taking advantage of opportunities that may come our way. First of all, we absolutely are looking. We are prospecting in every major market in North America. We are well aware of some of the boxes that have become available, some of our peer retailers. We have acted on that. I can tell you currently we have some in our pipeline that are a direct result of that. There will be more to come. We very much like where our pipeline is at. I also want to be cautious. We've always said that we're not going to open new stores to open new stores, that we've got to be smart. We've got to take a disciplined approach.

We will not open a new store unless we feel very good about that supply equation. That starts first and foremost with that on-site donation. Encouraged by what we have, our pipeline for 2026 looks fabulous. I will tell you we are in a better position as we sit right now than we were this time last year. We've talked about wanting to feather these new store openings in a more balanced way across the year. Last year, the midpoint of our new store openings was September. This year, it's improved into August. Ideally, we would be at June, July. There is still more work to go. We're feeling very good about that in 2026.

Lastly, the tone of the conversations with landlords, it continues to be very, very positive as they see us as a part of their mix and as thrifting becomes more and more mainstream, particularly in the U.S.

Peter Keith (Managing Director)

Okay. Sorry, I did slip in a second question there on Two Peaches. Could you just give us an update on how that's been going for you?

Jubran Tanious (President and COO)

Oh, I'm sorry, Peter. Yes, Two Peaches. So reminder to the group, Two Peaches was a small acquisition, small seven-store chain in Atlanta, Georgia that we made last year. So far, we're right on track with where we thought we were going to be. Our plan had always been to elevate the selection value, atmospherics, and overall experience of the Savers model to those customers. We have done that in three of the stores. The results have been in line with what we expected. We are on a very good track. I will say those seven stores are relatively de minimis to our overall P&L. What is important is this represents a dedicated Southeast region of the U.S. where we have tremendous white space opportunity. We are currently prospecting additional locations in the U.S. Southeast. We are excited about that. Going well.

Peter Keith (Managing Director)

Okay. That's exciting. A separate question I had because maybe for Mark is looking forward, certainly it's an intriguing dynamic where retail prices for apparel and various items could go up quite a bit. You guys could see an improved value proposition. How are you thinking about that going after that opportunity, maybe from an advertising perspective? I know you work with a number of influencers, but is advertising a lever that you could pull in a short period of time to maybe put more focus on the value proposition that you have?

Mark Walsh (CEO)

That's a great question. Look, I think what we've done and we've been very steadfast in our approach around marketing, we're very productive. The influencer network we have continues to grow and is strong. We'll leverage that influencer network as we see fit. I think it goes back to the comments I made earlier. As that value gap begins to widen, if it does, it does represent opportunities for us for trial, loyalty growth, market share gains. We will absolutely use our resources within the influencer network to drive that message home beyond that current following to maybe expand that following to drive more traffic into the stores.

Peter Keith (Managing Director)

Okay. Sounds great. Thanks so much and good luck.

Mark Walsh (CEO)

Thanks, Peter.

Operator (participant)

Thank you. Once again, should you have a question, please press star four by the one on your telephone keypad. Your next question comes from the line of Anthony Chukumba from Loop Capital Markets. Please go ahead.

Anthony Chukumba (Managing Director and Senior Research Analyst)

Thanks for taking my question. You mentioned that you opened your sixth centralized processing center and their off-site processing is servicing half of your new store openings, if I heard that correctly. What's the total number of stores that are being serviced right now through the CPCs?

Jubran Tanious (President and COO)

Yeah.

Michael Maher (CFO)

At that for you? Give me one second for you.

Right now, it is 45. So about nine per existing CPC.

Anthony Chukumba (Managing Director and Senior Research Analyst)

Got it. Okay. And then 9 per existing CPC, what would you like? What do you think is kind of the max for CPC?

Jubran Tanious (President and COO)

That's a good question, Anthony. I think that's actually a moving target because what we're finding is that as we get more and more efficient in these facilities, you're able to have more stores serviced on a single eight-hour shift. I hate to box us in with a ceiling on how many stores can be serviced by these because I think that number continues to grow. Again, the key, and Mark mentioned this, and you just reiterated it, that it is really helping power our new store growth. New stores are being made possible that would not have existed without these off-site production facilities. That'll continue into 2026 and beyond.

Anthony Chukumba (Managing Director and Senior Research Analyst)

That's helpful. Thank you.

Jubran Tanious (President and COO)

Thank you.

Operator (participant)

Thank you. There are no further questions at this time. I will now hand the call back to Mr. Mark Walsh for any closing remarks.

Mark Walsh (CEO)

I'd just like to thank all of you for your continued interest in Savers Value Village. We're looking forward to recapping our second quarter in late July. Thanks again.

Operator (participant)

This concludes today's call. Thank you for participating. You may all disconnect.