A Member of Pat McKeough’s Inner Circle recently asked for his advice on Savers Value Village, the largest for-profit thrift operator in the U.S. and Canada.
Pat likes the company’s consistent revenue growth and strategic positioning in the reuse economy. However, he notes it does not yet pay a dividend and has a short track record as it began trading in the public markets only last year.
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Savers Value Village Inc. (Symbol SVV on New York; www.savers.com), is the largest for-profit thrift operator in the U.S. and Canada. It operates 152 stores in the U.S., 157 in Canada, and 12 in Australia under the Savers, Value Village, Village des Valeurs, Unique and 2nd Ave. banners.
The company first sold shares to the public and began trading on June 29, 2023, at $18 a share. That was above the preliminary range of $15 to $17.
Though Savers Value Village is a company that runs for-profit thrift stores, it buys much of its merchandise from local nonprofits that have had merchandise donated to them. In this way, the company does help local nonprofits, which cycle that money back into the community.
Savers Value Village was founded by Bill Ellison, who opened the first store in San Francisco’s Mission District in 1954. His father was a career officer with the Salvation Army who managed their second-hand clothing stores. He helped finance his son’s first store.
By 1970, the company had six stores in three states, and moved its head office to Seattle. It opened its first Canadian store in 1980.
Several private equity firms have played a role in the company’s development.
Berkshire Partners acquired 50% of the business when Ellison retired in 2000. In 2006, Freeman Spogli & Co. acquired majority control for $550 million. Six years later, Freeman Spogli sold the company to private equity firms Leonard Green & Partners and TPG Capital. That deal valued the business at $1.72 billion. In 2019, the business was recapitalized, with Crescent Capital Group LP becoming the majority owner, and with Ares Management Corp. as a significant minority owner.
In March 2021, Ares acquired Crescent Capital’s majority interest. With the completion of Savers Value Village’s IPO, it now owns approximately 88% of the company. Meanwhile, two large pension plans—Norway’s Norges Bank Investment Management and the Healthcare of Ontario Pension Plan (HOOPP)—invested $130 million in the IPO.
Inner Circle: Revenue and earnings keep growing for Savers Value Village, especially earnings
In 2022, the company had revenue of $1.44 billion, up 19.4% from $1.20 billion in 2021, and up 72.3% from $834.0 million in 2020. It earned $84.7 million in 2022, up slightly from $83.4 million in 2021. It lost $63.5 million in 2020.
In the most recent quarter, which ended on December 30, 2023, Savers Value Village reported a 4.4% increase in net sales to $382.8 million, up from the previous year. Comparable store sales also saw an increase of 2.6%, with the U.S. and Canada experiencing a rise of 3.1% and 2.0%, respectively.
The company successfully opened five new stores during the quarter, bringing the total to 326 stores. Net income saw a significant jump of 66.0% to $43.9 million, or $0.27 per diluted share, compared to $26.4 million, or $0.18 per diluted share, in the same period last year.
The loyalty program remains a key asset for Savers Value Village, with active loyalty members contributing substantially to the company’s sales. While the exact number of active loyalty members as of the end of December 2023 has not been disclosed, loyalty members typically provide more repeat business and dependable, steadier long-term growth than one-time or casual customers.
Savers Value Village acquires most of the products it sells from non-profit organizations. Over the past five fiscal years, it has paid more than $580 million to these organizations while diverting more than an estimated 3.2 billion pounds of goods from North American landfills.
We are wary of recent new issues, as always, but the outlook for the company is positive—especially with a softer economy that draws more customers into its stores.
Recommendation in Pat’s Inner Circle: Savers Value Village Inc. is a hold.
