Customers shop at a Value Village in Etobicoke, Ont., on June 29. Savers Value Village priced its IPO at US$18 a share – above the $15 to $17 range that it had previously expected.Duane Cole/The Globe and Mail
It’s a good time to be in the thrifting business.
Consumers feeling the pinch of inflation and nervous about a potential recession are turning to second-hand shopping to save money. They are also more aware than ever of the environmental impact of the billions of pounds of textiles that end up in landfills every year.
That’s the sales pitch that Savers Value Village Inc., SVV-N the largest for-profit thrift store operator in the United States and Canada, made to investors ahead of its initial public offering on Thursday. The response was not thrifty: Shares climbed by more than 27 per cent on their first day of trading on the New York Stock Exchange, closing at nearly $23 a share.
“We’ve been watching the markets closely,” Savers Value Village chief executive Mark Walsh said in an interview Thursday, when asked about the decision to go public amid a relatively soft IPO market. “The business continued to perform. We continued to talk to investors. There was clearly a passion by the investment community that Savers could be one of those greenshoots in the IPO market. I think today we proved that.”
The Bellevue, Wash.-based company started with a single thrift shop in San Francisco in 1954, and has since grown to a 317-store enterprise with US$1.4-billion in sales and US$84.7-million in net profit last year.
A big slice of its business comes from Canada, which accounts for 41 per cent of the company’s revenue and 45 per cent of its profits. (The company has 153 stores in Canada, where Value Village/Village des Valeurs is the main brand; its other store banners are Savers, 2nd Avenue and Unique.) It helps that Canadian consumers are famously price-conscious.
“The acceptance of thrift is a little more mainstream in Canada than it is in the United States,” Mr. Walsh said.
Shoppers’ enthusiasm for thrifting seems to be rising. Savers Value Village’s comparable store sales – an important retail industry metric that tracks sales growth not attributable to new locations opening up – grew by 13.5 per cent last year.
That growth was particularly pronounced in Canada, compared with 2021 when there were still sporadic store closings because of COVID-19. But the overall trend is relatively steady: Aside from a sizable plunge in 2020, comparable sales have grown every year in both the U.S. and Canada since 2007, according to the company’s prospectus filed ahead of the IPO.
It is now planning a major expansion, with the prospectus identifying 2,200 potential new store locations. Mr. Walsh said he believes Canada can accommodate 300 to 400 new locations.
“We do have a lot of growth left in Canada,” he said. That will include more of its “boutique” stores, an experiment that began in Canada with a downtown Toronto location last year and has since opened two more in Toronto and Vancouver. These smaller-footprint stores, which sell only textile items, will be part of the company’s expansion strategy in urban areas across North America, Mr. Walsh said.
Many people who have shopped or dropped off donations at a Value Village location likely think of it as a non-profit enterprise – a natural assumption, since its biggest competitors Goodwill and the Salvation Army, are both non-profits with thousands of locations. The company, however, does partner with non-profits as suppliers, such as Diabetes Canada.
Stress Test: Save money and the planet: How thrifting can help combat inflation
Donations made directly to its stores are also done on behalf of non-profits: The company weighs those donations, pays non-profit partners an agreed-upon rate, and sells the goods for a profit. According to Savers Value Village, those payments totalled US$580-million over the past five years, and it partners with more than 100 charities.
The company had initially expected to raise an estimated US$272.3-million in net proceeds from the IPO, on an assumed $16 share price, but Savers Value Village priced the IPO at US$18 a share – above the $15 to $17 range that it had previously expected. The company plans to use the money to pay down debt, which totalled US$1.1-billion as of April 1.
The company counts a Canadian pension fund among its investors. Ahead of the IPO, the Healthcare of Ontario Pension Plan (HOOPP) was one of two investors that indicated their interest in buying up to a total of US$130-million in shares. (The other investor was Norges Bank Investment Management.)
Investment firm Ares Management Corp. owned all of the outstanding common shares before the IPO, and will continue to control the company, holding approximately 88.2 per cent of the shares, according to the prospectus.
Mr. Walsh said that it is not just inflation that has driven the company’s growth – roughly 70 per cent of its revenue comes from the 4.7 million shoppers who are part of its loyalty program, most of whom have been long-term customers. But he added that non-member transactions have been very strong recently.
“There is a trend toward understanding the circular economy and the waste in terms of textiles, and what that means for the planet,” he said.