Savers Value Village, Inc. (SVV), a thrift store retail chain, is changing how it calculates the tax effect on adjustments impacting Adjusted Net Income.

Instead of applying the overall tax rate as it has previously, Savers will now use the tax rate specifically applicable to the respective adjustments.

Not surprisingly, the new methodology is favorable to Savers’ performance.

The change lifted Savers’ Adjusted Net Income by:

—$15.7 million, or 16.8% in FY24
—$10.8 million, or 12.5% in FY25

Likewise, Savers also changed its calculation method for Adjusted EBITDA.

Beginning in FY25 the company will include non-cash occupancy-related costs, pre-opening expenses and store closing expenses— all of which were excluded in FY24, which inflated the key metric.

Not surprisingly, Savers’ most recent Proxy Statement indicates executive bonuses are based solely on Adjusted EBITDA.

Executives received more than $2.5 million in cash bonuses due, in part, to the exclusion of these expenses.

It should not surprise investors if in the next Proxy Statement due out, Savers switches from Adjusted EBITDA to Adjusted Net Income to determine executive bonuses.

With an Enterprise Value (EV) of approximately $2.6 billion, Savers is priced as if it will grow annual sales to more than $4 billion, up from an estimated $1.6 billion in 2025. To justify its current share price of $9.07 our Reverse DCF— which quantifies investor expectations embedded in the current share price— indicates Savers must:

—Grow sales 11% annually between 2027-2034, significantly faster than the company’s estimated 2025 and 2026 sales growth of 6.4% and 7.1%, respectively, and the three-year average of 8.7%
—Immediately increase NOPAT margin to 10%, significantly higher than our 2024 estimate of 6.16% and our 3-year average estimate of 8.41%
—Increase Invested Capital (IC) Turns to 1.3 from our 3-year average estimate of 1.01

Notably, the current share price also implies Savers increases Return on Invested Capital (ROIC) to 13% from our 3-year average estimate of 6.17%: