PetSmart Inc. (PETM), the specialty retailer of products, services, and solutions for pets, recently posted first-quarter 2011 earnings of 61 cents a share, up 32.6% from 46 cents in the year-ago quarter, outpacing the Zacks Consensus Estimate of 55 cents.
Buoyed by the first-quarter results, the company raised its earnings per share guidance in the range of $2.32 to $2.42 from its previous range of $2.23 to $2.35. The company also projects second-quarter 2011 earnings between 47 cents and 51 cents.
PetSmart delivered top-line growth of 6.8% in the quarter to $1,490.4 million, which was ahead of the Zacks Revenue Estimate of $1,485.0 million. The company expects revenue to increase in mid-single digits for fiscal 2011.
Merchandise sales grew 6.5% to $1,314.3 million, whereas service sales climbed 9.0% to $167.1 million. Other revenue in the quarter came in at $8.9 million.
Phoenix-based pet products retailer hinted that comparable-store sales surged 5.0% in the quarter, aided by a 2.7% growth in comparable transaction. PetSmart forecasted comparable store sales growth in the low- to mid-single digit range in fiscal 2011. For the second quarter of 2011, the company expects comparable store sales to grow in mid-single digit.
Favorable currency fluctuations, increased consumer transactions coupled with healthy sales during the quarter facilitated the company in boosting its top and bottom lines.
Further, PetSmart’s innovative and differentiated products as well its sustained effort to expand its portfolio of brands and assortments and its collaboration with Martha Stewart Living Omnimedia Inc. (MSO) have aided it to launch different lines of pet products for delivering healthy results.
Despite a 5.9% rise in the cost of goods sold, the company posted a substantial increase of 9.2% in gross profit to $441.4 million, benefiting from the top-line growth. Consequently, gross margin expanded 60 basis points to 29.6%. Operating income surged 17.8% for the quarter to $121.7 million, whereas operating margin increased 80 basis points to 8.2%.
During the quarter, PetSmart opened 5 stores bringing the total count to 1,192 stores. Currently, the company also operates 184 PetsHotels.
The company repurchased shares worth $102.0 million, incurred $31.0 million in capital expenditures and distributed dividends valued at $14.0 million during the reported quarter. It ended the quarter with cash and cash equivalents of $228.1 million, capital lease obligations of $515.1 million and shareholders’ equity of $1,144.0 million.
Currently, we prefer to maintain a long-term ‘Neutral’ recommendation on the stock. Moreover, PetSmart holds a Zacks #3 Rank, which translates into a short-term ‘Hold’ rating.
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