PetSmart Inc. (PETM), the specialty retailer of products, services, and solutions for pets, recently posted strong third-quarter 2011 earnings. Favorable currency fluctuations, increased consumer transactions coupled with healthy sales during the quarter facilitated the company to boost its top and bottom lines.
Further, PetSmart’s innovative and differentiated products along with its sustained effort to expand its portfolio of brands and assortments and its collaboration with Martha Stewart Living Omnimedia Inc. (MSO) facilitates the company to launch different lines of pet products for delivering healthy results.
The quarterly earnings of 50 cents a share jumped 32% from 38 cents delivered in the year-ago quarter, surpassing the Zacks Consensus Estimate of 48 cents a share.
Buoyed by the third-quarter results, the company raised its earnings per share guidance for the third time in current fiscal. PetSmartnow expects earnings in the range of $2.50 to $2.54 from its previous range of $2.46 to $2.52. Further, for fiscal 2012, PetSmart expects earnings to increase in the range of 11% to 17%.
The company also projects fourth-quarter 2011 earnings between 85 cents and 89 cents.
PetSmart delivered top-line growth of 8% in the quarter to $1,497.6 million, ahead of the Zacks Revenue Estimate of $1,490 million.
Merchandise sales grew 7.8% to $1,326.8 million, whereas service sales climbed 9% to $161.3 million. Other revenue in the quarter came in at $9.4 million, up 5.9% year-over-year.
Based in Phoenix, PetSmart, the retailer of pet products, stated that comparable-store sales increased 6.1% in the quarter, driven by a 2.2% growth in comparable transaction. PetSmart forecasted comparable store sales growth in the mid-single digit range in fiscal 2011. For the fourth quarter of 2011, the company expects comparable store sales to grow in the low-to mid-single digit range.
Despite a 7% rise in the cost of goods sold, the company posted a substantial increase of 10.1% in gross profit to $428.2 million, benefiting from top-line growth. Consequently, gross margin expanded 60 basis points to 28.6%. Operating income surged 21% for the quarter to $101.2 million, whereas operating margin increased 80 basis points to 6.8%.
During the quarter, PetSmart opened 15 stores and closed 2 stores bringing the total count to 1,210 stores. The company also opened 4 PetsHotels during the quarter bringing the total count to 189 PetsHotels.
The company repurchased shares worth $70 million, incurred $28 million in capital expenditures and distributed dividends valued at $16 million during the reported quarter. It ended the quarter with cash and cash equivalents of $271.3 million, capital lease obligations of $512 million and shareholders’ equity of $1,146.1 million.
PetSmart holds a Zacks #2 Rank that translates into a short-term ‘Buy’ rating. Our rank supports the consistent strong performance of the company as well as the robust outlook.
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