PetSmart Gives Earnings Dogfight (PETM)

PetSmart Inc. (NASDAQ: PETM) is getting shelled in after-hours trading after the large pet products retail giant posted disappointing earnings and guidance.  It turns out that spending on Fido and Fifi might not be  entirely recession-proof.   The company reported a 3% gain in second quarter earnings of $0.31 EPS on 5.4% higher revenues of $1.31 billion.  So this was growth and was also ahead of the Thomson Reuters earnings figures of $0.29 EPS, but a tad under the consensus estimate of $1.32 billion in revenues.

The increase in net sales was partially impacted by $8.6 million in unfavorable foreign currency fluctuations, while comparable store sales rose by 0.8%.  Pet services sales were $154.2 million, a gain of 10.2% from a year ago. But then the good news stops.

It seems that there is no back to school bump for Fido and Fifi.  PetSmart has lowered its outlook for 3Q, and now sees $0.20 to $0.24 EPS on flat comparable store sales.  We have estimates from Thomson Reuters listed as $0.26 EPS and compares to $0.28 EPS if you look at the same quarter in 2008.

Its full-year earnings guidance was now cut to $1.37 to $1.45 EPS from a prior range of $1.42 to $1.52 EPS and under a Thomson Reuters figure of $1.52 EPS.  For the year, PetSmart put total sales growth in the mid-single digits, comparable store sales growth in the low-single digits, and said services sales growth would be mid- to high-single digits.   If we take the mid-single digits at 5% for total sales growth, then that would come to roughly $5.32 billion and Thomson Reuters lists estimates as $5.35 billion in revenues.

The company has over 20 stores located on its online map in the area surrounding Philadelphia.  If sales start looking too soft ahead, maybe PetSmart could get Michael Vick to do some guest autograph appearances.

Shares closed up over 4% at $22.57 today and the 52-week trading range is $13.27 to $28.86.  The after-hours reaction has shares down a sharp 9% at $20.50.  If these levels hold, it will be the lowest levels since the end and middle of June.

JON C. OGG
August 19, 2009