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PetSmart (PETM) Surges After Jana Partners Reveals Major Stake

By  +Follow July 3, 2014 10:15AM
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PetSmart stock, PETM, Jana Partners, PetSmart sale

Shares of PetSmart, Inc. (PETM) surged 12.48% to $67.27 on July 3 after the activist hedge fund Jana Partners disclosed a 9.90% stake in the retailer. Due to the move, Jana Partners will become the company’s largest shareholder.

More than 16.17 million shares were traded on the day, comparing with the average volume of 2.34 million. PetSmart currently has a market cap of $6.67 billion.

The company’s stock has been up and down in the past six months. In late May, the stock’s price shed 10.59% from $64.58 to $57.98 per share. The stock has a 52-week high of $77.32, and a 52-week low of $55.00 per share.

Jana Partners Reveals Major Stake

Jana Partners revealed plans to hold discussions with PetSmart’s management and board about ways to increase the value of its stock. According to the filing, Jana Partner would like PetSmart take a series of actions, including exploring various options to improve operating performance, the company’s capital structure, and management and board composition.

Jana Partners also revealed that it intended to ask PetSmart to explore a sale of the company, the fact that most likely sparked much of the day’s gains.

PetSmart, a Phoenix, Ariz.-based company, is the largest specialty pet retailer of services and solutions for the lifetime needs of pets in the United States, Puerto Rico, and Canada. The company also offers pet food and pet products through an e-commerce site, PetSmart.com.

One Retail Stock with Reason for Optimism

PetSmart’s stock has several strengths, which has greater impacts than its weaknesses. The strengths include revenue growth, growth in earnings per share, and solid financial position. The company has a quarter-revenue growth rate of 1.10%, though is slightly lower than the industry average of 1.50%, which still appears to have trickled down to the company’s bottom line, and to improve the earnings per share as well.

The current debt-to-equity ratio of 0.48 is much lower than the industry average of 36.80, implying that PetSmart has successfully managed its debt levels. But its weak quick ratio of 0.70 demonstrates a lack of ability to pay short-term obligations.

Q1 2014 Saw Improving Income

PetSmart released its financial results for Q1 of fiscal 2014 on May 21. According to the report, the company’s net income has increased 1.30% to $104 million, from $102 million in Q1 of fiscal 2013. Comparable store sales, or sales in stores open at least one year, including online sales, fell 0.60%, with comparable transactions decreasing 2.20%. Services sales grew 4.50% to $200 million.

“We are pleased with the company’s ability to achieve earrings per share growth of 6.10% while continuing to drive earnings before tax margin expansion during the first quarter,” said CEO David Lenhardt. “However, we did not achieve our sales goals, which were impacted by a challenging and volatile consumer environment and a competitive market.”

Fierce Competition Could Eat Into Profits

Indeed, challenges from rivals and the market itself should be noted by investors. Despite the large market of pets’ products and services in the U.S., competitors surround PetSmart. Large supermarkets like Walmart (WMT) also offers pet supplies, and small grocery stores sell limited but much cheaper products. In addition, e-commerce’s expansion has blocked the development of physical stores. Amazon (AMZN) offers free delivery on thousands of pet supplies, offering more convenience at a competitive price.

In order to win over consumers, PetSmart has taken several actions, including building its own online shopping system and improving user experience. The company began to offer daily free shipping on orders over $49. It has also refined its online pet pharmacy services via well-designed selection items.

 

 

 

DISCLOSURE: The views and opinions expressed in this article are those of the authors, and do not represent the views of equities.com. Readers should not consider statements made by the author as formal recommendations and should consult their financial advisor before making any investment decisions.


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Results for PETM
HotKeyTrading
30 Oct 14 12:00:08
Hedge Funds Accumulating: $MYL $EVHC $MCC $PETM $BYI $DGX $RTN $XEC $PACW $FE $TER $OCN $ALGN $WY $PB http://t.co/Vv2VEn80mr #mkt #stocks
Jack Trader
30 Oct 14 11:01:27
$PETM Private-Equity Firms Prepare Bids for PetSmart http://t.co/VO0mWNAQGw
Investbioer
30 Oct 14 09:36:16
@MadMoneyOnCNBC what's up with $petm Jim?
ModernGraham
30 Oct 14 08:03:08
Petsmart Inc. Quarterly Valuation - October 2014 $PETM - #investing http://t.co/hgRaxhPghE
Daily Contracts
30 Oct 14 07:51:02
Real-Time feed of company contracts, original agreements and executive updates from PetSmart $PETM http://t.co/OGB6aermeH
Analyst Ratings
30 Oct 14 07:41:13
Get the latest ratings for $MRIN $COUP $KLKNF $PETM $WSM in your inbox with ARN Daily http://t.co/nSJuDsYidj
Thomas Collins
30 Oct 14 07:02:25
$PETM PetSmart, Inc (PETM) Ex-Dividend Date Scheduled for October 29, 2014 http://t.co/nv3bCve5tN
Market Int Center
30 Oct 14 06:21:39
PetSmart $PETM Trading Near $74.59 Resistance Level ( http://t.co/iZ3nCGoJuz )
Investbioer
30 Oct 14 04:35:31
$petm where are the bids.
HotKeyTrading
30 Oct 14 00:00:09
Hedge Funds Accumulating: $MCC $PETM $BYI $DGX $RTN $XEC $PACW $FE $TER $OCN $ALGN $WY $PB $TLM $MET http://t.co/Vv2VEn80mr #watchlist #spy
HotKeyTrading
29 Oct 14 20:00:05
Price Advances: $WMGI $OCN $PETM $MRGE $SGI $OMG $CPL $CEB $MWA $ETN $XEC $XRAY $ZLTQ $AMED $HES http://t.co/Vv2VEn80mr #mkt #analytics
Polyticks
29 Oct 14 19:40:19
RT @GillianTan: $PETM up 4% as Apollo, Hellman & Friedman, KKR prepare bids for retailer. Scoop with @DanaMattioli & @MikeSpectorWSJ: http:…
Stock Moo
29 Oct 14 18:01:32
$petm: [$$] corporate watch http://t.co/if1tuSpePD
12Stocks.com
29 Oct 14 16:02:45
S&P500 #Stocks Trend $NFX $GT $X $TSS $EA $XRAY $AET $WMB $WDC $MAR $AMP $SEE $MHFI $PCG $PETM $SCHW $WLP $ETN @ http://t.co/RPeaHBZz9y
Daily Contracts
29 Oct 14 14:08:02
Real-Time feed of company contracts, original agreements and executive updates from PetSmart $PETM http://t.co/OGB6aermeH
12Stocks.com
29 Oct 14 13:00:22
S&P500 #Stocks Trend $NFX $X $GT $TSS $EA $XRAY $AET $MAR $SEE $WDC $AMP $PCG $SCHW $SWY $WMB $MHFI $PETM $GLW @ http://t.co/RPeaHBZz9y
HotKeyTrading
29 Oct 14 12:00:08
Hedge Funds Accumulating: $PETM $BYI $DGX $RTN $XEC $PACW $FE $TER $OCN $ALGN $WY $PB $TLM $MET $CST http://t.co/XQITF0lRKD #investors #dow
Pet's Health24_7
29 Oct 14 11:54:24
Report: Interest high in PetSmart LBO http://t.co/epQ4losKAQ $PETM
MarketCurrents
29 Oct 14 11:53:10
Report: Interest high in PetSmart LBO http://t.co/iV8yNLZZZo $PETM
Mike Spector
29 Oct 14 10:40:57
RT @GillianTan: $PETM up 4% as Apollo, Hellman & Friedman, KKR prepare bids for retailer. Scoop with @DanaMattioli & @MikeSpectorWSJ: http:…
Adam Grimes
29 Oct 14 10:33:24
Market stats updated:http://t.co/68GbpCgEsV $O, $PETM, $WM, $ATI, $WUBA, $NFX, $GT, $INVN, $URS, $FB, $SPY, $IWM, $GLD
Jamie Heller
29 Oct 14 10:22:40
Took a while, but PetSmart auction finally getting going. $PETM http://t.co/qTWYMLnFP4
Jon Vince
29 Oct 14 10:14:45
$PETM... 3rd wave?
WSJ Deals
29 Oct 14 10:07:49
RT @GillianTan: $PETM up 4% as Apollo, Hellman & Friedman, KKR prepare bids for retailer. Scoop with @DanaMattioli & @MikeSpectorWSJ: http:…
XBanker Trader Guyer
29 Oct 14 09:43:06
RT @GillianTan: $PETM up 4% as Apollo, Hellman & Friedman, KKR prepare bids for retailer. Scoop with @DanaMattioli & @MikeSpectorWSJ: http:…
Day Trade Alerts
29 Oct 14 09:42:31
via #AlertTrade Price Action Alert $PETM - PETSMART #stocks #intraday http://t.co/VS8RO1bzXJ
Dana Mattioli
29 Oct 14 09:42:22
RT @GillianTan: $PETM up 4% as Apollo, Hellman & Friedman, KKR prepare bids for retailer. Scoop with @DanaMattioli & @MikeSpectorWSJ: http:…
Gillian Tan
29 Oct 14 09:40:50
$PETM up 4% as Apollo, Hellman & Friedman, KKR prepare bids for retailer. Scoop with @DanaMattioli & @MikeSpectorWSJ: http://t.co/wSaxER8WXW
Jon Vince
29 Oct 14 09:34:33
Btw... That little $PETM play was using MARKET ORDERS, lol. 71.55-72.61
ʇɐpıʍdnznʍ
29 Oct 14 09:30:40
$PETM action interesting
Jay C
29 Oct 14 09:26:56
RT @OpenOutcrier: $PETM private equity firms preparing bids.
Jon Vince
29 Oct 14 09:25:08
$PETM - in/out in 3 mins for +1.06. M happy. Go on w/o me.
HNW EQUITIES
29 Oct 14 09:23:20
RT @RiskArbOFI: $PETM PRIVATE EQUITY FIRMS PREPARING BIDS FOR PETSMART, CNBC CITES DJ
ʇɐpıʍdnznʍ
29 Oct 14 09:22:40
$PETM spiking.... KKR LBO happening ??
Emil Gafarov
29 Oct 14 09:19:34
$petm is an lbo target. Apollo, Hellman & Friedman & KKR are among bidders.
Risk Arb OFI
29 Oct 14 09:18:46
$PETM PRIVATE EQUITY FIRMS PREPARING BIDS FOR PETSMART, CNBC CITES DJ
Hacktheripper
29 Oct 14 09:17:14
$PETM was kinda late on letting ya'll know about this/but can only type so fast Pop & Drop
Jon Vince
29 Oct 14 09:14:34
RT @Hacktheripper1: $PETM looking to get bought out
sssc
29 Oct 14 09:11:48
RT @WrigleyTom: $PETM 72.75 | companies preparing bids -via Dow Jones #Stocks
Hacktheripper
29 Oct 14 09:09:50
$PETM looking to get bought out
Eric Scott Hunsader
29 Oct 14 09:09:27
Did $PETM just rocket because someone got an early look at SEC regulatory filing? Guess we'll know in a minute
Tom Wrigley
29 Oct 14 09:09:10
$PETM 72.75 | companies preparing bids -via Dow Jones
Dan
29 Oct 14 09:08:57
$petm spiking on bids being prepared. no position
Open Outcrier
29 Oct 14 09:08:42
$PETM private equity firms preparing bids.
Joe Kunkle
29 Oct 14 09:08:31
$PETM spiking
Fish4Bucks
29 Oct 14 09:08:30
60m $PETM 72.990 Price action Crossing up Median Resistance #stocks Signals based on the Fish4Bot indicator ... http://t.co/WZwETG8am0
Mook Trader
29 Oct 14 09:08:24
$PETM flashed size
Daily Contracts
29 Oct 14 09:02:02
Real-Time feed of company contracts, original agreements and executive updates from PetSmart $PETM http://t.co/OGB6aermeH
Fish4Bucks
29 Oct 14 08:27:09
60m $PETM Upper Trendline Pressure 70.380 #futures #stocks 11:26:53 AM http://t.co/WZwETG8am0 Signals based... http://t.co/WZwETG8am0
Daily Contracts
29 Oct 14 08:19:37
Real-Time feed of company contracts, original agreements and executive updates from PetSmart $PETM http://t.co/OGB6aermeH
				
				
By  +Follow July 3, 2014 10:15AM
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