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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
OptionsPlay
17 Sep 14 13:45:22
$PETM crossed above $70.75 resistance which is now support. $75 Target http://t.co/NYQReynEaL
Market Int Center
17 Sep 14 10:43:21
Potential PetSmart $PETM Trade Has 5.64% Downside Protection ( http://t.co/jMd81gHctf )
ValueWalk
17 Sep 14 09:20:18
Data Breaches: What They Mean For Consumers And Investors http://t.co/5lfC68YGjb $TGT $HD $SVU $PETM $PFCB http://t.co/dXjQk3qjYD
Harry Walkman
17 Sep 14 08:30:26
$PETM Can PetSmart, Inc. (PETM) Go to http://t.co/xVxt4itmNE, Inc. (AMZN)? http://t.co/ECn3UbvIUM
Fish4Bucks
16 Sep 14 10:19:10
60m $PETM Check Long Profit Area 71.080 Alert 01:18:59 PM #trading #stocks http://t.co/WZwETG8am0 Signals b... http://t.co/WZwETG8am0
Daily Contracts
16 Sep 14 07:09:02
Real-Time feed of company contracts, original agreements and executive updates from PetSmart $PETM http://t.co/OGB6aermeH
Fish4Bucks
16 Sep 14 06:32:20
60m $PETM 69.750 Price action Crossing Down Median Support #stocks Signals based on the Fish4Bot indicator P... http://t.co/WZwETG8am0
Fish4Bucks
16 Sep 14 06:30:35
60m $PETM Check Short Profit Area 69.750 Alert @ 09:30:01 AM #trading #stocks http://t.co/WZwETG8am0 Signals... http://t.co/WZwETG8am0
Analyst Ratings
15 Sep 14 12:14:21
Want the latest analyst ratings on $OAKS $MRIN $COUP $KLKNF $PETM? Get Them Delivered to Your Inbox http://t.co/nSJuDsYidj
Thomas Collins
15 Sep 14 09:31:01
$PETM Bank Of America: PetSmart Sale Unlikely http://t.co/6AvassPEAI
Mikael Furesjö
15 Sep 14 01:59:37
#Stock #Scan < #NYSE starts #trading 15Sep2014 (part II) http://t.co/OIli4vIgZI $ROC $PETM $ZMH $NE $YNDX $GLNG $RKT $TIBX $OCR $SFLY $GOGO
4-traders.com
13 Sep 14 03:25:04
PetSmart : Charities, Mohawk Hudson Humane Society Team Up to Save Hundreds of Pets in New York http://t.co/wT032kvEZb $PETM
Thomas Collins
12 Sep 14 14:30:28
$PETM PetSmart, Inc. (PETM) Leads these Three Stocks that Investors are Bearish On http://t.co/E2VzZmDn8T
Daily Contracts
12 Sep 14 09:20:02
Real-Time feed of company contracts, original agreements and executive updates from PetSmart $PETM http://t.co/OGB6aermeH
Fish4Bucks
12 Sep 14 06:31:43
60m $PETM 70.720 Price action Crossing up Median Resistance #stocks Signals based on the Fish4Bot indicator ... [link removed]
Irma Doucet
12 Sep 14 05:31:15
$PETM PetSmart, Inc. (PETM) Leads these Three Stocks that Investors are Bearish On http://t.co/qbGo2piVLj
Lucretia
12 Sep 14 05:31:15
$PETM Bank Of America: PetSmart Sale Unlikely http://t.co/xFKtK2BOOt
Cousin_Vinny
11 Sep 14 18:50:40
$PETM I see what you're looking at @justinweed1421 note stochastic is turning at support+50ma below http://t.co/DyrS3dUeci
Market Int Center
11 Sep 14 07:20:04
Potential PetSmart $PETM Trade Has 5.12% Downside Protection ( http://t.co/c7dEfvsT9C )
Daily Contracts
11 Sep 14 06:38:01
Real-Time feed of company contracts, original agreements and executive updates from PetSmart $PETM http://t.co/OGB6aermeH
ValueWalk
10 Sep 14 14:13:37
JANA Partners Bets Against Trian With Dollar General Bet http://t.co/z5MUlHdryL $DG $FDO $PETM $DLTR $ACT $EQIX $AIG http://t.co/Fh0Sk8DBbX
Hung Tran, MS, MD
10 Sep 14 13:39:06
$PETM Je pense donc je suis Justin http://t.co/ZkFsU0T7cC
Daily Contracts
10 Sep 14 11:22:01
Real-Time feed of company contracts, original agreements and executive updates from PetSmart $PETM http://t.co/OGB6aermeH
audrey daum
10 Sep 14 10:22:49
RT @ShawnCrandall: @jimcramer Found my dog Cody sleeping on the lessons chapter. He gets his food from $amzn but rates $petm a buy. http://…
Mad Money On CNBC
10 Sep 14 09:53:06
RT @ShawnCrandall: @jimcramer Found my dog Cody sleeping on the lessons chapter. He gets his food from $amzn but rates $petm a buy. http://…
Jim Cramer
10 Sep 14 09:49:11
RT @ShawnCrandall: @jimcramer Found my dog Cody sleeping on the lessons chapter. He gets his food from $amzn but rates $petm a buy. http://…
Market Int Center
10 Sep 14 08:38:11
PetSmart $PETM Showing Bullish Technicals With Resistance At $71.55 ( http://t.co/VnU0e8pn91 )
Shawn Crandall
9 Sep 14 20:22:40
@jimcramer Found my dog Cody sleeping on the lessons chapter. He gets his food from $amzn but rates $petm a buy. http://t.co/Gxhu3GpZRi
				
				
By  +Follow July 3, 2014 10:15AM
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