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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
NASDAQ
30 Sep 14 16:43:04
$PETM - Statement of Changes in Beneficial Ownership (4) http://t.co/zqfbKuVSTx
NASDAQ
30 Sep 14 16:40:04
$PETM - Statement of Changes in Beneficial Ownership (4) http://t.co/xwBsLHvhoc
NASDAQ
30 Sep 14 16:40:02
$PETM - Statement of Changes in Beneficial Ownership (4) http://t.co/D5CqQ0wXQ1
NASDAQ
30 Sep 14 16:37:06
$PETM - Statement of Changes in Beneficial Ownership (4) http://t.co/y8pTb4gCdP
NASDAQ
30 Sep 14 16:37:02
$PETM - Statement of Changes in Beneficial Ownership (4) http://t.co/42mOYgL6CJ
Julian Close
30 Sep 14 05:59:23
Hedged Trading ideas for $YHOO, $CLVS, $SHLD, $PETM and $ENDP from InvestorsObserver. http://t.co/mUzG0tVpTC #optionstrading #stockmarket
Investors Observer
30 Sep 14 05:59:23
Hedged Trading ideas for $YHOO, $CLVS, $SHLD, $PETM and $ENDP from InvestorsObserver. http://t.co/Nk8oXwijvz #optionstrading #stockmarket
Consestimate
29 Sep 14 16:36:29
Why PetSmart Is an Activist Investor Target . $PETM. http://t.co/aRfwZ7KTj9
New Constructs
29 Sep 14 11:40:08
Barron's has featured our research 9 times so far in 2014. Check out all of the features: http://t.co/qHyCVNOCUB $AOL $DNKN $PETM $HE $STZ
Fish4Bucks
29 Sep 14 06:59:46
60m $PETM 70.760 Price action Crossing up Median Resistance #stocks Signals based on the Fish4Bot indicator ... http://t.co/WZwETG8am0
Peter Bardens
29 Sep 14 06:30:39
$PETM Funds Added To PetSmart Positions http://t.co/ovEmT6pg9G
Lucretia
29 Sep 14 06:30:38
$PETM Bank Of America Says PetSmart, Inc. 'Increasingly Less Likely To Be Taken Private' http://t.co/BfqqX1AB6x
4-traders.com
29 Sep 14 05:50:04
PetSmart : Specialty Retail Equities Technical Coverage - TJX Cos, Ross Stores, The Michaels Cos, Vitamin S... http://t.co/9zRmsxE4wg $PETM
TipRanks
26 Sep 14 18:29:21
3-star analyst Denise Chai from Merrill Lynch reiterated a SELL rating on $PETM. http://t.co/L7P0rZAwSa
Tradespoon
26 Sep 14 08:02:55
$PETM remains on the Tradespoon Bulls conviction list. Get more bullish and bearish #picks. http://t.co/FhkYvUwAaf http://t.co/msTTdsdBNC
Samuel Brown
26 Sep 14 08:00:39
$PETM PetSmart lays off workers from Phoenix headquarters http://t.co/myneQvRSCP
The Fly
26 Sep 14 05:30:24
$TSCO $PETM Tractor Supply entering pet supply market with two store openings: Full Story http://t.co/jRa5aCkn4w
Victor Riesco
25 Sep 14 19:43:02
Others in similar setups & holding on well: $TRN $NVO $SHPG $MSG $ABC $PETM $AGN $GILD $ALGT
Alysia Sarkisian
25 Sep 14 16:04:34
RT @SeekingAlpha: Stock Screen: Retail Stocks With Established Earnings Growth http://t.co/NZ4RGvY0sx $DSW $PSMT $HVT $FOSL $CAB $TJX $HSNI…
Seeking Alpha
25 Sep 14 15:59:06
Stock Screen: Retail Stocks With Established Earnings Growth http://t.co/NZ4RGvY0sx $DSW $PSMT $HVT $FOSL $CAB $TJX $HSNI $PETM $URBN $DG
Market Int Center
25 Sep 14 11:56:29
Potential PetSmart $PETM Trade Has 4.03% Downside Protection ( http://t.co/irOEwWGcT2 )
Fish4Bucks
25 Sep 14 06:58:46
60m $PETM 70.230 Price action Crossing Down Median Support #stocks Signals based on the Fish4Bot indicator P... http://t.co/WZwETG8am0
Fish4Bucks
25 Sep 14 06:37:50
60m $PETM Check Long Profit Area 70.970 Alert 09:37:39 AM #trading #stocks http://t.co/WZwETG8am0 Signals b... http://t.co/WZwETG8am0
Mikael Furesjö
25 Sep 14 01:22:32
#Stock #Scan < #NYSE starts #trading 25Sep2014 (part2 http://t.co/OIli4vIgZI $STT $ROC $CNQ $DISH $PETM $DNR $PAA $CONN
Market Int Center
24 Sep 14 11:17:33
Potential PetSmart $PETM Trade Has 3.71% Downside Protection ( http://t.co/9VIi7gg1Po )
Fish4Bucks
24 Sep 14 10:30:57
60m $PETM 70.520 Price action Crossing up Median Resistance #stocks Signals based on the Fish4Bot indicator ... http://t.co/WZwETG8am0
Fish4Bucks
24 Sep 14 06:37:29
60m $PETM 70.495 Price action Crossing up Median Resistance #stocks Signals based on the Fish4Bot indicator ... http://t.co/WZwETG8am0
WinningStockCoach
23 Sep 14 12:00:00
Next retail move? $CAB $CVS $BBBY $DKS $DSW $FLWS $JCP $JWN $KSS $M $PETM $RAD $SHLD $SPLS $TGT $ULTA $WAG $WMT http://t.co/dAl8SBhZ2B
4-traders.com
23 Sep 14 11:55:02
Target draws focus to South Hill http://t.co/2IFMgsq5jg $SBH $TGT $PETM
InvestProfits
22 Sep 14 22:17:11
PetSmart Inc (PETM) Up 5.55% from its 200 Day Moving Average http://t.co/i03Im3j2Cp $PETM #invest #stocks #investing
				
				
By  +Follow July 3, 2014 10:15AM
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