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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
John Ablemann
29 Aug 14 15:00:36
$PETM PetSmart: The Pet360 Piece (PETM) http://t.co/XlVoaQfktA
TalkMarkets
29 Aug 14 14:49:00
Dividend #Investing For Our Furry Friends $PETM $PETS $PDCO $SPB $CLX $CL $PG http://t.co/AiuXAHgLdg
Jason
29 Aug 14 11:22:08
$PETM trying for HOD
Daily Contracts
29 Aug 14 08:24:01
Real-Time feed of company contracts, original agreements and executive updates from PetSmart $PETM http://t.co/OGB6aermeH
Biz News Pioneer
29 Aug 14 07:40:02
$PETM: PetSmart: Any Takeover Premium Likely Limited (PETM) http://t.co/pBjqtqQrzH http://t.co/7tLq7wNOzq
James P Worthy
29 Aug 14 07:30:47
$PETM PetSmart: The Pet360 Piece (PETM) http://t.co/IXTTzyEeFR
Samuel Brown
29 Aug 14 07:30:46
$PETM Can PetSmart, Inc. (PETM) Go to http://t.co/6wj7hT6BM7, Inc. (AMZN)? http://t.co/P1fSW1Y0ZA
Evener Investment
29 Aug 14 02:12:39
RT @SeekingAlpha: Where To Put My Money, Part 2: The Second One http://t.co/Uixzrnl8Bs $CLB $EBAY $MA $ORCL $PCLN $PETM $TJX
Seeking Alpha
29 Aug 14 02:08:18
Where To Put My Money, Part 2: The Second One http://t.co/Uixzrnl8Bs $CLB $EBAY $MA $ORCL $PCLN $PETM $TJX
John Ablemann
28 Aug 14 13:01:04
$PETM Can PetSmart, Inc. (PETM) Go to http://t.co/ZeYIxSYiZJ, Inc. (AMZN)? http://t.co/UnphveE2pc
BV Services
28 Aug 14 09:12:02
$PETM Petsmart Inc files Form 10-Q (Quarterly Reports) SEC Filing.. http://t.co/UYsYxWHGmf
Financial Updates
28 Aug 14 08:40:07
$PETM: Under Pressure From Jana, PetSmart Says It Will Explore Potential Sale http://t.co/FERvOBhFDj http://t.co/axNNJ9Y3j4
Jason
28 Aug 14 08:28:56
$PETM grabbed some lotto buyout calls
Vijay Neti
28 Aug 14 04:52:02
PetSmart: Making Moves For Future Growth $PETM $AMZN http://t.co/kh2N6aiPRh
Vijay Neti
28 Aug 14 04:47:52
PetSmart: The Pet360 Piece $PETM http://t.co/6elF5XIaeX
Daily Contracts
27 Aug 14 13:33:01
Real-Time feed of company contracts, original agreements and executive updates from PetSmart $PETM http://t.co/OGB6aermeH
12Stocks.com
27 Aug 14 13:00:33
S&P500 #Stocks Trend $BBY $WFM $GT $NRG $UNH $AMAT $HUM $DPS $TIF $DOW $WLP $PFE $AET $PETM $FTR $NE $HPQ $LYB @ http://t.co/RPeaHBZz9y
Stock Headlines
27 Aug 14 12:40:04
$PETM: PetSmart Inc Earnings Call scheduled for 10:00 am ET today http://t.co/4WiSAJlbLQ http://t.co/axvw5yhGWa
Jason
27 Aug 14 11:52:28
$PETM strong watching
Paula Jean Cullar
27 Aug 14 10:48:08
RT @shaunao1: PetSmart is now up for sale $PETM - http://t.co/rc4qxmXGDt http://t.co/9tC02Pxit7 #stocks
Jason
27 Aug 14 10:15:25
$PETM still looking for buyout, watching close..
12Stocks.com
27 Aug 14 08:53:16
MidCap #Stocks Trend $LVLT $DCI $GT $PNW $TECD $FTR $PETM $WFM $DSW $DATA $BAH $CLR $LH $CYH $HUM $TIF $PENN @ http://t.co/tf79gD96D3
12Stocks.com
27 Aug 14 08:52:35
S&P500 #Stocks Trend $GT $PNW $WM $STX $FTR $PETM $WFM $LH $HUM $TIF $AET $DPS $AFL $UNH $OI $WLP $PBI $TDC @ http://t.co/RPeaHBZz9y
12Stocks.com
27 Aug 14 08:52:16
S&P500 #Stocks Performance $BBY $SPLS $GT $PNW $WM $STX $FTR $BTU $PETM $WFM $CNX $SRE $CVC $ADM $PRGO $FE more@ http://t.co/RPeaHBZz9y
Stocks in News
27 Aug 14 08:40:02
$PETM: Exclusive: Amid investor pressure, PetSmart says to explore sale http://t.co/GHDKlmVa8n http://t.co/QlV8Ldz1Kl
Auto Binary option
27 Aug 14 08:27:52
RT @Couzin_Vinny: $PETM - daughter watching this flag with me - 15 min - she’s getting excited
Cousin_Vinny
27 Aug 14 08:20:20
$PETM - daughter watching this flag with me - 15 min - she’s getting excited
Cousin_Vinny
27 Aug 14 07:36:32
$PETM not PETN
Media Sentiment
27 Aug 14 07:24:54
$PETM received a new alert. Find out why at http://t.co/5udYd0Ofs6 #stocks #daytrading #trading #mkt #NYSE #NASDAQ #markets 187
Market Int Center
27 Aug 14 07:19:58
PetSmart $PETM Showing Bullish Technicals With Resistance At $71.93 ( http://t.co/g4NvzKRGek )
Cousin_Vinny
27 Aug 14 07:16:39
$PETM consider exit 1/2 +1.00 http://t.co/FJcMXO2QD2 swing/trail the rest - at recent highs http://t.co/rDbe3tLwhC
Cousin_Vinny
27 Aug 14 06:59:33
$PETM commentary last night http://t.co/t0ERI7YljL this kind of push is what we were looking 4 yday. http://t.co/cxN5s7Vomd
Cousin_Vinny
27 Aug 14 06:56:25
RT @1Bavarian: @Couzin_Vinny FYI—sold my last $PETM today, nice setup—will watch for re-entry—thanks again! <—nice surging to hod now
1Bavarian
27 Aug 14 06:45:23
@Couzin_Vinny FYI—sold my last $PETM today, nice setup—will watch for re-entry—thanks again!
Mikael Furesjö
26 Aug 14 23:54:28
#Stock #Scan:< #NYSE starts #trading 27Aug2014 http://t.co/OIli4vIgZI $ACT $GS $WMB $VALE $PRU $HLF $PETM http://t.co/mpevPu4Z1C
Pet's Health24_7
26 Aug 14 23:32:48
PetSmart: The Pet360 Piece http://t.co/yedPmViBGz $PETM
Alysia Sarkisian
26 Aug 14 23:32:22
RT @SeekingAlpha: PetSmart: The Pet360 Piece http://t.co/LuAjZux3Mr $PETM
Seeking Alpha
26 Aug 14 23:31:56
PetSmart: The Pet360 Piece http://t.co/LuAjZux3Mr $PETM
Business News Now
26 Aug 14 16:40:00
$PETM: [video] Ann Joins PetSmart, Family Dollar as Activists Target Retailers http://t.co/wjUgSgjPrG http://t.co/kaYHFy6erG
StockFluence.com
26 Aug 14 16:29:44
PetSmart, Inc.: 103 (-0.58%) http://t.co/j021Ztgwpk $PETM #PetSmart #Sentiment #Stock #Analysis #BigData
John Turner
26 Aug 14 15:01:03
$PETM PetSmart: Any Takeover Premium Likely Limited (PETM) http://t.co/mgIne3elLb
Gerardo Benitez
26 Aug 14 14:05:25
@BrattleStCap but I agree, seems $MIK is caught in $PETM multiple compression
Gerardo Benitez
26 Aug 14 14:04:39
@BrattleStCap unlike $PETM avg ticket is about $19 and most of their products need to be bought in person. Huge following by loyals
Brattle St. Capital
26 Aug 14 13:57:27
@gerardobenitez on surface looks like short due to AMZN/WMT - appears they have in store expertise etc - reminds me of poor mans $PETM
Stock News Guru
26 Aug 14 12:40:23
$PETM: [video] Ann Joins PetSmart, Family Dollar as Activists Target Retailers http://t.co/HPncR5oYQz http://t.co/Qy2SRuToAj
Market Int Center
26 Aug 14 12:33:33
PetSmart $PETM Showing Resistance Near $70.89 ( http://t.co/Kk7f1JezoG )
Stocks Pastor
26 Aug 14 09:50:18
My subs got $SFLY and $PETM yesterday. Check them now. You owe it to yourself to get in the game and $$$. sign up @ http://t.co/RNlVPIDUjE
Blue Horseshoe
26 Aug 14 08:42:08
@DoubleDown1929 @StaceyRetail ...19.1% $WMT, 21.1% $SPLS and 20.1% $PETM. How sustainable is sub 20%?
Cousin_Vinny
26 Aug 14 08:27:04
$PETM :)
Cousin_Vinny
26 Aug 14 08:08:55
RT @1Bavarian: @Couzin_Vinny Took your $PETM idea this morning @ 69.51, looking good (so far), thanks! <-watch the prev fail FYI - should go
				
				
By  +Follow July 3, 2014 10:15AM
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