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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
Luis Gutierrez
24 Oct 14 13:16:19
$PETM Petsmart being sought after by Private Equity investors. Maybe good. The stock has not done much for investors. Dog treats on isle 5!!
Anthony Allyn
24 Oct 14 12:08:43
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activistcorner
24 Oct 14 10:07:09
KKR sniffing around $PETM http://t.co/vkbIgxGr1f
Fugazi Partners
24 Oct 14 10:06:17
RT @activistcorner KKR sniffing around $PETM http://t.co/TIqK13iQHK
Gordon Gekko
24 Oct 14 10:04:12
RT @activistcorner KKR sniffing around $PETM http://t.co/7HLM6x9IIi
James P Worthy
24 Oct 14 10:02:51
$PETM Westport Fund Comments on PetSmart Inc http://t.co/Hxu3IOVNxb
downsidecapital
24 Oct 14 09:29:25
RT @activistcorner KKR sniffing around $PETM http://t.co/eTgQgHcGbg
James P Worthy
24 Oct 14 08:02:29
$PETM Petsmart Inc. Quarterly Stock Valuation (PETM) http://t.co/pSKRHcjyK5
Clair Voight
24 Oct 14 06:02:36
$PETM Petsmart Inc. Quarterly Stock Valuation (PETM) http://t.co/cP7vOpR9NX
4-traders.com
24 Oct 14 05:50:30
PetSmart : SickKids Foundation and PetSmart Canada Partner to Help Fund Pet Therapy Program; new sponsorshi... http://t.co/URDwqqkXNh $PETM
Точка Входа.Трейдинг
24 Oct 14 02:45:04
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Stock Relay
23 Oct 14 21:28:00
$MNDO % Change Click Here: http://t.co/zht8DOUaZK Also See: $TEDU $PETM $HITK $DLB ~
Stock Moo
23 Oct 14 15:55:48
$petm: SickKids Foundation and PetSmart Canada Partner to Help Fund Pet Therapy Program http://t.co/AOQRf6rijP
Stock Moo
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$petm: SickKids Foundation and PetSmart Canada Partner to Help Fund Pet Therapy Program http://t.co/ueIhvQS4Km
4-traders.com
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PetSmart : SickKids Foundation and PetSmart Canada Partner to Help Fund Pet Therapy Program http://t.co/OLkL0544ut $PETM
BV Services
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23 Oct 14 14:03:47
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Brandon Brown
23 Oct 14 11:39:47
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Samuel Brown
23 Oct 14 11:03:15
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Pet's Health24_7
23 Oct 14 08:59:23
NY Post: KKR interested in PetSmart http://t.co/c62CAMAVm9 $KKR, $PETM
gordon gekko is god
23 Oct 14 08:45:48
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Nicole Harris
23 Oct 14 08:43:41
RT @JonMarino: Is $PETM a howling bargain for private equity firms? According to one report, yes > http://t.co/RUejnE6B2u > @Petsmart @TheS…
Stock Picks
23 Oct 14 08:41:56
Watch $PETM, might be making a move
Texas_Stella
23 Oct 14 07:52:30
NY Post: KKR interested in PetSmart http://t.co/G23efrWajT $KKR $PETM
MarketCurrents
23 Oct 14 07:51:18
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Etalon Investment
23 Oct 14 06:40:49
RT @JonMarino: Is $PETM a howling bargain for private equity firms? According to one report, yes > http://t.co/RUejnE6B2u > @Petsmart @TheS…
Dave
23 Oct 14 06:30:09
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Jonathan Marino
23 Oct 14 06:24:04
Is $PETM a howling bargain for private equity firms? According to one report, yes > http://t.co/RUejnE6B2u > @Petsmart @TheStreetTV
Mr.Incredible
23 Oct 14 05:34:42
07:25 $PETM PetSmart has received takeover interest from KKR (KKR) and outer PE firms, according to reports
Fish4Bucks
23 Oct 14 04:27:14
60m $PETM Upper Trendline Pressure 71.510 #futures #stocks 07:27:03 AM http://t.co/WZwETG8am0 Signals based... http://t.co/WZwETG8am0
Pet's Health24_7
23 Oct 14 02:27:41
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Clyde Eltzroth
23 Oct 14 01:43:04
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Alysia Sarkisian
22 Oct 14 12:59:42
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Seeking Alpha
22 Oct 14 12:54:27
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12Stocks.com
22 Oct 14 08:54:14
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Fish4Bucks
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Fish4Bucks
22 Oct 14 06:33:48
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4-traders.com
21 Oct 14 22:50:36
PetSmart : Safe Halloween Fun with Pets http://t.co/hZfK8sPDg6 $PETM
Market Int Center
21 Oct 14 12:51:09
Potential PetSmart $PETM Trade Has 3.77% Downside Protection ( http://t.co/PMAVm82QtS )
Daily Contracts
21 Oct 14 12:06:02
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Fish4Bucks
21 Oct 14 11:27:10
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TickerChirp
21 Oct 14 03:51:05
Leading Tweets Concerning $PETM (Petsmart Inc symbol PETM) on 10/21/2014 http://t.co/5K7YvEd0Pc
Fish4Bucks
20 Oct 14 10:28:09
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20 Oct 14 06:39:26
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Dave & Poohdog
18 Oct 14 10:06:57
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Harry Walkman
17 Oct 14 07:32:11
$PETM How Will PetSmart (PETM) Stock Be Affected Today by This Analyst Action? http://t.co/YUxYPv52A0
Fish4Bucks
17 Oct 14 06:30:20
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Market Int Center
17 Oct 14 06:01:03
PetSmart $PETM Trading Near $62.50 Support Level ( http://t.co/9Mqg9CuPOO )
				
				
By  +Follow July 3, 2014 10:15AM
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