PetSmart Shares Dive on Earnings Beat, but Soft Guidance for 2013

Andrew Klips  |

Just after Wednesday’s closing bell, PetSmart Inc. (PETM) reported increases in fiscal fourth-quarter profit, comparable sales and more, but saw its shares stumble lower as its full-year guidance was not up to Wall Street expectations.

During the fiscal fourth quarter ended February 3, 2013, Phoenix, Arizona-based PetSmart recorded revenue of $1.88 billion, compared to $1.64 billion in the year prior quarter, although the recent quarter benefited from an extra week of sales.  Net income for the quarter rose to $134.0 million, or $1.24 per diluted share, compared to $102.0 million, or 91 cents per diluted share, in the year prior quarter.

The extra week in fiscal 2012 accounted for $126 million in sales and 17 cents per share in earnings.  Analysts price-in the extra time into estimates.

Wall Street was expecting earnings of $1.21 per share on revenue of $1.89 billion. PetSmart has posted profit growth in excess of 10 percent for 12 consecutive quarters.

Same-store-sales, or sales in stores open more than one year, increased by 4.6 percent in the latest quarter compared to the year earlier.

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Gross profit edged upward from 30.4 percent to 31.6 percent for the quarter. While operating, general and administrative expenses as a percentage of sales eked down from 20 percent in Q4 2011 to 19.8 percent in the latest quarter.

“We are pleased to report another quarter of solid earnings growth,” said Bob Moran, Chairman and Chief Executive Officer at PetSmart in today’s statement.  Apropos, Moran is on his way out as CEO, being replaced by current COO David Lenhardt in June, although Moran will retain his seat as chairman.

For all of fiscal 2012, the company notched sales of $6.76 billion versus $6.11 billion in fiscal 2011.  Profits totaled $389.5 million, or $3.55 per share, for 2012, against $290.2 million, or $2.55 per share, in 2011.

The disappointment arose from PetSmart’s outlook for fiscal 2013 in which the company estimated EPS in the range of $3.76 to $3.92 and sales growth between 2 percent and 4 percent.  Analysts were predicting $3.93 per share in earnings and 5 percent revenue growth.

For the first quarter, PetSmart sees 92 cents to 98 cents per share in earnings, basically in line with analyst forecasts.

Shares of PETM fell to about 9 month lows at $61.58 on February 25 before springing upward in the past 7 days to close trading on Wednesday at $66.55, up about 1 percent for the day.  The guidance coming in below analyst expectations has stung share value, sending prices sharply lower to around $61.50 per share in extended trading.

With the price drop, shares are still ahead about 10 percent in the past 52 weeks.

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