KingDMC
9 years ago
PetSmart to Be Acquired by BC Partners-Led Group
By David Benoit and Dana Mattioli
PetSmart Inc. agreed to be bought by a group led by BC Partners Inc. for about $8.25 billion, in the largest private-equity buyout of the year.
The group agreed to pay $83 a share for the pet-supply retailer, according to a statement. Besides BC, the group includes some of its limited partners as well as Longview Asset Management LLC, which controls a roughly 9% stake in PetSmart and under the deal would continue to hold some of that.
BC prevailed in the auction over rival buyout firm Apollo Global Management LLC.
PetSmart began contemplating a sale this summer amid pressure to do so from shareholders including Longview and activist investor Jana Partners LLC.
Jana disclosed a 9.9% stake in the company in July. Days after that, Longview, a longtime PetSmart investor, sent the board a letter urging it to hire bankers to consider a deal or other options.
The takeover would be a rare private-equity buyout in a year in which such firms have been priced out of the mergers-and-acquisitions market by lofty stock prices.
PetSmart, which was founded in 1987, has about 1,350 stores, more than half of which contain full-service veterinary hospitals, according to securities filings.
The Phoenix retailer has given up market share to competitors such as Target Corp. and Wal-Mart Stores Inc., as well as e-commerce giant Amazon.com Inc.
A number of retailers have come under pressure in recent years as consumers changed shopping habits and began shopping online more. Last year, office-supply retailers Office Depot Inc. and OfficeMax Inc. merged. In the dollar store category, both Dollar General Corp. and Dollar Tree Inc. are currently trying to buy Family Dollar Stores Inc.
stocktrademan
9 years ago
$PETM DD Notes ~ http://www.ddnotesmaker.com/PETM
bullish
buyout firms are looking at Petsmart, no deals yet
pressure by large holdings to sell the company
background:http://news.investors.com/111914-727171-petsmart-stock-jump-private-equity-buyout.htm?ven=yahoocp&src=aurlled&ven=yahoo
$PETM recent news/filings
## source: finance.yahoo.com
Thu, 04 Dec 2014 20:02:37 GMT ~ All eyes on PetSmart's buyout financing, as regulators circle
[Reuters - UK Focus] - By Natalie Harrison and Michelle Sierra NEW YORK, Dec 4 - Bankers are watching an auction for pet supply retailer PetSmart like hawks after a heated meeting with regulators about the implementation of ...
read full: http://uk.finance.yahoo.com/news/eyes-petsmarts-buyout-financing-regulators-200237304.html
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Thu, 04 Dec 2014 20:02:37 GMT ~ All eyes on PetSmart's buyout financing, as regulators circle
[Reuters] - By Natalie Harrison and Michelle Sierra NEW YORK, Dec 4 - Bankers are watching an auction for pet supply retailer PetSmart like hawks after a heated meeting with regulators about the implementation of ...
read full: http://finance.yahoo.com/news/eyes-petsmarts-buyout-financing-regulators-200237458.html
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Thu, 04 Dec 2014 18:04:15 GMT ~ PETSMART INC Financials
read full: http://finance.yahoo.com/q/is?s=petm
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Mon, 01 Dec 2014 13:07:32 GMT ~ The Zacks Analyst Blog Highlights: Wal-Mart Stores, Best Buy and PetSmart
read full: http://finance.yahoo.com/news/zacks-analyst-blog-highlights-wal-130732948.html
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Sat, 29 Nov 2014 00:07:29 GMT ~ 10-Q for PetSmart, Inc.
read full: http://www.companyspotlight.com/routers/headline/15327/10004/6428719?cp_code=YAH1&1417219649
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$PETM charts
basic chart ## source: stockcharts.com
basic chart ## source: stockscores.com
big daily chart ## source: stockcharts.com
big weekly chart ## source: stockcharts.com
$PETM company information
## source: otcmarkets.com
Link: http://www.otcmarkets.com/stock/PETM/company-info
Ticker: $PETM
OTC Market Place: Not Available
CIK code: 0000863157
Company name: PETsMART, Inc.
Company website: http://www.petsmart.com
Incorporated In: DE, USA
$PETM share structure
## source: otcmarkets.com
Market Value: $7,773,964,598 a/o Dec 05, 2014
Shares Outstanding: 99,411,312 a/o Nov 14, 2014
Float: Not Available
Authorized Shares: Not Available
Par Value: 0.0001
$PETM extra dd links
Company name: PETsMART, Inc.
Company website: http://www.petsmart.com
## STOCK DETAILS ##
After Hours Quote (nasdaq.com): http://www.nasdaq.com/symbol/PETM/after-hours
Option Chain (nasdaq.com): http://www.nasdaq.com/symbol/PETM/option-chain
Historical Prices (yahoo.com): http://finance.yahoo.com/q/hp?s=PETM+Historical+Prices
Company Profile (yahoo.com): http://finance.yahoo.com/q/pr?s=PETM+Profile
Industry (yahoo.com): http://finance.yahoo.com/q/in?s=PETM+Industry
## COMPANY NEWS ##
Market Stream (nasdaq.com): http://www.nasdaq.com/symbol/PETM/stream
Latest news (otcmarkets.com): http://www.otcmarkets.com/stock/PETM/news - http://finance.yahoo.com/q/h?s=PETM+Headlines
## STOCK ANALYSIS ##
Analyst Research (nasdaq.com): http://www.nasdaq.com/symbol/PETM/analyst-research
Guru Analysis (nasdaq.com): http://www.nasdaq.com/symbol/PETM/guru-analysis
Stock Report (nasdaq.com): http://www.nasdaq.com/symbol/PETM/stock-report
Competitors (nasdaq.com): http://www.nasdaq.com/symbol/PETM/competitors
Stock Consultant (nasdaq.com): http://www.nasdaq.com/symbol/PETM/stock-consultant
Stock Comparison (nasdaq.com): http://www.nasdaq.com/symbol/PETM/stock-comparison
Investopedia (investopedia.com): http://www.investopedia.com/markets/stocks/PETM/?wa=0
Research Reports (otcmarkets.com): http://www.otcmarkets.com/stock/PETM/research
Basic Tech. Analysis (yahoo.com): http://finance.yahoo.com/q/ta?s=PETM+Basic+Tech.+Analysis
Barchart (barchart.com): http://www.barchart.com/quotes/stocks/PETM
DTCC (dtcc.com): http://search2.dtcc.com/?q=PETsMART%2C+Inc.&x=10&y=8&sp_p=all&sp_f=ISO-8859-1
Spoke company information (spoke.com): http://www.spoke.com/search?utf8=%E2%9C%93&q=PETsMART%2C+Inc.
Corporation WIKI (corporationwiki.com): http://www.corporationwiki.com/search/results?term=PETsMART%2C+Inc.&x=0&y=0
WHOIS (domaintools.com): http://whois.domaintools.com/http://www.petsmart.com
Alexa (alexa.com): http://www.alexa.com/siteinfo/http://www.petsmart.com#
Corporate website internet archive (archive.org): http://web.archive.org/web/*/http://www.petsmart.com
## FUNDAMENTALS ##
Call Transcripts (nasdaq.com): http://www.nasdaq.com/symbol/PETM/call-transcripts
Annual Report (companyspotlight.com): http://www.companyspotlight.com/library/companies/keyword/PETM
Income Statement (nasdaq.com): http://www.nasdaq.com/symbol/PETM/financials?query=income-statement
Revenue/EPS (nasdaq.com): http://www.nasdaq.com/symbol/PETM/revenue-eps
SEC Filings (nasdaq.com): http://www.nasdaq.com/symbol/PETM/sec-filings
Edgar filings (sec.gov): http://www.sec.gov/cgi-bin/browse-edgar?action=getcompany&CIK=0000863157&owner=exclude&count=40
Latest filings (otcmarkets.com): http://www.otcmarkets.com/stock/PETM/filings
Latest financials (otcmarkets.com): http://www.otcmarkets.com/stock/PETM/financials
Short Interest (nasdaq.com): http://www.nasdaq.com/symbol/PETM/short-interest
Dividend History (nasdaq.com): http://www.nasdaq.com/symbol/PETM/dividend-history
RegSho (regsho.com): http://www.regsho.com/tools/symbol_stats.php?sym=PETM&search=search
OTC Short Report (otcshortreport.com): http://otcshortreport.com/index.php?index=PETM
Short Sales (otcmarkets.com): http://www.otcmarkets.com/stock/PETM/short-sales
Key Statistics (yahoo.com): http://finance.yahoo.com/q/ks?s=PETM+Key+Statistics
Insider Roster (yahoo.com): http://finance.yahoo.com/q/ir?s=PETM+Insider+Roster
Income Statement (yahoo.com): http://finance.yahoo.com/q/is?s=PETM
Balance Sheet (yahoo.com): http://finance.yahoo.com/q/bs?s=PETM
Cash Flow (yahoo.com): http://finance.yahoo.com/q/cf?s=PETM+Cash+Flow&annual
## HOLDINGS ##
Major holdings (cnbc.com): http://data.cnbc.com/quotes/PETM/tab/8.1
Insider transactions (yahoo.com): http://finance.yahoo.com/q/it?s=PETM+Insider+Transactions
Insider transactions (secform4.com): http://www.secform4.com/insider-trading/PETM.htm
Insider transactions (insidercrow.com): http://www.insidercow.com/history/company.jsp?company=PETM
Ownership Summary (nasdaq.com): http://www.nasdaq.com/symbol/PETM/ownership-summary
Institutional Holdings (nasdaq.com): http://www.nasdaq.com/symbol/PETM/institutional-holdings
Insiders (SEC Form 4) (nasdaq.com): http://www.nasdaq.com/symbol/PETM/insider-trades
Insider Disclosure (otcmarkets.com): http://www.otcmarkets.com/stock/PETM/insider-transactions
## SOCIAL MEDIA AND OTHER VARIOUS SOURCES ##
PST (pennystocktweets.com): http://www.pennystocktweets.com/stocks/profile/PETM
Market Watch (marketwatch.com): http://www.marketwatch.com/investing/stock/PETM
Bloomberg (bloomberg.com): http://www.bloomberg.com/quote/PETM:US
Morningstar (morningstar.com): http://quotes.morningstar.com/stock/s?t=PETM
Bussinessweek (businessweek.com): http://investing.businessweek.com/research/stocks/snapshot/snapshot_article.asp?ticker=PETM
$PETM DD Notes ~ http://www.ddnotesmaker.com/PETM
chmcnfunds
10 years ago
PetSmart: Your Portfolio's Best Friend
Jun. 17, 2014 9:39 AM ET | About: PetSmart, Inc (PETM)
Disclosure: The author has no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. (More...)
Summary
PetSmart's premium brands and in-store services give it an underrated moat.
Even with its poor recent earnings the company has managed slight profit growth.
The recent sharp decline makes PETM enticingly cheap.
PetSmart Inc. (PETM) is a leading retailer of pet products and services in the United States. Recently, PETM missed on revenue in 1Q14, and lowered its sales forecasts for FY14. As a result, the stock fell nearly 8%. However, the specialty retailer has a strong history of profit growth and is now trading at its lowest valuation in years. PETM deserves a closer look after this rapid share price decline, and the stock now makes our Most Attractive Stocks list.
Long Track Record of Profitability
PETM currently earns a 15% return on invested capital (ROIC), which ranks in the top quintile of all companies I cover. PETM's ROIC has also steadily risen from 9% in 2010. This positive trend is attributable to improvements in invested capital efficiency. Average Invested capital turns have improved from 1.52 in 2008 to 2.07 in 2014, a 36% improvement in capital efficiency.
In addition to improving capital efficiency, PetSmart has increased profits (NOPAT) by 11% compounded annually since 2009, and by 22% in 2013 on the back of both its service and retail merchandise growth. Figure 1 shows PetSmart's solid profit growth, a long-term trend that should reassure investors concerned over the recent disappointing guidance from the company.
Figure 1: Strong Long Term Profitability
(click to enlarge)(click link for chart)
Sources: New Constructs, LLC and company filings.
More than Just a Retailer
Over the past six years, PETM's merchandise sales and services sales have grown at a 5% and 6.5% compounded annual growth rate, respectively. This growth showcases PETM's moat, which comes from the variety of high quality products it carries and the value-added services it provides. PetSmart stocks premium dog and cat foods, many of which are not available at supermarkets, warehouse clubs, or mass merchandisers. PetSmart's services include pet grooming, training, boarding and day camp, and are not usually provided in discount or unspecialized stores either.
These services also give PetSmart some protection against online competitors like Amazon's (AMZN) and Wag.com. Wag.com's status as an Amazon subsidiary should give it some significant logistical and pricing benefits, but it can't compete with the in-store services PetSmart provides. Additionally, when comparing PetSmart's top 10 selling dog foods per the company's own retail website, Wag.com is either priced higher, or does not carry the product all together.
The other major advantage PetSmart has over online-only retailers in taking advantage of growing pet spending comes in the form of "pet parents", owners who treat their pets like children. These increasingly committed pet owners are more likely to pay a premium for personalized service and utilize PetSmart's grooming, boarding, and other in-store services. PetSmart is positioning itself as less of a simple retailer, and more as a comprehensive pet care resource for many owners.
Cheap Valuation
The recent decline in PETM's stock price creates a great opportunity for investors. At its current valuation of ~$57/share, PetSmart earns a price to economic book value (PEBV) ratio of 1.0. This ratio implies the market expects PETM to never grow NOPAT by any meaningful amount for the remainder of its corporate life. Even in its disappointing quarterly numbers, PETM grew revenue and gross profit by ~1%, and has guided to low single-digit growth in revenues and earnings for the year.
If PETM can continue to grow NOPAT in the low single digits, ~3%, for 10 years, the stock has a fair value of over $70/share. Given that pet spending is expected to grow by about 5% annually in the coming years, this forecast even allows for some market share loss to online competitors.
If we give PETM credit for 5.5% NOPAT growth for the next 10 years, in-line with the expected growth of the industry, the stock has a fair value of over $88/share today. This represents a 55% upside from the current price. Investors should look to PETM for a company with a proven track record of continuing growth, and one that should overcome these short-term issues due to its expansive product selection, value-added services, and intelligent management decisions.
With its lowered earnings and revenue estimates for 2014, PetSmart has set a low bar for itself and minimized the downside risk while improving the chances of an earnings beat. Investors have an opportunity now to buy this solid company at a cheap price.
Funds That Allocate to PETM
Mutual fund investors looking for exposure to PETM should take a look at Wasatch Funds Trust: Wasatch Strategic Income Fund (WASIX), which has a 4.1% allocation to PETM and earns our Attractive rating.
Kyle Guske II contributed to this report.
Disclosure: David Trainer and Kyle Guske II receive no compensation to write about any specific stock, sector or theme.
____________________________
http://seekingalpha.com/article/2272353-petsmart-your-portfolios-best-friend?uprof=46
PETM
chmcnfunds
10 years ago
Extensive article posted on SA:
_____________________________________
PetSmart: Ready To Get Out Of The Dog House?
Jun. 10, 2014 11:24 AM ET | About: PetSmart, Inc (PETM)
Disclosure: The author is long PETM. (More...)
Summary
Low valuation with e-commerce threat priced in.
Service offerings and proprietary products provide defensible moat.
Management has shown strong execution in the past, generating strong returns for shareholders.
PetSmart (PETM) reported Q1 numbers on May 21st. Revenue missed expectations and the company lowered its full-year guidance. The report increased investor concern about growing competitive pressures and internet disintermediation. These fears have driven the stock down almost 20% YTD. The market has overreacted to the competitive pressures and PETM offers an attractive value at this level.
Company Description:
PetSmart is the largest specialty retailer of pet products and services in North America. PETM operates 1,340 retail locations in the United States, Puerto Rico and Canada. PETM offers pet related services in many of its stores. All stores offer professional grooming services and most stores offer dog training. Full-service veterinary hospitals are in 844 of PETM stores. PETM also operates 200 PetHotels, which provide boarding for dogs and cats.
Industry Dynamics:
PETM serves a large and growing market. An American Pet Products Association "APPA" survey showed approximately 68% of households in the United States own a pet. The APPA estimates $58.5 billion will be spent in the pet industry during 2014, a 244% increase from the $17 billion spent in 1994.
Source: American Pet Products Association
Based on 2013 Nielsen data, PETM has a 17% share of the pet product market. A majority of pet products are purchased from mass merchants and grocery stores. However, many natural pet food brands are not sold through these channels due to manufacturer restrictions. PETM has occupied this niche space and is a leading seller of natural pet food.
Source: PetSmart (click link below for charts/tables)
Business Model Summary:
PETM operates in two reporting segments, Merchandise and Services.
Merchandise - Approximately 88.3% of FY 2013 sales were in the merchandise segment. PETM breaks down its merchandise sales into three key areas, Consumables, hard goods and Pets. Consumables sales include pet food, treats, and litter and represented 53.3% of FY 2013 sales. Hard goods include collars, leashes, healthcare supplies, grooming and beauty aids, toys, apparel, pet beds and pet carriers. Hard goods represented 32.8% of FY 2013 sales. Pet sales include fish, small birds, reptiles and other small pets. PETM doesn't sell dogs or cats but does provide space for pet adoptions. Pet sales represented 1.5% of FY 2013 sales.
Services - Services include professional grooming and boarding for dogs and cats. Services also include high quality training and day camps for dogs. Services represented approximately 11.1% of FY 2013 sales.
(click link below for charts/tables)
Source: PetSmart
Investment Rationale:
Service Offerings - PETM offers services including grooming, boarding, training and veterinary services in their stores. PETM also offers space for pet adoptions. These services allow PETM to build a relationship with its customers, building customer loyalty. Veterinary services are a key differentiator for PETM. Full-service veterinary hospitals are in 844 stores - 837 of these veterinary hospitals are operated by MMI Holdings doing business as "Banfield, The Pet Hospital." PETM has a 21% investment in MMI holdings. PETM Service offerings would be very difficult for online retailers to replicate. Service offerings are a key differentiator for PETM compared to its online competition. Services also drive store visits which could lead to additional sales. If customers are in a PETM store already they are likely to purchase other products in the store instead of purchasing from a competitor online.
Humanization of Pets - As seen in the graph below, pets are now seen as part of the family. This has allowed pet product sales to be resilient during difficult economic times. The trend of pet humanization has caused people to spend more on their pets, driving sales for pet product retailers like PETM. Pet owners are able to bring their pets to PETM stores. This caters to owners who feel their pet is part of the family and is not likely to be replicated by grocers or mass merchants.
(click link below for charts/tables)
Source: PetSmart
Channel Exclusive and Proprietary Products - PETM emphasizes natural, science, and therapeutic dog and cat foods. Many of these foods are not available in grocery stores or mass retailers, reducing the potential for competition. PETM also has proprietary foods and hard good products. Proprietary products offer higher margins and give PETM an increased level of quality control. PETM also has well-trained staff which can explain the benefits of higher quality pet food and help customers identify the best products for their pets. The knowledgeable service is another factor online competitors will have difficulty replicating.
Omni-Channel Capabilities - In order to counter online competition, management has emphasized PETM's omni-channel capabilities. PETM has a large brick and mortar presence and has been working to improve and integrate its website. PETM now has the ability to identify if products are available at local stores. PETM is rolling out an order online pickup in-store function which has been successful in test stores. Finally, PETM has stepped up its online promotions including offering discounts and free online shipping. These initiatives should drive sales and allow PETM to maintain market share.
Management - PETM management has been effective and shareholder friendly. Returns on investments have been attractive with an ROA of 17.54% and ROE of 39.66% in the most recent year, according to Yahoo Finance. Management has also returned significant amounts of capital to shareholders in recent years. PETM repurchased $464 million of stock during FY 2013 and another $130 during Q1 2014. PETM has $287.9 million remaining under its current share repurchase authorization. PETM also has a 1.3% dividend that has been growing at a double digit clip the past couple of years. Management has identified and delivered on its value strategy which has driven shareholder returns. (click to enlarge)Source: PetSmart
Valuation - There is a significant amount of pessimism priced into PETM shares. 17.8% of PETM shares are sold short. Valuation is attractive with an EV/EBITDA of 6.58 while the forward P/E ratio is 13.53x.
Risks:
Competition - There is fierce competition in the pet product market. Online competition and local pet supply stores have increased pressure on PETM in recent quarters. This has been reflected in negative same store sale trends. (click to enlarge)(click link below for charts/tables)
Source: PetSmart
PETM management was slow to react to the increased competition but it outlined a plan on the Q1 call to address the issues it sees in the market. PETM has competitive advantages due to its service offerings. PETM also has some pricing power with its suppliers as the largest specialty pet retailer. These advantages should offer a small moat around its business.
Slowing Consumer - Many retail companies saw weak sales in Q1 driven by bad weather and poor consumer sentiment. PETM's focus on higher quality, higher priced pet food could have seen a drag due to a weakness in its customer base in recent quarters. If the economy picks up during the rest of the year some of these pressures could be relieved.
E-Commerce - Competition from online retailers has picked up as well. In particular the launch of Amazon's (AMZN) Wag.com has been a key area of concern for investors. However, pet food and many other pet products are bulky and relatively low value making shipping less economical. High shipping costs make it more difficult for online only retailers to compete in the pet care space.
Margin Compression - Management's focus on protecting market share and expanding its e-commerce capabilities could compress margins. The increase in promotional activity online and free shipping offers will need to be closely watched. Management should be able to offset some of these costs with improvements from other areas, and a focus on higher margin proprietary products and services.
Potential Catalysts:
Cash Return to Shareholders - Management has been actively returning cash to shareholders through dividends and buybacks. A new repurchase authorization or dividend increase could provide a catalyst for the stock.
Acquisition - The specialty pet care business is highly fragmented. There have been rumors that PETM could consider purchasing a competitor to create synergies and grow the business. PETM could also be a takeover target for private equity due to its ability to generate free cash flow.
Q2 Earnings Report - The upcoming earnings report will be a key data point for the stock. Same store sales and margins will be two key areas to watch in the next report. If these metrics vary from expectations it could be a stock moving event.
Recent News:
Q1 2014 Earnings - PETM reported Q1 2014 earnings on May 21st. EPS of $1.04 beat expectations of $1.01 but revenues came in light at $1.73 billion vs. expectations of $1.77 billion. The big news was PETM lowered full year EPS guidance to $4.29-$4.39 below prior guidance of $4.42-$4.54 and analyst expectations of $4.45.
What to Watch:
Same Store Sales - As seen in the graph above, PETM's same store sales trajectory is troubling. This will be a key metric to watch. Management needs to stabilize same store sales trends for the stock to really take off.
Margins - Margins have been improving for PETM. However, the promotions in the online business could hurt margins. Management will have to protect margins for the thesis to play out.
Use of Cash - Management has been returning cash to shareholders through buybacks and dividends. There is a risk that management could make a poor acquisition. Also, if management begins to hoard cash it could indicate they are not confident in PETM's business outlook.
Store Unit Growth - Management's shareholder value strategy outlines 2%-3% square footage growth. This growth will drive company revenues and improve SG&A leverage. If store growth slows PETM EPS growth could be at risk.
Valuation:
P/E Ratio: PETM is trading with a trailing P/E of 14.36 and a forward P/E of 13.53. These are both well below historical averages for the stock. If PETM were able to return to 17x forward it would indicate a stock in the low $70s.
Conclusion:
PETM is a strong operator in the attractive pet care niche. The company's scale and service offerings provide an advantage in an increasing competitive marketplace. Concerns about competition and slowing sales have driven valuations to attractive levels. Company management is focused on maintaining market share and re-accelerating revenue growth. Price declines from current levels are unlikely due to PETM's strong cash flows and low valuation. If management is able to reaccelerate growth there is significant upside to current valuations.
________________________________
http://seekingalpha.com/article/2261343-petsmart-ready-to-get-out-of-the-dog-house?uprof=46
chmcnfunds
10 years ago
Why PetSmart's Turnaround Plan Will Work
By Eric Novinson |
May 30, 2014 | Comments (0)
Shares of PetSmart (NASDAQ: PETM ) tanked after the pet-products retailer reported its first-quarter results on May 21. The pet-products retailer cut its guidance and the Street didn't like that. The shares went for more than $65 at the end of the day on Monday, May 19, but they started falling even before the results came out on Wednesday. The shares were below $56 at the end of the day on May 22. The first-quarter results also included a few other items of concern for investors.
PetSmart's lousy first-quarter results
A drop in comparable-store sales is bad enough, although the 0.6% figure that PetSmart reported wasn't a huge drop. What's worse was that transaction count declined 2.2%. This indicates that PetSmart still managed to make more money from the customers who did show up, but the retailer's pricing power could still come under more pressure. In the earnings press release, CEO and President David Lenhardt blamed, "a challenging and volatile consumer environment and a competitive market." At least PetSmart didn't blame the weather.
The main thing that scared off investors was PetSmart's guidance cuts. The pet-products retailer now expects second-quarter EPS of $0.92-$0.96 and full-year EPS of $4.29-$4.39. Back when PetSmart released its earnings for the fourth quarter of 2013, it had predicted full-year EPS of $4.42-$4.54.
The pet-products retailer had also expected comparable-store sales growth of 2%-4% for the year; it now expects flat comps for 2014. It definitely looks like PetSmart expects tough competition in 2014.
Price competition
The bears think that Amazon.com (NASDAQ: AMZN ) will take away PetSmart's customers by selling pet food at lower prices. With 17.1% short interest on April 30, there are a lot of PetSmart bears right now. So I looked over the Blue Buffalo pet food prices at both retailers. Many of the prices were very similar; a few times, PetSmart even came out ahead. A 24-pound bag of BLUE Freedom Grain Free Large Breed Adult Dog Food, for example, was selling for $48.99 at PetSmart (discounted from $54.99) and $53.99 at Amazon.com (discounted from $58.99).
This shows that PetSmart can compete on price with Amazon.com for online orders, even with the higher overhead that results from PetSmart's store base. The price check also showed that Amazon.com works with Petco to fulfill pet-food orders; like PetSmart, Petco has stores all over the United States, so PetSmart can't use its bricks-and-mortar stores to gain a delivery speed advantage over Amazon.com. However, the PetSmart earnings call shows that the retailer has another way to fight back against Amazon.com.
The conference call
I wanted to check the call to see if PetSmart said anything about the fight going on between Blue Buffalo and Nestle Purina. It turns out that PetSmart has something that could help it fight off Amazon.com and reduce its dependence on Blue Buffalo at the same time, and it's something that has been effectively used by other big-box retailers recently. On the call, David Lenhardt mentioned this three-pronged strategy: "expanding our proprietary and exclusive products and services, growing our most valuable customers and connecting with pet parents in an authentic and personalized way." The first item could be key to fixing PetSmart's problems.
Lenhardt went on further to note that PetSmart sells a large number of exclusive and proprietary products, and these items generate 36% of the retailer's revenue. He then said that the company plans to drive double-digit growth in this area over the next three to five years. It sounds like PetSmart's planning to sell more private-label products. This would limit the price-matching power of Amazon.com and reduce PetSmart's dependence on other suppliers. PetSmart has a private-label natural brand of its own called Simply Nourish -- the brand includes dog and cat food and also extends into vitamins and supplements. Right now, PetSmart has 61 products for dogs and 25 products for cats available under this brand.
A premium private-label brand can be a very powerful and effective tool. Consider Whole Foods' 365 brand or Kroger's Simple Truth brand. Brands like these allow retailers to compete on price while capitalizing on their own reputations for quality, and retailers can also extend them into categories throughout their stores. Simply Nourish might be the key to turning around PetSmart's fortunes.
Foolish takeaway
PetSmart had a disappointing quarter, and its underwhelming guidance suggests that conditions will remain tough in the near future. However, this pet-products retailer may not be as vulnerable to online price competition as the bears think. In addition, with the dramatic fall in share price much of the bad news has been priced in at this point. If PetSmart succeeds in proprietary and exclusive products and keeps building up its Simply Nourish brand, it could still be a solid long-term investment.
______________________________
http://www.fool.com/investing/general/2014/05/30/why-petsmarts-turnaround-plan-will-work.aspx
PGNX
chmcnfunds
10 years ago
PetSmart Results, Omni-Channel Marketing And Phil Bowman
May. 29, 2014 5:57 AM ET | About: PetSmart, Inc (PETM)
Disclosure: I am long PETM. (More...)
Summary
PetSmart produced good results in Q1 2014 but future guidance and analyst downgrades punished the stock mostly out of fear of slowing traffic and growth.
The company has indicated that omni-channel marketing will help drive growth in stores, online and via mobile devices.
The company has hired Phil Bowman as Executive Vice President of Customer Experience to drive omni-channel marketing initiatives thus putting executive resources against these growth plans.
PetSmart (PETM) is now my 6th largest holding out of 21 stocks. I went "crazy" and bought heavily after it was crushed. What's interesting to me is that Q1 2014 didn't go badly at all...
Earnings of $1.04 per share were up 6.1% compared to $0.98 per share in the first quarter of 2013. Net income increased 1.3% to $104 million, compared to $102 million in the first quarter of 2013. Net sales for the first quarter of 2014 increased 1.1% to $1.7 billion.
Comparable store sales, or sales in stores open at least one year, including online sales, fell 0.6%, with comparable transactions decreasing 2.2%. Services sales, which are included in net sales, grew 4.5% to $200 million.
Furthermore, PETM is shareholder friendly and there's fiscal responsibility as evidenced here:
The company generated $137 million in cash flows from operating activities, spent $32 million in capital expenditures, distributed $20 million in dividends, and repurchased $130 million of PetSmart stock. The company ended the quarter with $301 million in cash, cash equivalents and restricted cash and zero borrowings on its credit facility.
So, PETM didn't miss big but they did guide lower for 2014.
Looking forward, PetSmart trimmed its outlook for the full year. PetSmart had previously estimated a full-year profit of between $4.42 and $4.54 per share. It now anticipates full-year earnings to fall between $4.29 and $4.39 per PETM share.
But, analysts also downgraded the stock:
Deutsche Bank Reiterates "Sell" Rating for PetSmart (reference)
Wolfe Research Downgrades PetSmart to Underperform (reference)
PetSmart Price Target Lowered to $55.00 at Jefferies Group
What's the summary? Well, PetSmart had a reasonable quarter. Nothing was horrific and there were no train wrecks. They landed right around consensus but guidance forward was weak.
So, short-term growth is slower than expected. But, what about long-term growth? Is there a catalyst?
PetSmart's Omni-Channel Marketing
It's pretty clear to me that PETM isn't sitting around hoping for growth. In fact, they're working through their plan to simultaneously drive traffic in all environments. This is the crux of omni-channel marketing:
Omni-Channel Retailing is the evolution of multi-channel retailing, but is concentrated more on a seamless approach to the consumer experience through all available shopping channels, i.e. mobile internet devices, computers, brick-and-mortar, television, radio, direct mail, catalog and so on. Retailers are meeting the new customer demands by deploying specialized supply chain strategy software..
Although this is absolutely, totally a buzzword, it captures the idea that shopping is done all over the place, with multiple devices, through all kinds of channels, at different points in time, for different reasons (e.g., QR codes, web site, smartphone).
For a brick-and-mortar company, like PETM, it's the next evolution. It's an awareness that "just adding water" (i.e., e-commerce or mobile) isn't enough. It needs to be a multi-headed attack.
Here are some great quotes:
The omni-channel consumer expects everything to be readily available at his or her fingertips and expects the overall brand experience to be similarly accessible. According to MIT's report, 80% of store shoppers check prices online, with one-third accessing the information on their mobile device while inside the actual store. This percentage proves that consumers are also approaching their experience from multiple angles.
And, if we look at other retailers for omni-channel innovation:
Best Buy's omni-channel strategy centers on adding value to brick and mortar retail stores that were for a time threatened by e-commerce competitors. Adding a "Store Pickup" option within its online shopping process turned out to be a major win for the brand. Although many shoppers compare products and buy online, some still prefer to pick up the goods in person from an actual store.
I've seen this in other environments, like restaurants (e.g., Panera Bread). The blending and merging of the internet, mobile, and physical stores is at the heart of multi-channel.
PetSmart's David Lenhardt said this on the Q1 2014 earnings call:
First, we are focused on driving our consumables sales and are pursuing a more powerful and effective marketing plan and in-store execution that emphasizes the value and breadth of our consumables offerings. Second, we are intensifying our omnichannel efforts to better capture the valuable online customer. Third, we are launching an inspirational and engaging brand campaign to differentiate PetSmart and elevate how the consumer relates to the PetSmart brand.
But, is this puffery? Is PETM just jabbering or are they actually taking action? Are they putting human resources against this drive for growth, and the future?
Enter: Phil Bowman
So, we've seen that growth is maybe slowing and the stock is punished as a result. We've heard that "omni-channel" is the next evolution of retail and that PetSmart is committed. Is there any meat and potatoes here or are we talking rice cakes and carrot salad?
Well, look who was hired on 28-May-2014: PetSmart Appoints Phil Bowman Executive Vice President of Customer Experience.
This is a pretty big deal. In case you're not familiar with "customer experience" it's not just fluffy and puffy stuff. It's the application of usability, user experience, customer service (and more) to a business, especially its technology and customer-facing environments like mobile and the web. It's what make people enjoy shopping along with great products and services.
Who's this Phil Bowman guy? Here's a great list of his skills and experience over on LinkedIn. Looks like he's got some talent.
He was the TD Ameritrade Chief Marketing Officer. Here's what I found from back in 2011.
Bowman comes with nearly 30 years' experience marketing some of North America's most recognized brands, including leadership roles covering everything from branding to direct marketing and client analytics. He most recently served as the senior vice president of corporate marketing for TD Bank Group in Toronto, ON, where he was responsible for the corporate brand, marketing communications and advertising, research and analytics, and integrated customer data and marketing technology, as well as marketing support for the bank's Wealth Management platform.
Prior to joining TD Bank Group, Bowman held marketing leadership roles with several other notable organizations, including H&R Block, Sprint, Circle K Stores and Pizza Hut Group, which at the time was a division of PepsiCo, Inc. He holds a Bachelor of Arts Degree in Communication from Brigham Young University, as well as a Masters of Business Administration, with an emphasis in Marketing, from the University of Virginia, Darden Graduate School of Business Administration.
...and he's now got the TD Ameritrade experience under his belt as well. So, there's even more depth now.
I also found this YouTube video where Bowman is talking about marketing and branding and customer stuff. About 9 minutes into that video he's talking about social media, digital markets, and more.
In that same video I thought it was awesome when he explained that by doing smart education you build confidence in buyers and therefore you don't need to compensate or sink to the bottom by offering discounts to win in the marketplace. That's part of the power of omni-channel marketing, and it also gives me hope that PetSmart can continue to leverage its brand and physical stores.
In any event, the point here isn't just that Phil Bowman seems highly competent. It's that PETM senior management understands they need to get smarter and drive growth using every channel possible. And, that they are putting investments into their online store and mobile, but also senior management.
Summary
PetSmart isn't just talking the talk, they are walking the walk. They are not standing still. They are not just bumbling along, or waiting for the tide to turn. I'm seeing a fiscally conservative company being aggressive about growth, and about the future, and giving customers what they want, need and expect.
Although I previously explained several reasons for investing in PETM (PetSmart Has A 35% Upside Right Now), I'm thrilled with how Phil Bowman, and what he represents, fits into the larger puzzle. My confidence in PETM's future is secure.
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http://seekingalpha.com/article/2243033-petsmart-results-omni-channel-marketing-and-phil-bowman?uprof=46
PETM
chmcnfunds
10 years ago
Why PetSmart Is A Buy
Taesik Yoon Taesik Yoon, Forbes Staff
INVESTING | 2/10/2014 @ 2:22PM |6,209 views
Traditional brick and mortar retailers seem to face more intense online competition every year. Given the challenging consumer spending environment—particularly during the highly promotional holiday shopping period—2013 was an especially tough year for many.
The weak holiday sales have resulted in numerous downgrades of retail stocks. Among them was PetSmart (PETM), the leading retailer of pet products and services in North America, which was downgraded by several analysts last month, citing weaker holiday traffic trends and expectations for increased online competition ahead.
However, PETM has been fairly unscathed by the growing dominance of online retailers over the years. The simple reason for this is the fact that no one has been able to stay in the business of selling 50 pound bags of dog food at a discount while also providing free shipping for very long. Additionally, demand for its products tends to be fairly inelastic and less affected by consumer spending trends.
That’s why I believe the stock is undeserving of the sharp sell-off it has had so far this year and why I expect the strong growth the company has enjoyed over the past several years to continue in 2014.
PetSmart’s 1,314 stores, which are strategically located at sites co-anchored by strong destination mass merchandisers, sell high-quality pet supplies consisting of roughly 11,000 distinct items. Through its Web site it sells an additional 10,000 items. PETM complements these product offerings with a wide selection of pet and veterinary services that promote repeat visits to its stores and creates cross-selling opportunities.
PETM has three business segments. The merchandise segment (88.5% of third quarter net sales) sells pet products that generally fall into three main categories: The consumables category (54.5%) includes pet food, treats and litter with an emphasis on super-premium, premium and therapeutic dog and cat foods, many of which are not available in grocery stores or warehouse clubs. The hardgoods category (32.4%) consists of pet supplies such as collars, leashes, health care items, grooming and beauty aids, toys and apparel, pet beds, pet carriers, aquariums and habitats. The live pets category (1.5%) is comprised of fresh-water fish, small birds, reptiles and small pets.
The services segment (10.9% of third quarter sales) provides a range of pet services, including full-service grooming (such as precision cuts, baths and nail trimming), pet training, and daycamp and boarding at its PetsHotels.
Through its 21% equity stake in Banfield Pet Hospital, PETM also offers routine examinations and vaccinations, dental care, pharmacy services and surgical procedures in many of its stores. The other segment (0.6% of third quarter sales) consists of license fees and reimbursements for specific operating expenses charged to Banfield.
Total third quarter net sales rose 4% year-over-year to $1.7 billion, benefiting from persistently strong demand for natural foods, grooming services and PetsHotels. Comparable store sales grew 2.7%. The merchandise, services and other segments saw sales increases of 3.9%, 5.2% and 7.4%, respectively, to$1.50 billion, $184.2 million and $10.5 million. Due to better sales mix, the operating margin expanded 45 basis points to 9%. Net income grew 12.0% to $92.2 million or 88 cents per share, which beat the consensus estimate by 2 cents.
PETM’s stock has not had a good start to the year. First, it could not escape the sell-off in retail stocks earlier this month spurred by the wave of disappointing sales reports over the holiday shopping season. It was also downgraded by several analysts primarily on concerns over slowing store traffic trends and the expectation for increased competition from Internet-based retailers such as Amazon.com . As a result, shares are down about 10% since the end of 2013.
PETM is certainly not immune to weak consumer spending trends. In fact, coupled with the negative impact of unfavorable weather conditions across the nation—especially in the past month—I would not be surprised if its fourth quarter results fall slightly shy of the consensus estimate.
Furthermore, I concede that the potential for greater competition from the Web is an ever present threat. This has already taken down well-known retailers, such as Blockbuster and Circuit City, while also grabbing substantial market share from other brick and mortars, including Staples , Radio Shack and Best Buy .
But I strongly believe that investors are overestimating the impact of these concerns. The sale of pet food and supplies tends to be less discretionary in nature, resulting in relatively inelastic demand. This is likely due to the fact that spending on pets typically represents a small portion of total household budgets and is centered on food and other consumables, which must be purchased regularly. As such, I think the negative impact of the softer holiday sales trends will be less significant than the stock’s recent drop implies.
In terms of online competition, I want to note that the Internet retail market is fairly mature with well entrenched players in virtually every product category. However, pet supplies has been one area where this is not the case. A key reason for this: the economics just aren’t there. That is, it has been very difficult to make a profit selling pet food at a price competitive enough to sway consumers while also offering free shipping. Many have tried and failed. While the economics of this business may have improved somewhat over the past several years, I believe this remains largely true today.
Furthermore, PETM has been placing more emphasis on growing its own Internet site as part of a larger omnichannel strategy aimed at simplifying the overall customer shopping experience and driving traffic to its stores. For example, it added real-time online inventory availability information for consumables so customers can find out if a specific item is available at their local store. For this reason, I view the threat of online competition as fairly muted.
At the same time, I am optimistic on the prospects within PETM’s services operations, which have continued to grow at a faster pace than its overall core business and represent a key competitive advantage over both online and traditional retailers that sell pet merchandise, such as Target and Costco.
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http://www.forbes.com/sites/investor/2014/02/10/why-petsmart-is-a-buy/
PETM
chmcnfunds
10 years ago
PetSmart Now Covered by Standpoint Research (PETM)
Posted by Nolan Pearson on Jan 30th, 2014 // No Comments
Standpoint Research began coverage on shares of PetSmart (NASDAQ:PETM) in a report issued on Wednesday, TheFlyOnTheWall.com reports. The firm issued a buy rating and a $76.00 target price on the stock.
PETM has been the subject of a number of other recent research reports. Analysts at Thomson Reuters/Verus downgraded shares of PetSmart from a buy rating to a hold rating in a research note to investors on Monday. Separately, analysts at Credit Suisse downgraded shares of PetSmart from an outperform rating to a neutral rating in a research note to investors on Wednesday, January 15th. Finally, analysts at UBS AG downgraded shares of PetSmart from a buy rating to a neutral rating in a research note to investors on Wednesday, January 15th. They now have a $72.00 price target on the stock, down previously from $82.00. Two research analysts have rated the stock with a sell rating, twelve have assigned a hold rating and six have issued a buy rating to the stock. PetSmart currently has a consensus rating of Hold and a consensus price target of $73.73.
PetSmart (NASDAQ:PETM) last issued its quarterly earnings data on Friday, November 22nd. The company reported $0.88 earnings per share (EPS) for the quarter, beating the consensus estimate of $0.86 by $0.02. The company had revenue of $1.70 billion for the quarter, compared to the consensus estimate of $1.70 billion. During the same quarter in the previous year, the company posted $0.75 earnings per share. The company’s revenue for the quarter was up 4.0% on a year-over-year basis.
PetSmart, Inc supplies products, services and solutions for the lifetime needs of pets. The Company operates a website for pet supplies, foods and different animal needs.
The Fly On The Wall
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http://www.wkrb13.com/markets/255029/petsmart-now-covered-by-standpoint-research-petm/
PETM
chmcnfunds
10 years ago
Undervalued Stock Of The Week: PetSmart
Jan. 26, 2014 3:16 AM ET | 14 comments | About: PETM
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. (More...)
The purpose of this series is to highlight stocks with long-term potential, which are undervalued, profitable, have underperformed the market, and have a favorable technical outlook. I apologize for missing two weeks of my series, as I was busy with work and other projects. The stock that I will be covering for my undervalued series this week is PetSmart (PETM). PETM stock has fallen 10.68% in the last quarter compared to the S&P 500 (SPY), which has gained 4.77% in the last quarter. I believe PetSmart is a solid undervalued long-term choice to gain exposure to the U.S pet supplies industry. The table below from the American Pet Products Association shows that spending on pets in the United States has steadily increased year after year. Even during the great recession when retail spending was falling off a cliff, spending on pets increased during that same time, which shows the underlying strength of the pet market even in the worst markets. PetSmart provides pet supplies for a wide variety of pets, along with pet services like grooming, pet hotel, and training services. With many retail stocks of late having serious declines because of poor sales, The CEO of PetSmart in the most recent earnings report commented on the consumer environment in relation to PetSmart:
"Given the challenged consumer environment during the quarter, we are pleased with our results and level of execution, "Our performance demonstrates the strength and stability of our business."
(Image from American Pet Products Association)(click link below for charts/tables)
Value
To value PETM I will be using a DCF calculator, with data for earnings and growth coming from Zacks.com, benchmark data from longrundata.com, and CPI data from the BLS. The DCF table shows shares of PETM are undervalued by 53.08%, which represents a good opportunity for price appreciation for shares of PETM.
EPS [ttm]: $3.99
Long-term Growth Rate: 15.59%
Earnings grow for next: 5 years
Level off: to 1% after
Benchmark return: 10 yr annualized SPY return of 6.94%+1.50% inflation= 8.44% benchmark
Technical Outlook
The chart below shows that shares of PETM have been steadily declining since the stock made a new high of just over $77/share at the beginning of October 2013. Shares of PETM have closed down eleven out of the last fifteen days, which shows the recent extreme downward pressure the stock has been facing over the last couple of weeks. However, after this recent decline, shares are near two important levels of support, both of which are medium to long-term levels of support. The first important support level [Blue Line] is at $60/share. This level is important because shares failed to trade above this level in the early part of 2012, but were finally able to break through this level at the end of May, and the stock has been above that support level ever since. The other level of support [Red Line] that is important is the upward trending support, which has been in place since the end of 2008, has been tested multiple times over the last 5 years and held each time. Going forward with the recent bearish activity in the stock, I expect that these two levels of support will be tested in the near future, and I believe shares will hold both levels of support and move toward my fair value of $98.80.
(click to enlarge)
(Image from ThinkorSwim Platform)
Catalyst
The biggest catalyst for PetSmart going forward is the continued growth in the pet supplies market. The first chart below from a recent investor presentation shows that pet ownership has fallen over the last five years, which you would think would cause revenues at PetSmart to decrease, however, that was not the case. PetSmart was able to increase revenues during the recession, and during that same period, pet ownership fell. Now the recession is over and pet ownership is on the rise again creating a strong tailwind for the PetSmart.
(Image from PetSmart Investor Presentation)
Another catalyst for PetSmart is its movements towards lessening its real estate footprint by building smaller stores. Starting in 2009 for new stores, PetSmart favored building less large stores and more small stores. The evidence of this is seen in the chart below showing that the percentage of the new stores built in 2009 was overwhelmingly large stores. Then when you compare that to this year where only 10% of new stores are large stores, you can clearly see that PetSmart has been phasing out large stores in favor of smaller stores. With these small stores, PetSmart has been able to reduce its operating costs, and thus increase profitability.
(click to enlarge)
(Image from PetSmart Investor Presentation)
Risks
The biggest risk to PetSmart going forward is the change in management that took place earlier this month. President & COO Joseph O'Leary decided to retire and the current CEO David Lenhardt will take over as President. Even though Lenhardt is an insider, there are always risks when there is a management change. In a recent press release, it stated: "PetSmart does not intend to replace the COO position and will realign these responsibilities among four newly created Executive Vice President Positions." With four new positions that were previously made up of duties of the COO, there could be a risk because of the decentralization of responsibilities, which could lead to inefficiencies in the management structure.
Closing thought
I believe shares of PETM are poised to move higher from current levels, because the stock is undervalued, the stock near two levels of strong support, and the company is well positioned to take advantage of the continued growth in pet supplies and services spending. Another positive is PETM is that they have been generating a large amount of free cash flow, which PETM is using to pay a dividend, which has increased 95% over the last 4 years. In addition, PETM has been using free cash flow to buy back stock, and over the last five years, PETM has bought back just over 16% of shares outstanding. Based on all these factors, I believe going forward shares of PetSmart in the long-term will move higher to my fair value estimate of $98.80.
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http://seekingalpha.com/article/1967801-undervalued-stock-of-the-week-petsmart?source=google_news
PETM
chmcnfunds
10 years ago
PetSmart Inc. (PETM): Today's Featured Specialty Retail Laggard
By TheStreet Wire 01/22/14 - 05:01 PM EST
PetSmart (PETM) pushed the Specialty Retail industry lower today making it today's featured Specialty Retail laggard. The industry as a whole closed the day up 0.6%. By the end of trading, PetSmart fell $0.66 (-1.0%) to $63.12 on heavy volume. Throughout the day, 2,034,201 shares of PetSmart exchanged hands as compared to its average daily volume of 1,280,100 shares. The stock ranged in price between $63.06-$64.21 after having opened the day at $64.01 as compared to the previous trading day's close of $63.78. Other companies within the Specialty Retail industry that declined today were: Big 5 Sporting Goods Corporation (BGFV), down 2.6%, XO Group (XOXO), down 2.1%, Perfumania Holdings (PERF), down 2.0% and Titan Machinery (TITN), down 1.7%.
PetSmart, Inc., together with its subsidiaries, operates as a specialty retailer of products, services, and solutions for pets in the United States, Puerto Rico, and Canada. PetSmart has a market cap of $6.7 billion and is part of the services sector. The company has a P/E ratio of 16.2, below the S&P 500 P/E ratio of 17.7. Shares are down 12.3% year to date as of the close of trading on Tuesday. Currently there are 2 analysts that rate PetSmart a buy, 1 analyst rates it a sell, and 15 rate it a hold.
TheStreet Ratings rates PetSmart as a buy. The company's strengths can be seen in multiple areas, such as its impressive record of earnings per share growth, revenue growth, notable return on equity, largely solid financial position with reasonable debt levels by most measures and increase in net income. We feel these strengths outweigh the fact that the company shows low profit margins.
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http://www.thestreet.com/story/12258446/1/petsmart-inc-petm-todays-featured-specialty-retail-laggard.html
PETM
chmcnfunds
11 years ago
Take Advantage of the Stable and Growing Pet Products Industry
By Ted Cooper - April 1, 2013 | Tickers: IDXX, PETM, WOOF
Ted is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
U.S. spending on pets surpassed $53 billion in 2012, up from just $17 billion in 1994, according to the American Pet Products Association. Most of the businesses that cater to pets -- especially at the higher end -- are growing at a steady mid-to-high single-digit pace.
The industry's steady past returns and favorable growth prospects makes a pull-back in a pet-related company's stock price an opportunity to get in at a discount. Not long ago, PetSmart (NASDAQ: PETM) announced disappointing guidance for 2013 due to weaker same-store sales increases than the street had anticipated, and a sell-off of its stock ensued.
However, PetSmart appears to be oversold -- providing an attractive entry point for investors.
Good to be in the pet business
Lots of stores sell pet food, but only PetSmart and its main rival, PETCO, sell a wide variety of high-end pet food and supplies. PetSmart is like the Whole Foods of pet food -- pet owners who care what their pets eat would not dare buy the off-brand processed food sold by Wal-Mart.
But pet supplies companies are not the only pet-related businesses benefiting from the boom in pet spending. VCA Antech (NASDAQ: WOOF) and Idexx Laboratories (NASDAQ: IDXX) also benefit.
VCA and Idexx compete in diagnostic lab tests for animals. VCA also owns animal hospitals. It frequently acquires independent animal hospitals in a roll-up format designed to produce cost advantages over local competitors by way of economies of scale. The lab business is much better than the animal hospital business, though integrating the two makes the animal hospital side more attractive than it otherwise would be due to synergies.
The key for both VCA and PetSmart is that they are large companies operating in a fragmented market. Most animal hospitals are independent -- or are part of a two- or three-hospital chain. Likewise, most of PetSmart's non-PETCO competition comes from mom-and-pop stores.
As a result of economies of scale, these companies typically earn relatively high and stable margins. However, VCA's margin has fallen precipitously over the last couple of years due to an increased emphasis on the lower-margin animal hospital side of the business.
One thing to note is that there were no substantial drop-offs in margins during the recession. Pet spending is becoming more of a non-discretionary expense for many pet-owners as the humanization of pets takes hold in America. This should enable all pet-related businesses to outperform the general economy during another downturn.
Getting in at an attractive price
Quality limits your downside, but price determines your return. So your goal should be to pay a low price for a high-quality business.
VCA's animal hospital is not nearly as good as its labs -- and unfortunately it seems content to continue moving away from its lab business. So VCA is the least attractive of the three on the quality scale and should be put aside from further consideration.
Idexx's lab business has high and stable margins. It earned $164 million in free cash flow in 2012 and will likely earn between $160 and $175 million in 2013. $175 million divided by the company's current market cap, $5.06 billion, suggests a 3.5% initial free cash flow yield. But Idexx is still growing, so the actual return on investment will probably be closer to double the initial yield, or 7%.
Luckily, PetSmart is both high-quality and selling at a low price. The stock sells at just 11x pre-tax earnings -- a bargain when you consider that it is growing at a high-single-digit rate. Investors keen on entering the pet business may have just found their entry point.
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http://beta.fool.com/titans8904/2013/04/01/take-advantage-of-the-stable-and-growing-pet-produ/28480/?source=eogyholnk0000001
PETM
chmcnfunds
11 years ago
Petsmart (PETM) – Investment Analysts’ Recent Ratings Updates
Posted by: Masoud Bidgoli Posted date: March 13, 2013 In: Analyst Articles - Company Sum, Markets
Petsmart (NASDAQ: PETM) received a number of ratings updates from brokerages and research firms in the last week:
Petsmart had its price target raised by analysts at Goldman Sachs to $74.00. They wrote, “Core growth drivers – notably strong increases in sales of superpremium foods – remain intact, though they are cycling years of big gains, and are unlikely to accelerate. The firm specifically indicated that dog is moderating from torrid growth, while cat actually gained momentum. … PETM asserts, and our checks concur, that the online market is not big enough to dent PETM’s sales yet. … We think PETM’s current forward growth rate supports the 16.5X forward multiple embedded in our price target.”
Petsmart was downgraded by analysts at Piper Jaffray from an “overweight” rating to a “neutral” rating. They now have a $68.00 price target on the stock. They wrote, “We are downgrading PETM shares to Neutral and reducing our price target from $82 to $68 following somewhat disappointing Q4 results. We continue to like the industry backdrop (with strong growth and fragmented competition), PETM’s solid execution and differentiation, and its positioning in the secular pet food trade-up theme. However, Q4 appears to be an inflection point for decelerating growth in the coming year(s), after 3 years of spectacular growth. Sales driving initiatives for 2013 appear less exciting compared to recent years, and the gross margin drivers around price optimization and localized assortment are not kicking in as quickly as we thought.”
Petsmart had its price target lowered by analysts at Jefferies Group from $71.00 to $66.00. They now have a “hold” rating on the stock.
Petsmart had its price target lowered by analysts at Bank of America to $80.00. They wrote, “?PetSmart reported 4Q EPS $0.01 below our forecast, though above guidance, due to slightly lower-than expected sales with 4.6% comps. Management noted that sales experienced volatility during 4Q, and we estimate comps likely had ~100 bps impact from Hurricane Sandy. That said, there has been sequential improvement 1Q-to-date, and we remain positive on company and industry fundamentals. We reiterate our Buy rating and believe that further improvement to already-favorable pet industry and housing metrics will provide potential upside.”
Petsmart had its price target lowered by analysts at UBS AG from $80.00 to $77.00. They now have a “buy” rating on the stock.
Petsmart had its price target lowered by analysts at Telsey Advisory Group to $75.00.
Petsmart had its “overweight” rating reaffirmed by analysts at Barclays Capital. They now have a $75.00 price target on the stock.
Petsmart was given a new $77.00 price target on by analysts at Morgan Stanley. They now have an “overweight” rating on the stock.
Petsmart was downgraded by analysts at Piper Jaffray from an “overweight” rating to a “neutral” rating.
Petsmart had its price target lowered by analysts at Deutsche Bank from $69.00 to $64.00. They now have a “hold” rating on the stock.
Petsmart opened at 61.91 on Wednesday. Petsmart has a 1-year low of $54.20 and a 1-year high of $72.75. The stock’s 50-day moving average is currently $65.17. The company has a market cap of $6.592 billion and a price-to-earnings ratio of 17.70.
PetSmart, Inc. supplies products, services and solutions for the lifetime needs of pets. The Company operates a website for pet supplies, foods and different animal needs.
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http://www.mideasttime.com/petsmart-petm-investment-analysts-recent-ratings-updates/2682/
Still plenty of upside.
PETM
chmcnfunds
11 years ago
A Smart Investment to Make Today
By Joseph Solitro - March 5, 2013 | Tickers: AMZN, PETS, PETM | 0 Comments
Joseph is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
The happiest place on Earth for humans may be Disney World, but the happiest place on Earth for our pets is PetSmart (NASDAQ: PETM). I do not know whether it is the smell of the food, other dogs, or just the thrill of being in public, but my puppies go absolutely crazy on the walk through the parking lot and into the store. My male puppy barks his head off if he sees a neighbor dog outside of my home, but seeing a dog in this store is like he's found a long lost friend. PetSmart is not just a great place to take your pets, but it is also the perfect company to invest in! Let us take a deeper look into what makes this company worthy of consideration.
Store, Salon, and More
PetSmart's stores have all of the pet products you need, along with grooming, training, and adoption services. This is the most well-known part of the company, but they also operate PetsHotels and Doggie Day Camps. PetsHotels are overnight boarding facilities for people heading out on trips or who just cannot watch their dogs or cats for a period of time. There are 195 in-store facilities to date, and this number will continue to grow. These "hotels" are staffed by hand-picked professionals and hold the PetSmart name, giving the pet owners much more peace of mind than with other boarding facilities. Doggie Day Camp is like daycare for your dog, in which they will play with other dogs and PetSmart associates, all while under close supervision. Finally, there are Banfield Pet Hospitals located in 60% of stores. This pet hospital provides a full range of health care services as well as emergency services. PetSmart owns a 20.5% equity stake in the operator of these hospitals.
Internet Based Competition
PetMed Express (NASDAQ: PETS) is an internet-based pet supplies and information provider. They carry all major brands and hand select the healthiest products for your pets. They also have the largest network of veterinary pharmacists in the world, making them a great source for pet medications and advice. However, since they are internet-based, they are limited in the services they can provide. With a market cap just under $250 million, they are about 1/27th the size of PetSmart. Their earnings growth has slowed drastically, rising just 5% in 2012, and they are expected to grow under 1% in 2013. They have a high dividend of 4.6%, but this is not high enough to compare to the growth and dividend combination PetSmart offers.
Amazon (NASDAQ: AMZN) is another internet-based retailer with a share of the pet supplies industry. You can buy just about anything imaginable on Amazon, including pet food, toys, and supplies. However, since they are internet-based like PetMed, they do not offer pet services. A major downside for Amazon is customer service relating to pet products. If a customer has questions or needs a product recommendation, they will need to contact someone with experience and expertise, which would result in a call to PetSmart, PetMed Express, or a local veterinarian. Also, PetSmart's prices are just as competitive as Amazon's, and if you order online from PetSmart you can elect to pick up your order at a local store for free. Amazon has the free "super-saver" shipping option, while PetSmart ships all orders over $49 for free. There are some cases where Amazon will win in the pricing war, but PetSmart has the advantage as of now.
Even with these strong competitors, PetSmart is still the leading online provider of pet supplies and information. As a brick and mortar store, PetSmart offers the personal interactions and services that most of us prefer when caring for our pets, and also gives our pets a place to go and feel welcome. I believe they will continue to have a stronghold in this industry.
Financial Growth
PetSmart reported third quarter earnings on Nov. 14, 2012. In this quarter, they recorded earnings per share of $0.75 compared to analyst expectations of $0.63. This is also a 50% increase year-over-year. In the quarter, comparable store sales increase 6.5%, total sales rose 9%, and sales of services grew 8%. Guidance for the full year was raised as management expects total sales to increase 10%-11% for the year.
This pet superstore is expected to earn $3.93 in 2013 and $4.48 in 2014. This represents an 11.6% growth from 2012 and 14% growth from 2013. These growth rates are not as high as the 38% from 2011 to 2012, but with the rate they are going, I expect management to raise expectations in their next report. Fourth quarter earnings are to be released on March 6 and current expectations call for $1.21 per share, a 33% increase year-over-year. With that said, PetSmart has beaten earnings expectations for three straight quarters, so I predict another blowout.
Current Pricing
PetSmart is trading at $62.75 during trading on Feb. 26, which is 13.74% below its 52 week high of $72.75. Their current price-to-earnings ratio is below the industry average and their operating margin is higher. This is odd, but forms a great opportunity for investors. They pay out $0.66 annually, representing a yield of 1.05%. This is not a high yield, but any dividend is a great dividend if the company has solid growth like this one.
The Foolish Bottom Line
Americans spend over $50 billion annually on their pets, and this number continues to grow. Forbes has said that 92% of people spent the same amount or more on their pets during the recent recession, which means that not only is the industry growing, but it is recession proof. PetSmart is the perfect way to play the growth in this industry, and it is for this reason that I am initiating an outperform call on CAPS. I believe this stock will test its 52 week high in the very near future and set new highs later this year. PetSmart is a stock I want to BUY.
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http://beta.fool.com/joeysolitro1/2013/03/05/smart-investment-today/25695/?logvisit=y&published=2013-03-05&source=eptcnnlnk0000001
PETM
chmcnfunds
11 years ago
Take Advantage of the Booming Pet Economy
By Adam Levy - March 1, 2013
Adam is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
Despite all of Bob Barker’s pleading at the end of the Price is Right, the pet population is exploding! As the number of pet owners rises, spending is rising even faster. The market size has doubled on a real basis in the last 20 years. In 2012, Americans spent over $52 billion on animals. That number is expected to rise to $74 billion by 2015.
(click below for graph)
(Source: The Atlantic)
There are several ways you can invest in the booming pet economy, but one company stands out to me: PetSmart (NASDAQ: PETM)
The last bastion of brick-and-mortar retail
Retail stores have been suffering at the hands of e-commerce giant Amazon.com (NASDAQ: AMZN) for some time now. The growth of the online retailer is a key driver to the expansion of the greater than $1 trillion e-commerce industry. However, the pet industry has proven a tougher customer for Amazon.
That’s not to say Amazon isn’t a significant threat in the pet supply business. Its Wag.com website launched a couple years ago and features a huge selection of products, and offers the usual Amazon perks – great prices and free and fast shipping.
However, pet owners seem to buck the trend of increasing online sales. Even Petmed Express (NASDAQ: PETS) is starting to see sales plateau after growing revenue by an average of 15.8% per year over the last decade. Earnings growth slowed to just 5% for the company in 2012, and is expected to rise just 1% in 2013.
The limitations of online retail are quite evident in the pet supplies category. Not much can beat the personalized (animalized?) recommendations from knowledgeable in store staff at specialty retailers like PetSmart. PetSmart has grown into a one-stop shop for pet owners providing food, toys, and other supplies as well as grooming, boarding, training, and veterinary services. Not to mention you can get your next pet there too.
But really, pet owners love going to PetSmart because their pets love it! While barking at the mailman as he delivers a package full of food, toys, and medicine is fun, it’s a far cry from going for a trip, meeting other animals, and getting a special treat at the end of it all.
The real competition
A much bigger threat to PetSmart is big-box retailer Wal-Mart (NYSE: WMT). As it’s just started expanding into the pet supplies business with food and toys, there’s still a lot of potential for Wal-Mart to capitalize on the booming pet industry by adding more pet-friendly store sections.
Currently, Wal-Mart doesn’t control the mind space of pet owners. However, it’s just a successful marketing campaign away from seeing packs of four legged creatures coming through its doors. Wal-Mart definitely has the pricing power to undercut PetSmart, which makes it a serious threat. I think it’s just a matter of time until we see a bigger push on Wal-Mart’s part.
The PetSmart Advantage
In 2009, when the U.S. was just entering a recessionary period, PetSmart started offering pet owners new upscale products such as organic food and specialty pet furniture. The idea of increasing high-end merchandise while facing a dismal macroeconomic environment is pretty counter-intuitive, but the results speak for themselves. Sales have increased nearly 8% annually for the past 4 years.
What’s more, the increase in high-end merchandise sales means higher margins for the company. From 2009 to 2011, the company improved its gross margin by 100 basis points from 28.5% to 29.5%. In its most recent four quarters, gross margin grew to 30.2%.
While big retailers might be able to snatch up customers looking for value, PetSmart has already started addressing a much more lucrative customer. Aside from high-end merchandise, PetSmart has an excellent foothold on in-store pet services, which comprise more than one-third of the pet-economy. This is one of the fastest growing segments of the company, as sales improved 8% in the third quarter last year.
Finally, PetSmart is just starting to grow internationally. Last year, the company entered a licensing agreement with a Korean retailer to sell its branded products. The agreement is a relatively low-risk low-cost approach to testing its brand identity in a foreign country with a similarly booming pet population.
A ‘Smart investment
PetSmart currently trades at a historically high P/E ratio. With its trailing P/E still floating above 20, it’s well above its 5-year average multiple of 18.5. However, the earnings growth continues to look strong, resulting in a forward-looking PEG ratio of 1.0.
I believe that the increase in relative price for the stock is completely justified as the company has proven it’s more than capable of outpacing the growth of its competition. However, just like any high P/E stock, even the slightest bit of bad news could cause the stock to stumble.
When PetSmart reports earnings on March 6, a miss on either the top or bottom lines could present an excellent buying opportunity. However, I expect it to continue its long run of earnings beats, so there may be no better time to buy than right now. If it goes down, you can always add to your position.
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http://beta.fool.com/adamlevy/2013/03/01/take-advantage-booming-pet-economy/25928/
PETM
chmcnfunds
11 years ago
New Picks From Billionaire David Harding: PetSmart, Inc. (PETM), Garmin Ltd. (GRMN), Seagate Technology PLC (STX)
By ERIC WINTER in Hedge Funds
Published: February 27, 2013 at 1:51 pm
David Harding of Winton Capital Management had humble beginnings as a hedge fund manager, starting with a paltry $1.6mm in assets in 1997, a far cry from the billions he currently manages. He favors quantitative strategies and keeps diversified exposure to most sectors, with a slight preference to the Services industry. Winton recently released its 13F filing for Q4 2012, outlining the fund’s portfolio activity. We take particular interest in the small-cap holdings of funds like Winton as we have found that the most popular small-cap picks amongst hedge fund managers can provide substantial market-beating returns (learn more here). Read on to see our analysis of the fund’s largest initiations for the last quarter of 2012.
Of Harding’s seventy-seven new purchases, PetSmart, Inc. (NASDAQ:PETM) was the largest, with 0.58% of the fund’s assets under management. The pet supply retailer had a positive gain looking back twelve months, beating the market’s 8.4% return by four percentage points. PETM reported a positive Q3 2012, with quarterly growth in both revenue and earnings year over year; the company is due to report Q4 earnings on the sixth of March. PetSmart has received two downgrades to neutral since the start of this year, as Wall Street expects lower spending on pets due to higher payroll taxes. Ken Heebner of Capital Growth Management built a PetSmart, Inc. (NASDAQ:PETM) position in the last quarter of 2012 as well (see his fund’s holdings here).
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http://www.insidermonkey.com/blog/new-picks-from-billionaire-david-harding-petsmart-inc-petm-garmin-ltd-grmn-seagate-technology-plc-stx-74982/
PETM
Penny Roger$
13 years ago
Top 5 Companies in the Specialty Stores Industry With the Highest Dividend Yield (BAMM, BGFV, SPLS, TIF, PETM)
| Thursday, August 4, 2011 8:04 AM |
Top 5 Companies in the Specialty Stores Industry With the Highest Dividend Yield (BAMM, BGFV, SPLS, TIF, PETM)
Investor's Business Daily - Aug 4, 2011 Aug 05, 2011 (SmarTrend(R) News Watch via COMTEX) -- Below are the top five companies in the Specialty Stores industry as measured by dividend yield. Dividends can enhance returns for investors ...TOP 5 COMPANIES IN THE SPECIALTY STORES INDUSTRY WITH THE BEST RELATIVE PERFORMANCE (HIBB, PETM, TSCO, SPLS, CAB) - Zacks.com
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Penny Roger$
13 years ago
Best Relative Performance in the Specialty Stores Industry Detected in Shares of Zale (ZLC, OMX, PETM, VSI, TIF)
| Tuesday, August 2, 2011 7:57 AM |
Best Relative Performance in the Specialty Stores Industry Detected in Shares of Zale (ZLC, OMX, PETM, VSI, TIF)
Investor's Business Daily - Aug 2, 2011 Aug 02, 2011 (SmarTrend(R) News Watch via COMTEX) -- Below are the top five companies in the Specialty Stores industry as measured by relative performance. This analysis was compiled based on ...Zale has the Best Relative Performance in the Specialty Stores Industry (ZLC, OMX, PETM, VSI, TIF) - Financial News Network Online
OFFICEMAX HAS THE BEST RELATIVE PERFORMANCE IN THE SPECIALTY STORES INDUSTRY (OMX, SPLS, VSI, ULTA, PETM) - Zacks.com
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jimmybob
9 years ago
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