PETSMART INC. $67 (Nasdaq symbol PETM; Aggressive Growth Portfolio, Consumer sector; Shares outstanding: 102.7 million; Market cap: $6.9 billion; Price-to-sales ratio: 1.0; Dividend yield: 1.0%; TSINetwork Rating: Above Average; www.petm.com) operates 1,269 pet stores in the U.S. and Canada. It also has 195 in-store PetsHotels, which look after pets while their owners are away.
In its 2013 fiscal year, which ended February 3, 2013, PetSmart’s earnings rose 34.2%, to $389.5 million from $290.2 million in fiscal 2012. The company spent $457 million on share buybacks during the year. Due to fewer shares outstanding, earnings per share rose 39.2%, to $3.55 from $2.55.
Sales rose 10.6%, to $6.8 billion from $6.1 billion. That’s mainly because same-store sales rose 6.3%, while sales of pet services, such as grooming and Pets- Hotel stays, increased 9.7%. Services accounted for 11.0% of PetSmart’s revenue, unchanged from the prior year. Sales also benefited from 46 new stores and four new PetsHotels.
The stock is now up 109.4% since we first recommended it at $32 in our October 2007 issue. Even so, it’s still attractive at 17.1 times the $3.92 a share that PetSmart will probably earn in fiscal 2014. The company also has a long history of raising its dividend. The current annual rate of $0.66 a share yields 1.0%.
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