PETSMART INC. $22 (Nasdaq symbol PETM; Aggressive Growth Portfolio, Consumer sector; Shares outstanding: 125 million; Market cap: $2.8 billion; Price-to-sales ratio: 0.5; WSSF Rating: Above Average) sells pet food and supplies through 1,145 stores in the U.S. and Canada. It also provides veterinary and grooming services, and boards pets at its 156 PetHotels.
In PetSmart’s second quarter, which ended August 2, 2009, its earnings rose 4.6%, to $39 million from $37.2 million a year earlier. Earnings per share gained 3.3%, to $0.31 from $0.30. Revenue rose 5.4%, to $1.3 billion from $1.2 billion. About 85% of the revenue gain came from the 70 stores and 35 PetHotels that PetSmart opened over the past year. Same-store sales rose 0.8%. Pet-service revenue, which accounts for 12% of the company’s overall sales, rose 10.2%.
Because of the slow economy, PetSmart plans to open just seven to nine new stores in the second half of fiscal 2010. This will let the company focus on improving the profitability of its existing stores.
The stock trades at 15.5 times the $1.42 a share that PetSmart will probably earn this year. The $0.40 dividend yields 1.8%. PetSmart holds cash of $180.7 million, or $1.44 a share. Its $554-million long-term debt is just 20% of its market cap.
PetSmart is a buy.
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