PetSmart Gets a Hairball: Fool by Numbers

On Aug. 15, PetSmart (Nasdaq: PETM  ) released second-quarter earnings for the period ended July 30.

• Revenues came in slightly ahead of expectations. EPS fell short of estimates on expenses to evaluate a merger the company did not pursue and updates to one of its distribution centers, which also lowered gross margins.
• Same-store sales increased by 4.9% during the quarter, and sales of services continued to grow at a rapid clip, with a 28% increase.
• A $250 million share repurchase plan was announced. If executed at today's prices, the plan would reduce the share count by more than 7%.

(Figures in thousands, except per-share data)

Income Statement Highlights

	Avg. Est.	Q2 2006	Q2 2005	Change
Sales	$1,010,000	$1,020,609	$899,097	13.5%
Net Profit	--	$34,630	$35,745	(3.1%)
EPS	$0.28	$0.25	$0.24	4.2%
Diluted Shares		141,237	147,099	(4%)

Get back to basics with a look at the income statement.

Margin Checkup

	Q2 2006	Q2 2005	Change*
Gross Margin	29.87%	31.33%	(1.46)
Operating Margin	6.07%	6.8%	(0.73)
Net Margin	3.39%	3.98%	(0.59)

*Expressed in percentage points.

Margins are the earnings engine. See how they work.

Balance Sheet Highlights

Assets	Q2 2006	Q2 2005	Change
Cash + ST Invest.	$390,466	$399,926	(2.4%)
Accounts Rec.	$24,172	$24,101	0.3%
Inventory	$415,645	$367,727	13%

Liabilities	Q2 2006	Q2 2005	Change
Accounts Payable	$177,096	$174,845	1.3%
Long-Term Debt	$0	$0	N/A

Learn the ways of the balance sheet.

Cash Flow Highlights

Not provided by company.

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Related companies:

• Petco (Nasdaq: PETC  )
• Wal-Mart (NYSE: WMT  )
• Target (NYSE: TGT  )
• PetMed Express (Nasdaq: PETS  )
• Tractor Supply (Nasdaq: TSCO  )
• MWI Veterinary Supply (Nasdaq: MWIV  )

Related Foolishness:

• Foolish Fundamentals: Margins

• Foolish Fundamentals: Enterprise Value

• Foolish Fundamentals: Free Cash Flow

• Foolish Fundamentals: Valuation

• Foolish Fundamentals: Return on Invested Capital

• Foolish Fundamentals: GAAP

• Foolish Fundamentals: Cash Conversion Cycle

• Foolish Fundamentals: The Income Statement

• Foolish Fundamentals: Inventory

• Foolish Fundamentals: The Cash Flow Statement

• Foolish Fundamentals: Stocks

• Foolish Fundamentals: Bonds

Fool by Numbers is designed to give you the raw earnings information in a timely fashion, putting all the numbers you need in one easy-to-read place. But at The Motley Fool, we believe numbers tell only part of the story, so check Fool.com for more of our in-depth discussion of what the numbers mean.

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At the time of publication,Nathan Parmelee held shares of PetSmart but had no positions in any of the other companies mentioned. Fool rules are here.