PetSmart (NASDAQ:PETM) will unleash earnings on Monday. Here's what you need to watch for in the company's results.


Source: Wikimedia Commons, Anthony 92931.

The first issue that needs to be addressed is whether the pet-centric retailer met Wall Street's expectations. Analysts tag profits for PetSmart at $1.02 per share this quarter, up from $0.98 per share for the year-ago quarter. The company projects its full-year 2014 earnings-per-share outlook in the range of $4.42 to $4.54. I'll be looking to see if the Phoenix-based retailer met its first-quarter EPS estimate.

Sales growth
PetSmart's sales growth has outpaced the industry, with net sales having increased more than 8% on average annually from 2008 through 2012. Yet its growth rate has since slowed. Last quarter, same-store sales grew 1.2%, which was significantly less than the year-ago period's 4.6%. For the first quarter, it expects same-store sales growth of low-single digits. Meanwhile, sales for PetSmart services -- like boarding, training, grooming, and veterinary -- were up 2.6% in Q4 2013. Services sales grew 15% in the year-ago period and steadily slowed in 2013. I'll be looking for what type of sales growth took place in the first quarter. Specifically, I'll be watching for where PetSmart achieved growth, be it merchandise sales or sales from services.

Big retailers circling the dog park
Wal-Mart and have aggressively entered the pet supply market with countless pet products, premium private-label dog food, free shipping, and two-day delivery guarantees. Since 88% of PetSmart's sales are derived from merchandise as opposed to services, these retailing giants could potentially bite into PetSmart's revenues. Yet PetSmart's strengths lie in its strong brand and differentiation through its service offerings. Services not only drive PetSmart's margins substantially but also provide an in-store customer experience that online competitors can't touch. North America's largest provider of pet services knows this and is growing its service offerings. PetSmart's services sales increased 63% from 2007 to 2012.

PetSmart investors' tails have happily wagged for years, with the company returning more than 200% to shareholders since 2009. Will PetSmart continue to warm investors' hearts or, instead, offer a cold nose this quarter? Monday's earnings release will give us some indication.

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Nicole Seghetti owns shares of Wal-Mart Stores. Follow her on Twitter @NicoleSeghetti. The Motley Fool recommends and owns shares of It recommends PetSmart. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.