PetSmart, Inc.: An Earnings Preview

What you need to watch for when PetSmart releases earnings next week.

May 15, 2014 at 11:01AM

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.

Your credit card may soon be completely worthless
The plastic in your wallet is about to go the way of the typewriter, the VCR, and the 8-track tape player. When it does, a handful of investors could stand to get very rich. You can join them -- but you must act now. An eye-opening new presentation reveals the full story on why your credit card is about to be worthless -- and highlights one little-known company sitting at the epicenter of an earth-shaking movement that could hand early investors the kind of profits we haven't seen since the dot-com days. Click here to watch this stunning video.

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.

4 in 5 Americans Are Ignoring Buffett's Warning

Don't be one of them.

Jun 12, 2015 at 5:01PM

Admitting fear is difficult.

So you can imagine how shocked I was to find out Warren Buffett recently told a select number of investors about the cutting-edge technology that's keeping him awake at night.

This past May, The Motley Fool sent 8 of its best stock analysts to Omaha, Nebraska to attend the Berkshire Hathaway annual shareholder meeting. CEO Warren Buffett and Vice Chairman Charlie Munger fielded questions for nearly 6 hours.
The catch was: Attendees weren't allowed to record any of it. No audio. No video. 

Our team of analysts wrote down every single word Buffett and Munger uttered. Over 16,000 words. But only two words stood out to me as I read the detailed transcript of the event: "Real threat."

That's how Buffett responded when asked about this emerging market that is already expected to be worth more than $2 trillion in the U.S. alone. Google has already put some of its best engineers behind the technology powering this trend. 

The amazing thing is, while Buffett may be nervous, the rest of us can invest in this new industry BEFORE the old money realizes what hit them.

KPMG advises we're "on the cusp of revolutionary change" coming much "sooner than you think."

Even one legendary MIT professor had to recant his position that the technology was "beyond the capability of computer science." (He recently confessed to The Wall Street Journal that he's now a believer and amazed "how quickly this technology caught on.")

Yet according to one J.D. Power and Associates survey, only 1 in 5 Americans are even interested in this technology, much less ready to invest in it. Needless to say, you haven't missed your window of opportunity. 

Think about how many amazing technologies you've watched soar to new heights while you kick yourself thinking, "I knew about that technology before everyone was talking about it, but I just sat on my hands." 

Don't let that happen again. This time, it should be your family telling you, "I can't believe you knew about and invested in that technology so early on."

That's why I hope you take just a few minutes to access the exclusive research our team of analysts has put together on this industry and the one stock positioned to capitalize on this major shift.

Click here to learn about this incredible technology before Buffett stops being scared and starts buying!

David Hanson owns shares of Berkshire Hathaway and American Express. The Motley Fool recommends and owns shares of Berkshire Hathaway, Google, and Coca-Cola.We Fools don't 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.

©1995-2014 The Motley Fool. All rights reserved. | Privacy/Legal Information