Operations at PETsMART (NASDAQ:PETM) continue to run smoothly. The nation's leading pet-supply firm posted another stellar quarter, with first-quarter net income soaring 46% to $35.8 million, or $0.24 per share. Same-store sales rose by 8.7%, driving double-digit total revenue growth to $796 million. (Much of that growth likely came from the veritable menagerie I call home.)
While standard pet food can be found on the shelves of discounters such as Target (NYSE:TGT) or Wal-Mart (NYSE:WMT), and local grocery stores like Albertson's (NYSE:ABS) carry a sparse selection of chew toys, treats, and other sundry items, the overall quality and mind-boggling product breadth at specialty retailers such as PETsMART and competitor Petco (NASDAQ:PETC) is unrivaled. Shoppers who think of their pets as children (and we all know the type) refuse to accept anything less than the premium private-label products available through PETsMART's superstores, websites, and catalogues.
It is not products, however, but pet-related services that truly distinguish PETsMART from other competitors. In-store grooming and obedience classes are available, as is outsourced veterinary care. Not only are these services drawing market share away from grocery stores and local pet stores, but they are also more profitable than other business segments. Sales of pet services, which now account for over 7% of total revenues, jumped 28% to $58.4 million in this quarter. Expect increasing competition from Petco, though, which has begun making inroads into this lucrative sector.
There simply wasn't much to find fault with in PETsMART's first quarter. No need to threaten the company with a figurative rolled-up newspaper, after it raised its dividend, repurchased over $19 million of stock, opened 23 new locations, trimmed expenses, and increased gross margins for the 13th consecutive quarter. Management at PETsMART is brimming with optimism, projecting a 5% to 6% increase in second-quarter comps (on top of an 8% advance last year) and lifting full-year guidance to $1.17 to $1.18, a 23% increase over last year's record earnings.
Investors unwilling to shell out a few extra dollars for PETsMART's stock -- which like its pet food typically sells for a premium -- should at least admire the company's status as a responsible corporate citizen. Adoption programs sponsored by the company have found homes for 1.8 million pets, and affiliated charities have donated more than $31 million. This is something even non pet-owners can appreciate.
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Fool contributor Nathan Slaughter owns a recalcitrant dog and two apathetic cats. He owns none of the shares mentioned, but is thinking maybe he should.
