Its first-quarter profit actually dropped a whopping 61.4% to $41.2 million, or $0.32 per share. Of course, you may recall that last year's first quarter included a mammoth $0.47-per-share gain from PetSmart's transaction related to MMI Holdings.
PetSmart's sales increased 9.1% to $1.2 billion, with comp sales growing 2.9%. Operating income did rise by 4.8% to $80.3 million. And PetSmart touted the strength of its pet services segment, where sales surged 21.6% to $130.4 million.
I get why many people love PetSmart. Americans adore their pets and will go to great lengths for them. However, I have had a hard time feeling very bullish on PetSmart for a while now (my PetSmart pessimism started last November). And now, with consumer confidence at a 16-year low, I just can't get behind this stock.
After all, people can get all manner of pet supplies at Wal-Mart
Let's not forget that many people may remain loyal to mom-and-pop pet shops that provide specialty items big chains don't carry (and which often offer an extremely personal touch).
PetSmart's services, like pet hotels, grooming, and training, are indeed pure high-margin genius. However, they're much more genius when the economy's booming. Travel is likely to be greatly curtailed until consumers feel better about their pocketbooks, and even if they do travel, I'd imagine they might be more likely to rely on family or friends to watch their furry buddies while they're away. And if Mommy decides not to get her own hair trimmed as regularly, is Fifi's coiffure going to be seen as a priority? I'm not entirely convinced.
It's always been perfectly reasonable to wonder how much PetSmart could grow when it has tons of competition. Now, though, with consumers putting themselves on tighter leashes budget-wise, I'm concerned that this stock may need an ominous sign: "Beware of the dog."