PetSmart Posts 4th Quarter Beat
PetSmart (PETM: 31.05 +0.10%) reported fourth quarter 2008 results after the close yesterday that were above Wall Street’s expectations. The company reported EPS of $.62 which exceeded analyst expectations of $.59. Revenue came in at $1.36 billion which was exactly inline with consensus estimates.
Key Highlights
The difficult economic environment weighed on top-line performance, but management has taken steps to adjust their cost structure. Other highlights include:
- Revenues increased 2.3% y/y to $1.36 billion
- Same store sales grew 3.0%
- Ended the year with $126 million in cash & equivalent with zero debt
- Full Year EPS guidance of $1.40 - $1.50 (current consensus at $1.49)
“Despite the macro economic pressures, I am proud to announce that PetSmart was still able to deliver on both sales and earnings per share growth for the quarter,” said Phil Francis, Chairman and Chief Executive Officer.
Earnings Analysis
Fourth quarter performance was clearly above expectations as the company was able to grow both top-line sales and profitability in an increasingly difficult economic environment. However, the company now expects profits to decline in 2009 and remains “cautious about the economic climate.”
Share Performance
PetSmart’s shares are down 6% in mid-day trading to $17.39. However, the stock has held up quite well in 2009 despite the 21% drop in the S&P 500.
Recommendation
We believe that PetSmart operates in a relatively healthy segment of the economy. Pet owners will continue to make purchases even during a recession. Therefore, we believe there is likely some upside potential in management’s earnings guidance for 2009.
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