PetSmart (PETM) is a leading specialty retailer that opened its first pet supplies store in 1987. It has benefited from a strong tailwind ever since. The company's industry-leading sales to targeted customers, dubbed "pet parents," are rising despite the economy's slow recovery.
PetSmart is the largest North American retailer of products and pet services, such as grooming and boarding, based on the company's net sales in its 2010 fiscal year ended January 30. The Phoenix, Ariz. company operated 1,192 stores as of May 1 and expects to add 40 to 45 new stores, net of closings, by the end of 2011.
Top-line growth has been solid. Net sales, which totaled $5.7 billion in fiscal 2010, rose annually right through the start of the U.S. recession in late 2007 and the beginning of the economy's slow recovery in 2009.
PetSmart is biting off the biggest piece of a steadily growing market. The American Pet Products Association in Greenwich, Conn., reports that U.S. pet expenditures have risen annually for more than 10 years in a row. The group has forecast that U.S. spending on pets will grow this year to $50.8 billion, about 5 percent more than last year.
Net income increased in the last fiscal year to $240 million, up 21 percent from the preceding year, and the bottom-line improvement continued in the first quarter of the current fiscal year.
PetSmart reported net income of $70.9 million in the 13 weeks ended May 1, up from 27 percent from the comparable period last year. Net sales in the first quarter rose 6.8 percent, a year over year, to $1.4 billion.
Most analysts following the company recommended buying PetSmart stock as of early August. Investment firm Piper Jaffray raised its investment rating on the stock to overweight from neutral on July 27, one day before RBC Capital Markets initiated coverage of the stock with an outperform rating.
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