PetSmart Reports Results for the Second Quarter 2010

Published on Wednesday, 18 August 2010 16:04 Written by TradersHuddle Staff

PHOENIX-( Business Wire )-

PetSmart, Inc. (NASDAQ: PETM) today reported earnings of $0.41 per share, up 32% compared to $0.31 per share in the second quarter of 2009. Net income totaled $48.4 million in the second quarter of 2010, compared to $39.0 million in the second quarter of 2009.

Total sales for the second quarter of 2010 increased 6.2% to $1.4 billion. The increase in net sales was partially impacted by $5.8 million in favorable foreign currency fluctuations. Comparable store sales, or sales in stores open at least a year, grew 4.6% in the second quarter. Services sales, which are included in total sales, grew 7.2% to $165 million.

“We are pleased to report that in the second quarter, we continued to execute on our strategic priorities, and delivered another quarter of consistent, quality earnings growth,” said Bob Moran, Chief Executive Officer and President. “Our results for the second quarter have exceeded our goals, and demonstrate our ability to drive and deliver solid earnings growth, while continuing to invest in innovative product offerings and strengthening our brand.”

“We are very pleased with our performance for the second quarter in delivering strong operating results while also maintaining a healthy balance sheet,” said Chip Molloy, Senior Vice President and Chief Financial Officer. “For the full year, we are maintaining our comparable store sales expectations of low- to mid-single digits and raising our earnings per share guidance from $1.91 to $1.99. For the third quarter, we anticipate comparable store sales in the mid-single digits and earnings per share of $0.35 to $0.39.”

Conference call information

PetSmart management has scheduled a teleconference for 4:30 p.m. EDT today to discuss results for the second quarter 2010. This teleconference will be webcast live for all investors at www.petm.com or www.streetevents.com. The webcast will be available until the company announces results for the third quarter of 2010. In addition, you can listen to the call live by dialing (866) 793-1342 (within the United States and Canada) or (703) 639-1313 (for international callers), code 1474047.

A phone replay will be available through September 18, 2010, 11:59 p.m. EDT, at (888) 266-2081 in the United States and Canada, or at (703) 925-2533 for international callers, code 1474047.

About PetSmart

PetSmart, Inc. is the largest specialty pet retailer of services and solutions for the lifetime needs of pets. The company employs approximately 45,000 associates and operates more than 1,164 pet stores in the United States and Canada, 168 in-store PetSmart PetsHotel(R) cat and dog boarding facilities, and is a leading online provider of pet supplies and pet care information (http://www.petsmart.com). PetSmart provides a broad range of competitively priced pet food and pet products; and offers complete pet training, pet grooming, pet boarding, PetSmart(R) Doggie Day Camp(SM) pet day care services and pet adoption services. Since 1994, PetSmart Charities, Inc., an independent 501(c)(3) non-profit animal welfare organization and the largest funder of animal welfare efforts in North America, has provided more than $110 million in grants and programs benefiting animal welfare organizations. Through its in-store pet adoption partnership with PetSmart Charities(R), PetSmart has helped save the lives of more than 4 million pets.

Forward-looking statements

This news release contains forward-looking statements concerning our expectations for future performance, including the statements comprising our 2010 guidance. These "forward-looking statements" are based on currently available information, operating plans and projections about future events and trends. They inherently involve risks and uncertainties that could cause actual results to differ materially from those predicted in such forward-looking statements. Such risks and uncertainties include, but are not limited to: changes in general economic conditions; conditions affecting customer transactions and average ticket including, but not limited to, weather conditions or other seasonal events; our ability to compete effectively; disruption of our supply chain; our ability to effectively manage our growth and operations; changes in our cost structure; and changes in the legal or regulatory environment. Undue reliance should not be placed on such forward-looking statements as they speak only as of the date hereof, and we undertake no obligation to update these statements to reflect subsequent events or circumstances except as may be required by law. For additional information on these and other factors that arise when investing in PetSmart, please see our filings with the Securities and Exchange Commission, including our most recent annual report on Form 10-K and subsequent reports on Forms 10-Q and 8-K.

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PetSmart, Inc. and Subsidiaries
Condensed Consolidated Statements of Operations
(in thousands, except per share and store data)
(Unaudited)
		Thirteen Weeks Ended							Thirteen Weeks Ended							Twenty-Six Weeks Ended							Twenty-Six Weeks Ended
		August 1, 2010				% of Sales			August 2, 2009				% of Sales			August 1, 2010				% of Sales			August 2, 2009				% of Sales
Merchandise sales		$	1,216,682			87.5	%		$	1,154,593			88.2	%		$	2,450,277			88.0	%		$	2,339,348			88.7	%
Services sales			165,305			11.9	%			154,192			11.8	%			318,592			11.4	%			297,011			11.3	%
Other revenue			8,553			0.6	%			-			0.0	%			16,824			0.6	%			-			0.0	%
Net sales			1,390,540			100.0	%			1,308,785			100.0	%			2,785,693			100.0	%			2,636,359			100.0	%
Cost of merchandise sales			869,226			62.5	%			830,629			63.5	%			1,739,068			62.4	%			1,678,503			63.7	%
Cost of services sales			116,466			8.4	%			108,744			8.3	%			229,214			8.2	%			211,192			8.0	%
Cost of other revenue			8,553			0.6	%			-			0.0	%			16,824			0.6	%			-			0.0	%
Total cost of sales			994,245			71.5	%			939,373			71.8	%			1,985,106			71.3	%			1,889,695			71.7	%
Gross profit			396,295			28.5	%			369,412			28.2	%			800,587			28.7	%			746,664			28.3	%
Operating, general and administrative expenses			304,288			21.9	%			295,623			22.6	%			605,319			21.7	%			583,006			22.1	%
Operating income			92,007			6.6	%			73,789			5.6	%			195,268			7.0	%			163,658			6.2	%
Interest expense, net			(14,590	)		-1.0	%			(14,970	)		-1.1	%			(29,933	)		-1.1	%			(29,944	)		-1.1	%
Income before income tax expense and equity in income from investee			77,417			5.6	%			58,819			4.5	%			165,335			5.9	%			133,714			5.1	%
Income tax expense			(31,150	)		-2.2	%			(21,392	)		-1.6	%			(64,914	)		-2.3	%			(51,141	)		-1.9	%
Equity in income from investee			2,119			0.2	%			1,537			0.1	%			3,557			0.1	%			2,653			0.1	%
Net income		$	48,386			3.5	%		$	38,964			3.0	%		$	103,978			3.7	%		$	85,226			3.2	%
Earnings per common share:
Basic		$	0.41						$	0.32						$	0.88						$	0.69
Diluted		$	0.41						$	0.31						$	0.87						$	0.68
Weighted average shares outstanding:
Basic			117,079							123,474							117,528							123,914
Diluted			119,423							125,504							119,917							126,102
Stores open at beginning of each period			1,160							1,137							1,149							1,112
Stores opened during each period			5							10							19							36
Stores closed during each period			(1	)						(2	)						(4	)						(3	)
Stores open at end of each period			1,164							1,145							1,164							1,145

PetSmart, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
(In thousands, except par value)
(Unaudited)
		August 1,				January 31,				August 2,
		2010				2010				2009
Assets
Cash and cash equivalents		$	239,413			$	308,360			$	180,656
Restricted cash			46,515				48,172				55,250
Receivables, net			54,042				52,232				58,729
Merchandise inventories			622,483				563,389				574,985
Deferred income taxes			36,805				36,805				29,334
Prepaid expenses and other current assets			92,585				57,652				89,680
Total current assets			1,091,843				1,066,610				988,634
Property and equipment, net			1,158,509				1,201,857				1,262,458
Equity investment in affiliate			36,043				32,486				28,591
Deferred income taxes			87,561				94,901				84,829
Goodwill			43,323				42,200				41,989
Other noncurrent assets			26,566				23,932				24,257
Total assets		$	2,443,845			$	2,461,986			$	2,430,758
Liabilities and Stockholders' Equity
Accounts payable and bank overdraft		$	198,093			$	212,121			$	189,242
Accrued payroll, bonus and employee benefits			107,203				105,162				92,879
Accrued occupancy expenses and deferred rents			62,046				63,142				60,404
Current maturities of capital lease obligations			41,147				37,839				34,930
Other current liabilities			128,807				146,965				130,075
Total current liabilities			537,296				565,229				507,530
Capital lease obligations			534,928				533,635				553,960
Deferred rents			88,279				91,030				92,587
Other noncurrent liabilities			105,223				99,377				98,241
Total liabilities			1,265,726				1,289,271				1,252,318
Stockholders' Equity:
Preferred stock; $.0001 par value			-				-				-
Common stock; $.0001 par value			16				16				16
Additional paid-in capital			1,181,647				1,148,228				1,127,947
Retained earnings			1,171,039				1,093,708				1,005,050
Accumulated other comprehensive income			4,091				2,369				2,178
Treasury stock			(1,178,674	)			(1,071,606	)			(956,751	)
Total stockholders' equity			1,178,119				1,172,715				1,178,440
Total liabilities and stockholders' equity		$	2,443,845			$	2,461,986			$	2,430,758

PetSmart, Inc.Investor Relations, 623-587-2025