PetSmart Profit Tops Estimate

(RTTNews) - Pet supplies retailer PetSmart, Inc. (PETM) said Tuesday after the markets closed that its third quarter profit remained essentially flat with last year, as higher costs and expenses offset a 2.6% increase in sales.

However, the company's quarterly earnings per share, excluding items, came in above analysts' expectations as did its quarterly sales. At the same time, the company gave a slightly downbeat earnings forecast for the current quarter.

"As our review of strategic alternatives continues, we remain focused on our four growth strategies and profit improvement program to continue to deliver value for customers and shareholders. I am pleased with our progress to date across our four growth strategies, and in taking decisive actions to deliver expected annualized pre-tax cost savings of $200 million under our profit improvement program," said David Lenhardt, PetSmart's Chief Executive Officer.

PetSmart shares are currently gaining 2.21% in after hours trading after closing the day's regular trading session at $73.62, up a penny. The shares trade in a 52-week range of $55.00 to $75.44.

PetSmart said in August that it will explore strategic alternatives, including a possible sale, bowing to pressure from activist investor Jana Partners LLC and other shareholders that the company sells itself. In July, On July 3, hedge fund Jana Partners revealed a 9.9% stake in PetSmart.

For the third quarter ended November 2, 2014, the Phoenix, Arizona-based company reported net income of $92.2 million or $0.92 per share, compared to $92.2 million or $0.88 per share for the year-ago quarter.

Excluding one-time costs associated with the company's profit improvement program, adjusted net income for the latest quarter was $102.2 million or $1.02 per share.

On average, 26 analysts polled by Thomson Reuters expected the company to earn $0.94 per share for the third quarter. Analysts' estimates typically exclude special items.

Gross margin for the quarter narrowed to 29.4% from 29.8% a year ago, while operating margin shrank to 8.7% from 9.0% last year.

Net sales for the third quarter rose 2.6% to $1.74 billion from $1.70 billion in the same quarter last year. Twenty-four analyst had a consensus revenue estimate of $1.73 billion for the third quarter.

Same-store sales for the third quarter were flat, with average ticket increasing 2.4%, and comparable transactions decreasing 2.4%. Services sales grew 6.0% to $195.3 million.

Looking forward to the fourth Quarter, the company forecasts same-store sales growth slightly positive, earnings per share of $1.30 to $1.34 and adjusted diluted earnings per share of $1.34 to $1.38. Analysts currently expect the company to earn $1.37 per share for the fourth quarter.

For the fiscal year 2014, the company continues to forecast relatively flat same-store sales and sales growth in the low-single digits. However, the company updated its fiscal 2014 earnings guidance to include the costs associated with the profit improvement program and the completion of the Pet360 acquisition. The company now forecasts earnings per share of $4.24 to $4.29 and adjusted earnings per share of $4.39 to $4.43. Previously, the company forecast earnings of $4.29 to $4.39 per share.

Analysts currently expect the company to earn $4.33 per share on sales growth of 1.7% for the fiscal year 2014.

The company also said it expects fiscal year 2015 same-store sales to grow in the low-single digits.