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Author Topic: PetSmart Profits for the first quarter of 2007 business as usual  (Read 3486 times)
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3catkidneyfailure
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« on: May 16, 2007, 06:40:09 PM »

Thought you all might be interested or angered as I am by this PetsMart Press Release on its profits for the first quarter of 2007. WAKE UP FOLKS. It's business as usual in the pet food industry. THERE HAS TO BE A NATIONAL BOYCOTT OF MANUFACTURED PET FOODS TO HURT THESE GUYS WHERE IT COUNTS, IN THE FINANCIAL POCKETBOOK until they voluntarily one and all safety test all food ingredients in every product and every batch, honestly label the origin of all ingredients, and voluntarily implement an independent national certification of food safety program clearly marked on the product. Choose a date for a national boycott and make your own vet-approved foods until these manufacturers all scream uncle because their stock is dropping in value! Be upset, be angry, and take action --
3catkidneyfailure

News Release
PetSmart Reports Results for the First Quarter 2007
    --  Earnings of $0.78 per Share

    --  Comp Sales Growth of 4 Percent

    --  Earnings of $0.34 per Share Excluding State Line Tack Exit and
        MMI Stock Transaction

PHOENIX--(BUSINESS WIRE)--May 16, 2007--PetSmart, Inc. (NASDAQ: PETM), today reported net income of $106.7 million, or $0.78 per diluted share for the first fiscal quarter of 2007. That compares with net income of $41.8 million, or $0.30 per diluted share, for the first quarter of fiscal 2006.

Included in the company's first quarter 2007 results was approximately $3.8 million, or $0.03 per share, in net after tax expense related to the exit of the State Line Tack product line. The net expense includes inventory valuation adjustments and accelerated depreciation offset by the net proceeds of the previously announced sale of certain assets related to the company's equine catalog and e-commerce operation.

During the first quarter of 2007, the company recorded a net benefit of approximately $64 million, or $0.47 per share, from the sale of a portion of its shares in MMI Holdings, Inc. (MMI), the third-party operator of its in-store Banfield veterinary hospitals. As part of that transaction, PetSmart increased its voting share of MMI, which resulted in a change from the cost method to the equity method of accounting for the investment.

Excluding those items, earnings per diluted share for the first quarter of fiscal 2007 were $0.34.

"PetSmart delivered a solid performance in the first quarter despite a pet food recall unlike anything we have ever experienced in the industry," said Phil Francis, chairman and CEO. "This demonstrates that we have built a business model that remains strong even when faced with adversity."

Sales

Net sales for the first quarter of 2007 were $1.11 billion, compared to $1.01 billion for the same period in 2006, and comparable store sales - or sales in stores open at least a year - grew 4 percent in the first quarter, on top of 3.7 percent in the first quarter of 2006.

Pet services sales were $107.3 million, up 18 percent from the same period last year.

PetSmart opened 23 new stores and closed three locations during the first quarter of 2007, which compares with 20 new stores and four closures during the first quarter of 2006.

Gross margins and expense

Gross margins were 30.5 percent in the first quarter of 2007, compared with 30.7 percent in the same period in 2006. Excluding the net expense from exiting the State Line Tack product line, gross margins were 30.6 percent for the first quarter of 2007.

Operating, general and administrative expenses were 23.6 percent of net sales in the first quarter of 2007, compared with 23.3 percent in the first quarter of 2006. Excluding the net expense from exiting the State Line Tack product line, operating, general and administrative expenses were 23.2 percent of net sales in the first quarter of 2007.

Pre-tax income

PetSmart generated pre-tax income of 14.7 percent of sales in the first quarter. That compares with 6.7 percent for the same period last year. Excluding the net expense related to the exit of the State Line Tack product line and the benefit from the sale of MMI shares, pre-tax income was 6.7 percent in the first quarter of 2007.

Share purchases and dividend payments

PetSmart purchased approximately 914,000 of its shares at an average price of $29.55 during the first quarter of 2007. At the end of the first quarter, the company had $63 million remaining on its current authorization, which extends through August 9, 2007.

As previously announced, the company paid a dividend of $0.03 per share on May 11, 2007, to shareholders of record at the close of business on April 27, 2007.

Outlook

PetSmart projects comparable store sales in the low- to mid-single digits for the second quarter of 2007 and in the mid-single digits for the full year.

PetSmart estimates earnings of $0.26 to $0.28 per share in the second quarter which includes $0.03 per share in estimated expense to exit the State Line Tack product line.

For the full year PetSmart expects earnings of $2.03 to $2.05 per share which includes approximately $0.11 in expense to exit the State Line Tack product line. In addition, the sale of shares of MMI will result in a benefit of $0.47 per share, while the change to the equity method of accounting for the investment in MMI should result in a $0.02 per share benefit. Also included is the benefit of a 53rd week of sales in 2007 which is estimated at $0.08 per share.

Conference call information

PetSmart management has scheduled a teleconference for 4:30 p.m. (EDT) today to discuss results for the first quarter of 2007 as well as the current outlook. This teleconference will be Web-cast live for all investors at www.petm.com or www.streetevents.com. The Web-cast will be available until the company announces results for the second quarter of 2007. In addition, you can listen to the call live by dialing 800-709-7416 (within the United States and Canada) or 706-679-5320 (for international callers), code 6865205. A phone replay also will be available through May 30, 2007, at 800-642-1687 in the United States and Canada, or at 706-645-9291 for international callers, code 6865205.

About PetSmart

PetSmart, Inc. is the largest specialty pet retailer of services and solutions for the lifetime needs of pets. The company operates more than 928 pet stores in the United States and Canada, a growing number of in-store PetsHotel cat and dog boarding facilities, and is a leading online provider of pet supplies and pet care information (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, doggie day camp and pet adoption services. Since 1994, PetSmart Charities, Inc., an independent 501(c)(3) non-profit animal welfare organization, has donated more than $52 million to animal welfare programs and, through its in-store pet adoption programs, has saved the lives of more than 2.9 million pets.

Forward-looking statements

This news release contains forward-looking statements including statements relating to future revenue growth and goals, our expectations regarding the exit from our State Line Tack product line, our expectations with respect to our investment in MMI and future business opportunities that involve substantial risks and uncertainties. Such risks and uncertainties include, but are not limited to, general economic conditions, competitive forces, our ability to successfully exit the State Line Tack product line and our ability to manage our operations and growth. Actual results and developments may therefore differ materially from those described in this release. For more information about PetSmart, Inc., and risks arising when investing in PetSmart, Inc., you are directed to the company's most recent Annual Report on Form 10-K filed with the Securities and Exchange Commission.

Statement of utility

PetSmart continues to provide all information required in accordance with Generally Accepted Accounting Principles (GAAP), but it believes that evaluating its ongoing operating results may be difficult if an investor is limited to reviewing only GAAP financial measures. Accordingly, PetSmart uses non-GAAP financial measures of its performance internally to evaluate its ongoing operations and to allocate resources within the organization.

PetSmart's management does not itself, nor does it suggest that investors should, consider such non-GAAP financial measures in isolation from, or as a substitute for, financial information prepared in accordance with GAAP. The non-GAAP financial measures used by PetSmart may not be consistent with the presentation of similar companies in PetSmart's industry. However, PetSmart presents such non-GAAP financial measures in reporting its financial results to provide investors with an additional tool to evaluate PetSmart's operating results in a manner that focuses on what it believes to be its ongoing business operations.

PetSmart's management believes it is useful for itself and investors to review both GAAP information and non-GAAP measures of earnings per share, and the related impacts on gross margins, operating, general and administrative expenses and pretax income as adjusted. For the first quarter of 2007, these non-GAAP measures exclude the effect of net expense from the exit of the State Line Tack product line and a benefit from the sale of a portion of the Company's shares in MMI. PetSmart's management believes that these measures allow investors to have a better understanding of the overall performance of PetSmart's business and its ability to perform in subsequent periods.

Management believes the inclusion of these non-GAAP financial measures provides consistency and comparability of financial results and better enables investors to evaluate the ongoing operations and prospects of PetSmart by providing better comparisons. Whenever PetSmart uses such a non-GAAP financial measure, it strives where possible to provide a reconciliation of non-GAAP financial measures to the most closely applicable GAAP financial measure. Investors are encouraged to review the related GAAP financial measures and the reconciliation of these non-GAAP financial measures to their most directly comparable GAAP financial measure.

                   PetSmart, Inc. and Subsidiaries
           Condensed Consolidated Statements of Operations
           (in thousands, except per share and store data)
                             (Unaudited)

                         Thirteen Weeks Ended    Thirteen Weeks Ended
                        ----------------------  ----------------------
                        April 29, 2007  % of    April 30, 2006  % of
                                        Sales                   Sales
                        -------------- -------  -------------- -------

Net sales                  $1,111,625  100.00%     $1,011,529  100.00%
Cost of sales                 773,146   69.55%        701,449   69.35%
                        -------------- -------  -------------- -------

Gross profit                  338,479   30.45%        310,080   30.65%

Operating, general and
 administrative
 expenses                     261,894   23.56%        235,401   23.27%
                        -------------- -------  -------------- -------

Operating income               76,585    6.89%         74,679    7.38%

Gain on sale of
 investments                   95,363    8.58%              -    0.00%
Interest expense, net          (8,825)  -0.79%         (6,733)  -0.67%
                        -------------- -------  -------------- -------

Income before income tax
 expense
and equity in income
 from investee                163,123   14.67%         67,946    6.72%

Income tax expense            (56,641)  -5.10%        (26,182)  -2.59%

Equity in income from
 investee                         225    0.02%              -    0.00%
                        -------------- -------  -------------- -------

Net income                   $106,707    9.60%        $41,764    4.13%
                        ============== =======  ============== =======

Basic earnings per
 share                          $0.80                   $0.30
                        ==============          ==============
Diluted earnings per
 share                          $0.78                   $0.30
                        ==============          ==============

Weighted average
 shares outstanding -
 basic                        133,316                 137,449
Weighted average
 shares outstanding -
 diluted                      136,672                 141,088

---------------------- --------------- ------- --------------- -------
Stores open at
 beginning of each
 period                           908                     826
Stores opened during
 each period                       23                      20
Stores closed during
 each period                       (3)                     (4)
Stores open at end of
 each period                      928                     842
---------------------- --------------- ------- --------------- -------

                   PetSmart, Inc. and Subsidiaries
             Reconciliation of non-GAAP to GAAP Measures
                (In thousands, except per share data)
                             (Unaudited)

                         Thirteen Weeks Ended April 29, 2007
                ------------------------------------------------------


                                                 Reconciling items
                                              -----------------------
                           As Reported (GAAP)    Equine   Sale of MMI
                                              product line   stock
                                                  exit
                           -------------------------------------------

Net sales                  $1,111,625 100.00%         $-          $-
Cost of sales                 773,146  69.55%     (2,070)          -
                           ------------------ ----------- -----------

Gross profit                  338,479  30.45%      2,070           -

Operating, general and
 administrative expenses      261,894  23.56%     (4,234)          -
                           ------------------ ----------- -----------

Operating income               76,585   6.89%      6,304           -

Gain on sale of
 investments                   95,363   8.58%          -     (95,363)
Interest expense, net          (8,825) -0.79%          -           -
                           ------------------ ----------- -----------

Income before income tax
 expense
and equity in income from
 investee                     163,123  14.67%      6,304     (95,363)

Income tax expense            (56,641) -5.10%     (2,499)     31,026

Equity in income from
 investee                         225   0.02%          -           -
                           ------------------ ----------- -----------

Net income                   $106,707   9.60%     $3,805    $(64,337)
                           ================== =========== ===========

Basic earnings per share        $0.80
Diluted earnings per share      $0.78

Weighted average shares
 outstanding - basic          133,316
Weighted average shares
 outstanding - diluted        136,672



                                    Non-GAAP
                           ---------------------------

Net sales                     $1,111,625       100.00%
Cost of sales                    771,076        69.36%
                           -------------- ------------

Gross profit                     340,549        30.64%

Operating, general and
 administrative expenses         257,660        23.18%
                           -------------- ------------

Operating income                  82,889         7.46%

Gain on sale of
 investments                           -         0.00%
Interest expense, net             (8,825)       -0.79%
                           -------------- ------------

Income before income tax
 expense
and equity in income from
 investee                         74,064         6.66%

Income tax expense               (28,114)       -2.53%

Equity in income from
 investee                            225         0.02%
                           -------------- ------------

Net income                       $46,175         4.15%
                           ============== ============

Basic earnings per share           $0.35
Diluted earnings per share         $0.34

Weighted average shares
 outstanding - basic             133,316
Weighted average shares
 outstanding - diluted           136,672

                   PetSmart, Inc. and Subsidiaries
                Condensed Consolidated Balance Sheets
                            (in thousands)
                             (Unaudited)


                                           April 29,      January 28,
                                             2007            2007
                                        ---------------  -------------

Assets
 Cash and cash equivalents                    $118,909       $148,799
 Short-term investments                        164,135         19,200
 Restricted cash and short-term
  investments                                   80,000         60,700
 Receivables, net                               57,439         36,541
 Merchandise inventories                       461,744        487,400
 Other current assets                          104,566         90,629
                                        ---------------  -------------

         Total current assets                  986,793        843,269

 Property and equipment, net                 1,059,088      1,032,421
 Deferred income taxes                          91,847         97,648
 Other noncurrent assets                        64,661         80,139
                                        ---------------  -------------

         Total assets                       $2,202,389     $2,053,477
                                        ===============  =============

Liabilities and Stockholders' Equity
 Accounts payable and bank overdraft          $187,546       $179,638
 Other current liabilities                     345,765        321,077
 Current maturities of capital lease
  obligations                                   18,312         17,667
                                        ---------------  -------------

          Total current liabilities            551,623        518,382

 Capital lease obligations                     436,647        431,334
 Deferred rents and other noncurrent
  liabilities                                  120,376        102,867
                                        ---------------  -------------

          Total liabilities                  1,108,646      1,052,583

 Stockholders' equity                        1,093,743      1,000,894
                                        ---------------  -------------

          Total liabilities and
           stockholders' equity             $2,202,389     $2,053,477
                                        ===============  =============


    CONTACT: PetSmart, Phoenix
             Tawni Adams, 623-587-2686
             PetSmart Media Line, 623-587-2177

    SOURCE: PetSmart, Inc.

 


 
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Marilyn
Jr. Member
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Posts: 41


« Reply #1 on: May 19, 2007, 10:06:45 AM »

I would guess that Petsmart probably lost a lot of business on some products, but gained on others.  They carry such a wide variety of products.  That can give them some "cushion" when there are problems with some products.

I know that I very seldom bought my pet food at Petsmart, but now that I have switched to a brand that seems to be untouched by the recalls, Petsmart is the only place near me that I can get it.  So, they are getting business from me that they never got before.
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straybaby
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Posts: 1528


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« Reply #2 on: May 19, 2007, 10:44:26 AM »

also, they are getting people buying more often as they try and get their pets to eat new foods with each recall. it can take several different trys to find a food kitty won't walk away from. even if people are just buying 1 can of 4 different brands, that's 4 more cans multiplied by home many households? Then 3 go in the trash and are replaced by the one they *thought* kitty liked. until she changed her mind that is. rinse and repeat . . .
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3catkidneyfailure
Guest
« Reply #3 on: May 21, 2007, 08:33:11 AM »

I'm not indicting PetSMart. Just pointing out that their business overall is showing increased profit. So it is business as usual for the makers.

If you switch your cats to homemade food, that will have an effect on the profits of these "road kill" manufacturers. All my pets ate at
PetSmart and they are all dead or dying.

It takes patience and persistance to switch your cat to a new food. Transition gradually, over a week or two, but you can do it. It does
take very long to make your own food, is not more expensive than premium foods, and it is a very real action that will cause pet food manufacters to improve their food. Get the recipe from your vet and make the foods yourself.
3cats
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CodyBear
Long-Standing Member
Sr. Member
****
Posts: 391


« Reply #4 on: May 21, 2007, 10:32:13 AM »

IMHO, PetSmart is as bad as any in the pet food industry chain.  I went to Petsmart looking for any food brand that had never been mentioned in the recall.  I went up and down the aisles.  Nothing.  At least in my local PetSmart, they do not stock any better foods than you can get at WalMart, IMHO.  I am now buying a limited amount of manufactured pet food from my local health food store.  My mixture is about 1/3rd manufactured, 2/3rd homemade, plus one doggie vitamin.  This was the result of a long talk with my vet about nutritional needs, and my determination for a complete ban on any product that has even the remote possibility of an ingredient from China, IMHO.
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Eympire
Full Member
***
Posts: 88


« Reply #5 on: May 21, 2007, 11:56:59 AM »

I've never  been in a Petsmart. I should take  a  look.  see what  they stock. we have 3 pet stores clustered closer together that already meet my pet needs.
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shibadiva
Hero Member
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Posts: 1412


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« Reply #6 on: May 21, 2007, 03:52:20 PM »

It's a big-box store. If you know what you want and they stock it, it's fine.

I haven't been in one lately to see if they are filling up their empty shelves with better foods. I'm not sure that informed consumers have been their target market, but who knows, they've maybe seen the opportunity.
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A small body of determined spirits fired by an unquenchable faith in their mission can alter the course of history.
~~ Gandhi
Eympire
Full Member
***
Posts: 88


« Reply #7 on: May 22, 2007, 08:09:55 AM »

well, they've never gotten my business. Maybe I shall just try & get them to carry better food. Put my 2 cents in.
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