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This is my dog Spridle. My grandmother used to call him Stridle, but his name was Spridle.
He’s been gone for over 20 years, but I still remember what a great companion he was. Like any other member of my family, I would have done anything for him. Back then, Spridle ate expired dog food from Spags. But if he was my dog today, I would shop for him every week at Pet Smart. If you ever walk into a Pet Smart, you’ll know why.
Today I bought stock in Pet Smart (PETM) at a price of 70.56. I will sell it in 4 to 6 weeks at 81.33. Here’s why I like PETM:
It all starts with this amazing chart. The stock is up about 70% in the last 52 weeks. That’s about 6% a month, which means if it keeps going up at this pace, it will be another HUGE $$$MR. MARKET$$$ winner. In fact, PetSmart has seen its stock nearly triple since the 2008 financial crisis to about $71 a share.But that’s not the only reason to like this stock. Here are some more:
• Trailing PE is 23.8
• Forward PE is 18.6
• PEG ratio only 1.2
• Return on Assets 14.1%
• Return on Equity 28.9%
• Quarterly revenue growth 8.9%
• Quarterly earnings growth 28.3%
• Dividend Yield of 0.8% (beats your savings account)
How did we end up with all of these great numbers? It comes from the stores, of course. PetSmart, Inc., together with its subsidiaries, operates as a specialty retailer of products, services, and solutions for pets in the United States, Puerto Rico, and Canada. The company offers consumables, such as pet food, treats, and litter; and hardgoods, which include pet supplies and other goods comprising collars, leashes, health care supplies, grooming and beauty aids, toys, apparel, and pet beds and carriers, as well as aquariums and habitats, accessories, décor, and filters for fish, birds, reptiles, and small pets. It also provides fresh-water fish, small birds, reptiles, and small pets; and pet services, such as grooming, including precision cuts, baths, nail trimming and grinding, and teeth brushing, as well as training, boarding, and day camp services. In addition, the company operates PetsHotels that offer boarding for dogs and cats; provides personalized pet care, an on-call veterinarian, temperature controlled rooms and suites, daily specialty treats and play time, and day camp services for dogs; and operates veterinary hospitals, which offer services comprising routine examinations and vaccinations, dental care, a pharmacy, and surgical procedures. As of January 29, 2012, it operated 1,232 retail stores; 192 PetsHotels; 791 veterinary hospitals under the trade name of Banfield, The Pet Hospital; and 8 hospitals operated through other third parties in Canada. The company also offers its products through an e-commerce and community site, PetSmart.com. PetSmart, Inc. was founded in 1986 and is based in Phoenix, Arizona.
Who loves their pets? We all do! Who loves Pet Smart? Pet parents! Here, check out these reviews:
Online Shopper 08-21-2012
“One of the bandanas I bought for my puppy ( the brown with paws) came out with Pink Paw Prints, on the website the paw print looked anything but Pink, and my Dog is a Boy!”
“I always trust the items and people at Petsmart.Their employees are very nice to me at any time I go shopping either onein Aliso Viejo or Tustin Market Place.I bought a cat tower through online and one of my cats looks so happy using it! Thanks Petsmart!!”
“The Kong toys I got are the best! My dogs are toy destroyers! These toys last and they still enjoy playing with them for a long time. They are truely worth the money spent on them.”
You get the picture? Nothing is too good for our pets. People think of pets as people. I mean we helicopter parent our kids, so why not our pets. At least our pets talk to us. Petsmart stores make money and the company is building new stores. They plan on adding 50 stores a year for the next eight years. It is a bullet proof formula for earnings success, and with this success will come a higher stock price. So let’s dig in and find out just why this peculiar chain is so successful. I mean you can get dog food at the supermarket or at Walmart, right? So why do people shop at Pet Smart???
Last quarter, same-store sales, the key metric for any retailer, were up 7% despite lackluster U.S. consumer confidence. Remember on the Brady bunch, Tiger used to sleep in the doghouse? Do you know any people now who make their dogs sleep outside? Dogs sleep in your house. A lot of dogs sleep in your bedroom. So now dogs need to be free of fleas, ticks and mange, necessitating a whole range of products and services that never would occur to an outside doghouse dog. While you’re at it, you might as well feed them organic food and vitamins, too. The company posted strong revenue growth in every merchandise category (pet toys, pet leashes, pet food, and pet medicine) and all service categories (pet hotels, daycare, and grooming). Like my stomach, they are growing out in all directions.
When I was a kid, I hated going shopping at Spags. I used to get in there and then lie on the floor so may parents would kick me to stand up. Not so with Petsmart. At Petsmart, you can bring your pet into the store. Dogs know when their master pulls up in the parking lot at Petsmart and they get all happy. Go check one out…all of the dogs heading into the store are all happy jumping and wagging their tails. One dog told me that his favorite part was looking at the birds in their glass cages. Dogs can’t go in Wal Mart and Target and especially not into Path Mark or Shop Rite. You starting to dig what I’m saying? Bark once for yes.
This was the 10th quarter in a row where PetSmart posted an earnings growth rate above 10%. Same-store sales have been up 5% or better each of the last six quarters. That’s just same store sales. What do you think happens when they build more stores? Yep..they are selling gluten free dog food, probiotic dog food, low carb dog food for the dogs who like to work out and stay slim. This crap is expensive. In this recession, these super premium foods are their fastest growing items. Crazy? Not really, we love our pets. It makes you feel good to go out and take care of them, because they really appreciate their pet parents. These premium pet food makers aren’t stupid either. They don’t want their margins beaten down by Wal Mart or Sams Club buyers. They are happy to sell to PetSmart. Americans are spending over $50 billion per year on their pets. It’s big business.
ANAL-ysts expect the company to earn $3.31 per share this year, $3.67 per share next year, and $4.30 per share in the following fiscal year. Now I’m not going to make fun of the ANAL-ysts, since PetSmart’s earnings are fairly easy to predict. PETM keeps beating the ANAL-yst estimates, and that’s not going to change.
There’s going to be a significant widening of gross margins in FY 13, driven by continued gains from PETM's price optimization software and occupancy cost leverage. Operating margins will grow, reflecting gross margin improvement and a modest leveraging of SG&A expenses due to solid same-store sales growth. So PETM is going to post earnings this year of $3.56/share which, at their trailing PE of 23.8, gets you to a share price of 84.73, which is past my sell target.
Even Spridle will like those numbers and wag his tail. Here’s what the chief dog had to say:
“Our performance in the second quarter was due to the strengths across all three merchandising categories: consumables; hard goods and live goods, as well as across services. Our comparative everyday low price strategy, coupled with our commitment to our uniquely engaged in-store experience that is not easily duplicated, has led to continued success in growth, even in today’s challenging economic environment. But its our differentiation that makes us the leading pet specialty retailer, by providing solution for our pet partners to help them help their pets live long, healthy and happy lives.”
“The high-end food for natural super premium aisle for us has done really well. It’s been doing very well for a long time. The last two quarters has not only done well in dog, but it’s started to accelerate in cat, which has been a very nice outcome for us.”
“I definitely believe we are picking up market share. We are still looking at the market growth in the 4% to 5% range and when you look at our top line growth it’s empirically looking at the data and we are definitely picking up share.”
“Whether it's finding the right pet, the best food or the perfect toy, signing up for training or grooming sessions, checking into a PetsHotel, or taking home a newly adopted dog or cat, we help pet parents help their pets live long, happy, healthy lives.”
Sometimes I really miss Spridle. If you liked this write up, please share it with a two legged friend.
$$$MR. MARKET$$$
He’s been gone for over 20 years, but I still remember what a great companion he was. Like any other member of my family, I would have done anything for him. Back then, Spridle ate expired dog food from Spags. But if he was my dog today, I would shop for him every week at Pet Smart. If you ever walk into a Pet Smart, you’ll know why.
Today I bought stock in Pet Smart (PETM) at a price of 70.56. I will sell it in 4 to 6 weeks at 81.33. Here’s why I like PETM:
It all starts with this amazing chart. The stock is up about 70% in the last 52 weeks. That’s about 6% a month, which means if it keeps going up at this pace, it will be another HUGE $$$MR. MARKET$$$ winner. In fact, PetSmart has seen its stock nearly triple since the 2008 financial crisis to about $71 a share.But that’s not the only reason to like this stock. Here are some more:
• Trailing PE is 23.8
• Forward PE is 18.6
• PEG ratio only 1.2
• Return on Assets 14.1%
• Return on Equity 28.9%
• Quarterly revenue growth 8.9%
• Quarterly earnings growth 28.3%
• Dividend Yield of 0.8% (beats your savings account)
How did we end up with all of these great numbers? It comes from the stores, of course. PetSmart, Inc., together with its subsidiaries, operates as a specialty retailer of products, services, and solutions for pets in the United States, Puerto Rico, and Canada. The company offers consumables, such as pet food, treats, and litter; and hardgoods, which include pet supplies and other goods comprising collars, leashes, health care supplies, grooming and beauty aids, toys, apparel, and pet beds and carriers, as well as aquariums and habitats, accessories, décor, and filters for fish, birds, reptiles, and small pets. It also provides fresh-water fish, small birds, reptiles, and small pets; and pet services, such as grooming, including precision cuts, baths, nail trimming and grinding, and teeth brushing, as well as training, boarding, and day camp services. In addition, the company operates PetsHotels that offer boarding for dogs and cats; provides personalized pet care, an on-call veterinarian, temperature controlled rooms and suites, daily specialty treats and play time, and day camp services for dogs; and operates veterinary hospitals, which offer services comprising routine examinations and vaccinations, dental care, a pharmacy, and surgical procedures. As of January 29, 2012, it operated 1,232 retail stores; 192 PetsHotels; 791 veterinary hospitals under the trade name of Banfield, The Pet Hospital; and 8 hospitals operated through other third parties in Canada. The company also offers its products through an e-commerce and community site, PetSmart.com. PetSmart, Inc. was founded in 1986 and is based in Phoenix, Arizona.
Who loves their pets? We all do! Who loves Pet Smart? Pet parents! Here, check out these reviews:
Online Shopper 08-21-2012
“One of the bandanas I bought for my puppy ( the brown with paws) came out with Pink Paw Prints, on the website the paw print looked anything but Pink, and my Dog is a Boy!”
“I always trust the items and people at Petsmart.Their employees are very nice to me at any time I go shopping either onein Aliso Viejo or Tustin Market Place.I bought a cat tower through online and one of my cats looks so happy using it! Thanks Petsmart!!”
“The Kong toys I got are the best! My dogs are toy destroyers! These toys last and they still enjoy playing with them for a long time. They are truely worth the money spent on them.”
You get the picture? Nothing is too good for our pets. People think of pets as people. I mean we helicopter parent our kids, so why not our pets. At least our pets talk to us. Petsmart stores make money and the company is building new stores. They plan on adding 50 stores a year for the next eight years. It is a bullet proof formula for earnings success, and with this success will come a higher stock price. So let’s dig in and find out just why this peculiar chain is so successful. I mean you can get dog food at the supermarket or at Walmart, right? So why do people shop at Pet Smart???
Last quarter, same-store sales, the key metric for any retailer, were up 7% despite lackluster U.S. consumer confidence. Remember on the Brady bunch, Tiger used to sleep in the doghouse? Do you know any people now who make their dogs sleep outside? Dogs sleep in your house. A lot of dogs sleep in your bedroom. So now dogs need to be free of fleas, ticks and mange, necessitating a whole range of products and services that never would occur to an outside doghouse dog. While you’re at it, you might as well feed them organic food and vitamins, too. The company posted strong revenue growth in every merchandise category (pet toys, pet leashes, pet food, and pet medicine) and all service categories (pet hotels, daycare, and grooming). Like my stomach, they are growing out in all directions.
When I was a kid, I hated going shopping at Spags. I used to get in there and then lie on the floor so may parents would kick me to stand up. Not so with Petsmart. At Petsmart, you can bring your pet into the store. Dogs know when their master pulls up in the parking lot at Petsmart and they get all happy. Go check one out…all of the dogs heading into the store are all happy jumping and wagging their tails. One dog told me that his favorite part was looking at the birds in their glass cages. Dogs can’t go in Wal Mart and Target and especially not into Path Mark or Shop Rite. You starting to dig what I’m saying? Bark once for yes.
This was the 10th quarter in a row where PetSmart posted an earnings growth rate above 10%. Same-store sales have been up 5% or better each of the last six quarters. That’s just same store sales. What do you think happens when they build more stores? Yep..they are selling gluten free dog food, probiotic dog food, low carb dog food for the dogs who like to work out and stay slim. This crap is expensive. In this recession, these super premium foods are their fastest growing items. Crazy? Not really, we love our pets. It makes you feel good to go out and take care of them, because they really appreciate their pet parents. These premium pet food makers aren’t stupid either. They don’t want their margins beaten down by Wal Mart or Sams Club buyers. They are happy to sell to PetSmart. Americans are spending over $50 billion per year on their pets. It’s big business.
ANAL-ysts expect the company to earn $3.31 per share this year, $3.67 per share next year, and $4.30 per share in the following fiscal year. Now I’m not going to make fun of the ANAL-ysts, since PetSmart’s earnings are fairly easy to predict. PETM keeps beating the ANAL-yst estimates, and that’s not going to change.
There’s going to be a significant widening of gross margins in FY 13, driven by continued gains from PETM's price optimization software and occupancy cost leverage. Operating margins will grow, reflecting gross margin improvement and a modest leveraging of SG&A expenses due to solid same-store sales growth. So PETM is going to post earnings this year of $3.56/share which, at their trailing PE of 23.8, gets you to a share price of 84.73, which is past my sell target.
Even Spridle will like those numbers and wag his tail. Here’s what the chief dog had to say:
“Our performance in the second quarter was due to the strengths across all three merchandising categories: consumables; hard goods and live goods, as well as across services. Our comparative everyday low price strategy, coupled with our commitment to our uniquely engaged in-store experience that is not easily duplicated, has led to continued success in growth, even in today’s challenging economic environment. But its our differentiation that makes us the leading pet specialty retailer, by providing solution for our pet partners to help them help their pets live long, healthy and happy lives.”
“The high-end food for natural super premium aisle for us has done really well. It’s been doing very well for a long time. The last two quarters has not only done well in dog, but it’s started to accelerate in cat, which has been a very nice outcome for us.”
“I definitely believe we are picking up market share. We are still looking at the market growth in the 4% to 5% range and when you look at our top line growth it’s empirically looking at the data and we are definitely picking up share.”
“Whether it's finding the right pet, the best food or the perfect toy, signing up for training or grooming sessions, checking into a PetsHotel, or taking home a newly adopted dog or cat, we help pet parents help their pets live long, happy, healthy lives.”
Sometimes I really miss Spridle. If you liked this write up, please share it with a two legged friend.
$$$MR. MARKET$$$
(click to enlarge)
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