Buoyed by the second-quarter results, PetSmart raised its earnings per share guidance for the second time in current fiscal. It now expects earnings in the range of $2.40 to $2.48 from its previous range of $2.32 to $2.42. The company also projects third-quarter 2011 earnings between 41 cents and 45 cents.
PetSmart delivered top-line growth of 7-percent in the quarter to $1,487.6 million, ahead of the Zacks Revenue Estimate of $1,484 million. The company expects revenue to increase in mid-single digits for fiscal 2011.
Merchandise sales grew 6.9-percent to $1,300.5 million, whereas service sales climbed 7.6-percent to $177.9 million. Other revenue in the quarter came in at $9.1 million.
The Phoenix-based pet products retailer hinted that comparable-store sales increased 5-percent in the quarter, aided by a 2-percent growth in comparable transaction. PetSmart forecasted comparable store sales growth in the low- to mid-single digit range in fiscal 2011. For the third quarter of 2011, the company expects comparable store sales to grow in 3 to 4-percent range.
Favorable currency fluctuations, increased consumer transactions coupled with healthy sales during the quarter facilitated the company in boosting its top and bottom lines.
Further, PetSmart’s differentiated products as well its sustained effort to expand its portfolio of brands and assortments and its collaboration with Martha Stewart Living Omnimedia Inc. have helped it to launch different lines of pet products for delivering healthy results.
Despite a 5.7-percent rise in the cost of goods sold, the company posted a substantial increase of 10.3-percent in gross profit to $437 million, benefiting from top-line growth. Consequently, gross margin expanded 90 basis points to 29.4-percent. Operating income surged 19.9-percent for the quarter to $110.3 million, whereas operating margin increased 80 basis points to 7.4-percent.
During the quarter, PetSmart opened eight stores and closed three, bringing the total count to 1,197 locations. The company also opened one PetsHotels during the quarter bringing the total count to 185 PetsHotels.
The company repurchased shares worth $63 million, incurred $20 million in capital expenditures and distributed dividends valued at $14 million during the reported quarter. It ended the quarter with cash and cash equivalents of $259.2 million, capital lease obligations of $514.7 million and shareholders’ equity of $1,155.9 million.