PetSmart Continues To Deliver Despite Sector Turbulence

It is becoming increasingly rare for retailers to show consistently strong results, but PetSmart Inc. (PETM) did it again in the second quarter, beating the Street’s estimates and meeting its own guidance. The pet product giant’s “underlying results are solid, particularly relative to a very choppy retail sector,” Goldman Sachs analyst Matthew Fassler said in a note to clients.

PetSmart also hiked its guidance and boosted its share buyback plans. The company is executing with little visible impact from current broader economic issues, while flexible pricing is helping it meet same-store sales growth expectations, Mr. Fassler said.

While the huge pet food recall will impact the company’s results longer than initially expected, PetSmart is delivering nonetheless, he added.

Mr. Fassler maintained his “neutral” rating and US$34 price target on PetSmart shares.

Citigroup analyst Bill Sims, who noted that every other retailer appears to be cutting guidance, said PetSmart’s increase may not be big, but is a boost nonetheless.

He reiterated his “buy” rating and US$36 price target, admitting that while the stock is not a steal relative to other “beaten-down names,” PetSmart’s steady operating income growth and accelerated share repurchase program make it one of the most attractive stocks in the sector.

PETM 1-yr chart: