PetSmart Gains on Surprise Earnings Beat

Shares of PetSmart Inc. climbed 6.4% in after hours trading on a slight earnings beat after making a new 52-week low during Wednesday's regular trading session. Last month the company warned Q3 and full year earnings would be soft due to an "uncertain economic environment," (full summary). Because the company revised EPS down to just $0.17-0.20, investors were pleasantly surprised Wednesday when actual EPS came in at $0.23. Shares are down 19% over the last month (excluding Wednesday's after-hours gains), following the company's warning. In the latest quarter, net income was down 6.9% to $29.5 million, despite a 7.8% gain in net sales to $1.12 billion. Consensus analyst estimates were for adjusted EPS of $0.22 on sales of $1.12 billion. Gross margin fell 0.1% to 29.7%, while same store sales showed a Y/Y increase of 1.4%. The company expects Q4 EPS in a range of $0.70 to $0.74 (midpoint in-line with consensus estimates of $0.71) and raised its FY earnings forecast to a range of $2.05 to $2.09 a share, after previously lowering its earnings forecast to a range of $2.02 to $2.07 a share. CFO Chip Molloy sounded a cautiously optimistic note on the earnings call: "We have the tools in place for a strong finish to the year. Our business is well prepared, but we remain cautious due to macroeconomic uncertainty surrounding this year's holiday season," (full transcript).

Sources: Press release, Wall Street Journal, Bloomberg, Reuters
Commentary: Goldman Sachs Finds PetSmart’s Long-Term Appeal "Considerable" • PetSmart Cuts Q3, FY Guidance on Economic Uncertainty • PetSmart Continues To Deliver Despite Sector Turbulence
Stocks/ETFs to watch: PETM. ETFs: XRT
Earnings call transcript: PetSmart Q3 2007

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