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PetSmart Announces Third Quarter 2013 Results

Total Sales up 4.0%; Comp Sales of 2.7%; Earnings up 17.3% to $0.88 per Share

PHOENIX--(BUSINESS WIRE)--Nov. 22, 2013-- PetSmart, Inc. (NASDAQ: PETM) today announced financial results for the third quarter of 2013 and provided guidance for the fourth quarter and fiscal year 2013.

Third Quarter Results

Earnings of $0.88 per share, up 17.3% compared to $0.75 per share in the third quarter of 2012. Net income totaled $92 million in the third quarter of 2013, compared to $82 million in the third quarter of 2012.

Total sales for the third quarter of 2013 increased 4.0% to $1.7 billion. Comparable store sales, or sales in stores open at least a year, grew 2.7%, including comparable transactions growth of 0.2%. Services sales, which are included in total sales, grew 5.2% to $184 million.

The company generated $107 million in cash flows from operating activities, spent $51 million in capital expenditures, distributed $17 million in dividends, and repurchased $30 million of PetSmart stock. The company ended the quarter with $367 million in cash, cash equivalents and restricted cash and zero borrowings on its credit facility.

“Given the challenged consumer environment during the quarter, we are pleased with our results and level of execution,” said David Lenhardt, Chief Executive Officer. “Our performance demonstrates the strength and stability of our business.”

Guidance

Fiscal year 2013 is a 52-week year. Except for comparable stores sales growth, which is calculated on an equivalent basis, comparisons to fiscal year 2012, a 53-week year, are based on U.S. GAAP, unless otherwise noted.

  • Comparable store sales growth of 3% to 3.5%
  • Total sales growth of approximately 3% (on a 52 to 52-week basis, total sales growth of approximately 5%)
  • Earnings before tax margin expansion of 20 to 40 basis points (on a 52 to 52-week basis, earnings before tax margin expansion of 50 to 70 basis points)
  • Earnings per share of $3.94 to $3.98

The fourth quarter of 2013 is a 13-week quarter. Except for comparable stores sales growth, which is calculated on an equivalent basis, comparisons to the fourth quarter of 2012, a 14-week quarter, are based on U.S. GAAP, unless otherwise noted.

  • Comparable store sales growth of 2.5% to 3.5%
  • Total sales growth of -3% to -2% (on a 13 to 13-week basis, total sales growth of 4% to 5%)
  • Earnings before tax margin expansion of -45 to -15 basis points (on a 13 to 13-week basis, earnings before tax margin expansion of 45 to 75 basis points)
  • Earnings per share of $1.19 to $1.23

Conference call information

PetSmart management has scheduled a teleconference for 9:00 a.m. EST on November 22, 2013 to discuss results for the third quarter 2013. This teleconference will be webcast live for all investors at www.petm.com. The webcast will be available until the company announces results for the fourth quarter of 2013. In addition, you can listen to the call live by dialing 866-219-5631 (within the United States and Canada) or 703-639-1122 (for international callers), code 1627400.

A phone replay will be available through December 22, 2013, 11:59 p.m. EST, at 888-266-2081 in the United States and Canada, or at 703-925-2533 for international callers, code 1627400.

About PetSmart

PetSmart, Inc. (NASDAQ: PETM) is the largest specialty pet retailer of services and solutions for the lifetime needs of pets and is a leading online provider of pet supplies and pet care information (http://www.petsmart.com). The company employs approximately 54,000 associates and operates more than 1,314 pet stores in the United States, Canada and Puerto Rico, and over 196 in-store PetSmart® PetsHotel® dog and cat boarding facilities. PetSmart provides a broad range of competitively priced pet food and pet products; and offers dog training, pet grooming, pet boarding, PetSmart Doggie Day CampSM day care services and pet adoption services. Through its in-store pet adoption partnership with PetSmart Charities®, PetSmart has helped save the lives of more than 5 million pets since 1994. PetSmart Charities, Inc. and PetSmart Charities of Canada, Inc. (“PetSmart Charities”) are independent, nonprofit organizations that save the lives of homeless pets and reduce shelter intake through spay/neuter efforts. In 2012, nearly 450,000 dogs and cats found homes through PetSmart Charities’ adoption centers in all PetSmart stores and by sponsoring community adoption events. PetSmart Charities is the leader in granting money to help pets in need, with more than $28 million given in 2012 throughout North America.

Forward-looking statements

This news release contains forward-looking statements concerning our expectations for future performance, including the statements comprising our 2013 guidance. These "forward-looking statements" are based on currently available information, operating plans and projections about future events and trends. They inherently involve risks and uncertainties that could cause actual results to differ materially from those predicted in such forward-looking statements. Such risks and uncertainties include, but are not limited to: changes in general economic conditions; conditions affecting customer transactions and average ticket including, but not limited to, weather conditions or other seasonal events; our ability to compete effectively; disruption of our supply chain; our ability to effectively manage our growth and operations; changes in our cost structure; and changes in the legal or regulatory environment. Undue reliance should not be placed on such forward-looking statements as they speak only as of the date hereof, and we undertake no obligation to update these statements to reflect subsequent events or circumstances except as may be required by law. For additional information on these and other factors that arise when investing in PetSmart, please see our filings with the Securities and Exchange Commission, including our most recent annual report on Form 10-K and subsequent reports on Forms 10-Q and 8-K.

 
PetSmart, Inc. and Subsidiaries
Condensed Consolidated Statements of Operations
(in thousands, except per share and store data)
(Unaudited)
                             
Thirteen Weeks Ended Thirteen Weeks Ended Thirty-Nine Weeks Ended Thirty-Nine Weeks Ended
November 3, 2013     % of Sales October 28, 2012     % of Sales November 3, 2013     % of Sales October 28, 2012     % of Sales
 
Merchandise sales $ 1,500,443 88.5 % $ 1,444,683 88.7 % $ 4,502,272 88.0 % $ 4,303,625 88.2 %
Services sales 184,190 10.9 % 175,018 10.7 % 580,474 11.4 % 546,899 11.2 %
Other revenue   10,535       0.6 %   9,810       0.6 %   29,015       0.6 %   28,547       0.6 %
 
Net sales   1,695,168       100.0 %   1,629,511       100.0 %   5,111,761       100.0 %   4,879,071       100.0 %
 
Cost of merchandise sales 1,045,743 61.7 % 1,008,278 61.9 % 3,123,671 61.1 % 2,989,671 61.3 %
Cost of services sales 133,917 7.9 % 128,911 7.9 % 409,136 8.0 % 392,152 8.0 %
Cost of other revenue   10,535       0.6 %   9,810       0.6 %   29,015       0.6 %   28,547       0.6 %
 
Total cost of sales   1,190,195       70.2 %     1,146,999       70.4 %   3,561,822       69.7 %     3,410,370       69.9 %
 
Gross profit 504,973 29.8 % 482,512 29.6 % 1,549,939 30.3 % 1,468,701 30.1 %
 
Operating, general and administrative expenses   352,304       20.8 %   342,958       21.0 %   1,073,202       21.0 %   1,038,736       21.3 %
 
Operating income 152,669 9.0 % 139,554 8.6 % 476,737 9.3 % 429,965 8.8 %
 
Interest expense, net   (12,930 )     -0.8 %   (13,375 )     -0.8 %   (38,926 )     -0.8 %   (41,054 )     -0.8 %
 

Income before income tax expense and equity income from Banfield

139,739 8.2 % 126,179 7.8 % 437,811 8.5 % 388,911 8.0 %
 
Income tax expense (51,054 ) -3.0 % (48,335 ) -3.0 % (161,094 ) -3.2 % (144,840 ) -3.0 %
 
Equity income from Banfield   3,536       0.2 %   4,472       0.3 %   11,287       0.2 %   11,448       0.2 %
 
Net income $ 92,221       5.4 % $ 82,316       5.1 % $ 288,004       5.5 % $ 255,519       5.2 %
 
Earnings per common share:
Basic $ 0.89   $ 0.76   $ 2.78   $ 2.36  
Diluted $ 0.88   $ 0.75   $ 2.75   $ 2.32  
 
Weighted average shares outstanding:
Basic 103,957 107,719 103,579 108,303
Diluted 104,753 109,333 104,637 110,117
                                                 
Stores open at beginning of each period 1,301 1,249 1,278 1,232
Stores opened during each period 16 24 41 49
Stores closed during each period   (3 )   (4 )   (5 )   (12 )
Stores open at end of each period       1,314               1,269               1,314               1,269        
 
 
PetSmart, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
(In thousands, except par value)
(Unaudited)
               
November 3, February 3, October 28,
2013 2013 2012
 
Assets
Cash and cash equivalents $ 295,868 $ 335,155 $ 298,090
Short-term investments 1,967 9,150 13,862
Restricted cash 71,226 71,916 71,916
Receivables, net 52,576 72,198 49,811
Merchandise inventories 797,533 679,090 765,831
Deferred income taxes 62,859 62,859 51,381
Prepaid expenses and other current assets   118,757     86,768     111,164  
 
Total current assets 1,400,786 1,317,136 1,362,055
 
Property and equipment, net 956,653 985,707 997,361
Equity investment in Banfield 30,326 39,934 35,412
Deferred income taxes 101,321 102,992 85,308
Goodwill 42,951 44,242 44,248
Other noncurrent assets   63,945     46,970     44,623  
 
Total assets $ 2,595,982   $ 2,536,981   $ 2,569,007  
 
Liabilities and Stockholders' Equity
Accounts payable and bank overdraft $ 240,603 $ 202,122 $ 266,708
Accrued payroll, bonus and employee benefits 164,111 176,082 161,030
Accrued occupancy expenses and deferred rents 79,716 70,671 74,106
Current maturities of capital lease obligations 66,517 61,581 60,023
Other current liabilities   208,133     244,436     181,381  
 
Total current liabilities 759,080 754,892 743,248
 
Capital lease obligations 453,620 464,578 475,552
Deferred rents 67,439 73,855 75,948
Other noncurrent liabilities   110,769     120,064     117,248  
 
Total liabilities   1,390,908     1,413,389     1,411,996  
 
Stockholders' Equity:
Preferred stock; $.0001 par value - - -
Common stock; $.0001 par value 17 17 17
Additional paid-in capital 1,504,135 1,418,411 1,393,158
Retained earnings 2,061,254 1,827,996 1,711,574
Accumulated other comprehensive income 2,082 5,506 5,600
Less: Treasury stock   (2,362,414 )   (2,128,338 )   (1,953,338 )
 
Total stockholders' equity   1,205,074     1,123,592     1,157,011  
 
Total liabilities and stockholders' equity $ 2,595,982   $ 2,536,981   $ 2,569,007  

Source: PetSmart, Inc.

PetSmart, Inc.
Investor Relations, 623-587-2025

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