Why PetSmart Shares Popped


Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of pet products retailer PetSmart (NAS: PETM) climbed 10% on Wednesday after its quarterly results and guidance easily topped Wall Street expectations.

So what: PetSmart's blowout first quarter -- EPS of $0.85 versus the consensus of $0.73 -- and strong full-year outlook are forcing analysts to increase their growth expectations yet again. In particular, a solid same-store sales increase of 7.4% suggests that consumers continue to spend money on their pets even amid the weak economy.

Now what: Management now sees full-year EPS of $3.19 to $3.31, up nicely from its prior view of $3.02. "With the strength of our differentiation and pipeline of innovation," COO David Lenhardt said in a conference call, "we will continue to execute on our strategic priorities at every level of the business to deliver strong shareholder returns through 2012 and beyond." With the stock hitting all-time highs and trading at a forward P/E of 20, however, I'd wait for a little more margin of safety before buying into that bullishness.

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At the time thisarticle was published Fool contributor Brian Pacampara owns no position in any of the companies mentioned. Motley Fool newsletter services have recommended buying shares of PetSmart. Try any of our Foolish newsletter services free for 30 days.We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Fool's disclosure policy always gets a perfect score.

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