PetSmart Reports Results for the First Quarter 2013

PetSmart Reports Results for the First Quarter 2013

Q1 Earnings up 15% to $0.98 per Share; Comp Sales of 3.5%; Total Sales up 5.0%; Comp Transactions up 0.8%

PHOENIX--(BUSINESS WIRE)-- PetSmart, Inc. (NASDAQ: PETM) today reported earnings of $0.98 per share, up 15% compared to $0.85 per share in the first quarter of 2012. Net income totaled $102 million in the first quarter of 2013, compared to $95 million in the first quarter of 2012.


Total sales for the first quarter of 2013 increased 5.0% to $1.7 billion. The increase in net sales was partially impacted by $2 million in unfavorable foreign currency fluctuations. Comparable store sales, or sales in stores open at least a year, grew 3.5%, benefitting from comparable transactions growth of 0.8%. Services sales, which are included in total sales, grew 5.8% to $192 million.

During the first quarter, the company generated $147 million in cash flows from operating activities, spent $35 million in capital expenditures, and repurchased $180 million of PetSmart stock. The company ended the quarter with $324 million in cash, cash equivalents and restricted cash and zero borrowings on its credit facility.

"We are pleased to report another quarter of solid earnings growth," said Bob Moran, Chairman and Chief Executive Officer. "Our focus on providing solutions for the lifetime needs of pets has kept our pet parent customers highly engaged with our brand, resulting in positive comparable store sales growth and transaction growth."

"As a reminder, the annual guidance for 2013 is for 52 weeks versus 53 weeks in 2012. For fiscal year 2013, we anticipate comparable store sales growth of 3% - 4%, and total sales growth of 3% - 4%. We are raising our earnings per share guidance from a previous range of $3.76 to $3.92, to our current expectations of $3.82 to $3.94," said Chip Molloy, Executive Vice President and Chief Financial Officer. "For the second quarter of 2013, we are expecting comparable store sales growth in the 3% to 4% range, and earnings per share between $0.82 to $0.86."

Conference call information

PetSmart management has scheduled a teleconference for 4:30 p.m. EDT on May 22, 2013 to discuss results for the first 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 second quarter of 2013. In addition, you can listen to the call live by dialing 866-814-1933 (within the United States and Canada) or 703-639-1365 (for international callers), code 1613971.

A phone replay will be available through June 22, 2013, 11:59 p.m. EDT, at 888-266-2081 in the United States and Canada, or at 703-925-2533 for international callers, code 1613971.

About PetSmart

PetSmart, Inc. (NAS: PETM) is the largest specialty pet retailer of services and solutions for the lifetime needs of pets. The company employs approximately 52,000 associates and operates more than 1,289 pet stores in the United States, Canada and Puerto Rico, over 196 in-store PetSmart® PetsHotel® dog and cat boarding facilities, and is a leading online provider of pet supplies and pet care information (http://www.petsmart.com). 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 the organization's 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

May 5, 2013

% of Sales

April 29, 2012

% of Sales

Merchandise sales

$

1,509,372

88.2

%

$

1,439,559

88.3

%

Services sales

191,577

11.2

%

181,014

11.1

%

Other revenue

9,647

0.6

%

9,320

0.6

%

Net sales

1,710,596

100.0

%

1,629,893

100.0

%

Cost of merchandise sales

1,037,114

60.6

%

994,508

61.0

%

Cost of services sales

134,089

7.8

%

128,691

7.9

%

Cost of other revenue

9,647

0.6

%

9,320

0.6

%

Total cost of sales

1,180,850

69.0

%

1,132,519

69.5

%

Gross profit

529,746

31.0

%

497,374

30.5

%

Operating, general and administrative expenses

362,228

21.2

%

343,023

21.0

%

Operating income

167,518

9.8

%

154,351

9.5

%

Interest expense, net

(13,168

)

-0.8

%

(14,129

)

-0.9

%

Income before income tax expense and equity income from Banfield

154,350

9.0

%

140,222

8.6

%

Income tax expense

(55,547

)

-3.2

%

(48,172

)

-3.0

%

Equity income from Banfield

3,612

0.2

%

2,633

0.2

%

Net income

$

102,415

6.0

%

$

94,683

5.8

%

Earnings per common share:

Basic

$

0.99

$

0.87

Diluted

$

0.98

$

0.85

Weighted average shares outstanding:

Basic

103,305

108,930

Diluted

104,583

111,030

Stores open at beginning of each period

1,278

1,232

Stores opened during each period

13

14

Stores closed during each period

(2

)

(5

)

Stores open at end of each period

1,289

1,241

PetSmart, Inc. and Subsidiaries

Condensed Consolidated Balance Sheets

(In thousands, except par value)

(Unaudited)

May 5,

February 3,

April 29,

2013

2013

2012

Assets

Cash and cash equivalents

$

252,988

$

335,155

$

268,928

Short-term investments

7,455

9,150

22,276

Restricted cash

71,226

71,916

71,929

Receivables, net

66,272

72,198

57,346

Merchandise inventories

738,568

679,090

682,896

Deferred income taxes

62,859

62,859

51,381

Prepaid expenses and other current assets

81,041

86,768

81,716

Total current assets

1,280,409

1,317,136

1,236,472

Property and equipment, net

972,679

985,707

1,035,759

Equity investment in Banfield

28,426

39,934

26,597

Deferred income taxes

100,601

102,992

79,798

Goodwill

43,914

44,242

44,738

Other noncurrent assets

48,155

46,970

43,036

Total assets

$

2,474,184

$

2,536,981

$

2,466,400

Liabilities and Stockholders' Equity

Accounts payable and bank overdraft

$

257,628

$

202,122

$

246,612

Accrued payroll, bonus and employee benefits

132,705

176,082

126,195

Accrued occupancy expenses and deferred rents

69,626

70,671

69,456

Current maturities of capital lease obligations

63,180

61,581

55,920

Other current liabilities

246,431

244,436

177,511

Total current liabilities

769,570

754,892

675,694

Capital lease obligations

462,436

464,578

496,004

Deferred rents

71,565

73,855

79,582

Other noncurrent liabilities