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Petsmart Profit Rises 31%; Stock Jumps

August 29, 2003|From Bloomberg News

Petsmart Inc., the largest U.S. pet-supplies retailer, said fiscal second-quarter profit surged 31% after it remodeled stores and increased services such as veterinarian checkups. The company's shares rose 11% on the news.

Net income climbed to $28.1 million, or 19 cents a share, from $21.5 million, or 15 cents, a year earlier. Sales in the quarter ended Aug. 3 increased 11% to $725.8 million, the Phoenix-based company said.

Petsmart stores are offering services including training and grooming, which are more profitable than selling pet food. The company also lowered shelves and grouped merchandise by animals rather than products as part of the store remodeling. Sales at stores open at least a year rose 7.9%.

The renovations have been a "nice driver" of sales, said Lori Wachs, who helps oversee about $6 billion at Delaware Management, which owns Petsmart shares.

"You have the traffic there, you might as well try to capture it with services," Wachs said.

Shares of Petsmart rose $2.39 to $23.34 on Nasdaq. They have risen 47% in the last year.

The company was forecast to earn 17 cents a share, the average estimate of eight analysts surveyed by Thomson First Call. Petsmart raised its full-year profit forecast to 91 cents to 93 cents a share. In May it projected profit in the year ending in January of as much as 90 cents.

Service revenue helped boost gross profit margin, or the percentage of sales remaining after subtracting the cost of sales, to 29.7% in the quarter, up from 28.6% a year earlier. Petsmart Chief Executive Philip Francis said the renovations would increase same-store sales for at least a year.

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