PetSmart's Earnings Beat

Rise in sales and operating efficiencies facilitated PetSmart Inc. (PETM - Snapshot Report) to post robust fourth-quarter fiscal 2012 earnings. The quarterly earnings of $1.24 per share jumped 36% from 91 cents delivered in the comparable year-ago quarter. Moreover, the reported earnings surpassed the Zacks Consensus Estimate of $1.21.

Following strong results, the company now projects earnings in the range of 92 cents–98 cents for the first quarter and between $3.76 and $3.92 per share for fiscal 2013.

Sturdy sales across all categories spurred a 15% increase in its top line to $1,879.2 million. However, the company’s quarterly revenues fell short of the Zacks Consensus Estimate of $1,888 million. Going forward, PetSmart expects sales to increase by 2%–4% in fiscal 2013.

This Zacks Rank #3 (Hold) company’s innovative and differentiated products and its sustained efforts to expand its portfolio of brands and assortments facilitate it to deliver healthy results. In a move to boost sales, PetSmart collaborated with Martha Stewart Living Omnimedia Inc. (MSO - Snapshot Report) and General Nutrition Centers, Inc. ("GNC"), to launch assorted lines of pet products.

By categories, Merchandise sales grew 14.8% to $1,676 million, whereas Services sales increased 14.9% to $193.6 million. Other revenues in the quarter came in at $9.6 million, up 3.8% year over year.

PetSmart, which competes with Target Corporation (TGT - Analyst Report) and Wal-Mart Stores Inc.(WMT - Analyst Report), registered 4.6% growth in comparable-store sales, with a 1.2% rise in comparable transactions. The company now expects comparable-store sales to increase by 2%–4% in first quarter and fiscal 2013.

Benefiting from its top-line growth, gross profit jumped 19.2% year over year to $593.4 million. Moreover, gross margin expanded 120 basis points to 31.6%, reflecting lower cost of sales as a percentage of revenue.

PetSmart’s operating income remains strong, portraying growth of 30.2% to $221.3 million. Alongside, operating margin expanded 140 basis points to 11.8%, indicating operating efficiencies.

During the quarter, PetSmart opened 11 stores and closed 2, bringing the total store count to 1,278. Additionally, the company opened 1 PetsHotel, ending the quarter with 196 hotels.

The company ended the quarter with cash and cash equivalents of $335.2 million, capital lease obligations of $464.6 million and shareholders’ equity of $1,123.6 million.

In fiscal 2012, PetSmart generated operating cash flow of $696 million and incurred capital expenditures of $138 million. Furthermore, the company repurchased shares worth $457 million and distributed $84 million in dividends.