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Rise in sales and operating efficiencies facilitated PetSmart Inc. (PETM - Snapshot Report) to post better-than-expected first-quarter fiscal 2013 earnings. The quarterly earnings of 98 cents a share surpassed the Zacks Consensus Estimate by couple of cents and jumped 15.3% year over year.

Following strong results, the company raised its earnings guidance and now projects earnings in the range of $3.82 – $3.94 per share for fiscal 2013, up from its earlier guidance range of $3.76 – $3.92.  Moreover, the company expects second-quarter fiscal 2013 earnings between 82 cents and 86 cents.

Sturdy sales across all categories spurred a 5% increase in its top line to $1,710.6 million. However, the company’s quarterly revenue fell short of the Zacks Consensus Estimate of $1,721 million. Going forward, PetSmart expects sales to increase by 3%–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 facilitated 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. Moreover, the company added The Walt Disney Company's (DIS - Analyst Report) pet apparel and toys to its product portfolio.

By categories, Merchandise sales grew 4.8% to $1,509.4 million, whereas Services sales increased 5.8% to $191.6 million. Other revenues in the quarter came in at $9.6 million, up 3.5% year over year.

PetSmart registered 3.5% growth in comparable-store sales, with a 0.8% rise in comparable transactions. The company now expects comparable-store sales to increase by 3%–4% in second quarter and fiscal 2013.

Benefiting from its top-line growth, gross profit increased 6.5% year over year to $529.7 million. Moreover, gross margin expanded 45 basis points to 31%, reflecting lower cost of sales as a percentage of revenue.

PetSmart’s operating income remains strong, portraying growth of 8.5% to $167.5 million. Alongside, operating margin expanded approximately 30 basis points to 9.8%.

Going forward, PetSmart expects gross margins to remain flat or rise marginally in fiscal 2013, while

EBT margin is expected to increase slightly.  Moreover, EBT margin is expected to increase 40 to 50 basis points during the second quarter.

During the quarter, PetSmart opened 13 stores and closed 2, bringing the total store count to 1,289. Moreover, it currently operates 196 PetsHotel.

The company ended the quarter with cash and cash equivalents of $253 million, capital lease obligations of $462.4 million and shareholders’ equity of $1,051.3 million.

During the quarter, PetSmart generated operating cash flow of $147 million and incurred capital expenditures of $35 million. Furthermore, the company repurchased shares worth $180 million and had no borrowings under its credit facility.

Other Stock to Consider

The other stock that you may want to consider as our model shows that it has the right combination of elements to post an earnings beat this quarter:

Foot Locker Inc. (FL - Snapshot Report) with an Earnings ESP of +2.30% and a Zacks Rank #2 (Buy).

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