Retail Sector Ideas

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PetSmart -- >>> 3 Stocks Any Growth Investor Should Consider



By Federico Zaldua

November 14, 2012



http://beta.fool.com/martinzaldua/2012/11/14/3-stocks-any-growth-investor-should-consider/16490/?ticker=BLL&source=eogyholnk0000001




A solid retail growth story

In a recent report, Needham projected that PetSmart's (NASDAQ: PETM) sales will continue to be strong across all merchandising categories, expecting continued margin expansion and solid growth. According to the American Pet Products Association, in 2012 U.S. households spent over 50 billion dollars on their pets. Since 1994, the amount of money spent on pets has increased every year, even during the economic recession. PetSmart is different from other retailers (Wal-Mart or Target), as it offers an array of services to meet the needs of people who are passionate and knowledgeable about pets. By offering more specialized services and products, PetSmart makes 4.6 times greater annual gross margin per customer.

The company is a strong grower, reflected in its 3 year average EPS growth of 25% and 9% sales growth. In the recent report, the company reported net income growth of 28% and same-store revenue growth of 7%. PetSmart's performance in the second quarter was due to the strengths across all three merchandising categories: consumables, hard goods and live goods, as well as services. The company will keep growing, driven by its comparative everyday low price strategy, coupled with its commitment to uniquely engaged in-store experience that is not easily duplicated. This approach has led to continued growth, even in today’s challenging economic environment. The company is not expensive at 17x forward P/E and just 1.1 P/S. Tudor Investment Corporation bought the stock in the recent quarter.

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