The Q1 2014 earnings report for pet supply retailer PetSmart, Inc (NASDAQ: PETM), a brick and mortar peer of online Petmed Express Inc (NASDAQ: PETS), is due out before the market opens on Wednesday. Aside from the PetSmart earnings report, it should be said that Petmed Express Inc reported Q4 2013 earnings on May 5th (sales slipped 4.9% to $48.6 million while net income came in at $4.5 million verses $4.6 million – results that were blamed on severe winter weather). However, PetSmart did get some downgrades recently with analyst saying there is increased competition in the pets space.
What Should You Watch Out for With the PetSmart, Inc Earnings Report?First, here is a quick recap of PetSmart's recent earnings history from Yahoo! Finance:
| EPS Est | 0.96 | 0.86 | 0.86 | 1.21 |
| EPS Actual | 0.98 | 0.89 | 0.88 | 1.28 |
| Difference | 0.02 | 0.03 | 0.02 | 0.07 |
| Surprise % | 2.10% | 3.50% | 2.30% | 5.80% |
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In early March, PetSmart reported reported a 2.9% Q4 2014 revenue increase to $1.8 billion and a 14% net income increase to $132 million. PetSmart hopes to boost sales even more by offering more natural and raw pet food options and by adding more services at its grooming salons, such as coloring dog fur with washable chalk. The CEO also noted in the earnings call that customers who buy natural pet foods and use their grooming services visit stores more often and spend more money across the entire store. This time around and according to the Yahoo! Finance analyst estimates page, the consensus expects revenues of $1.77B and EPS of $1.01 - down from EPS of $1.02 expected thirty days ago and EPS of $1.07 expected ninety days ago.
On the news front, PetSmart was downgraded to Underperform from Peer Perform by Wolfe Research on Monday (no details appear to be available) while in April, Bank of America also downgraded the company to Underperform from Neutral citing an increase in competition. And to give an example of the dog eat dog competition in the pet space: A lawsuit was filed back in April claiming Martha Stewart Living Omnimedia, Inc (NYSE: MSO) tried to undercut a business partner's relationship with PetSmart was allowed to proceed in court. According to the complaint, Martha Stewart Living Omnimedia, Inc realized it had undervalued Stewart-branded pet products and then disparaged the plaintiff to PetSmart and withheld approval of pet products to try to get latter to contract directly with Martha Stewart Living.
What do the PetSmart, Inc Charts Say?The latest technical chart for PetSmart reveals some downward trend lines:
A look at the long term performance chart for PetSmart shows a great long term performance that seems to have leveled off around the middle of 2012 while Petmed Express Inc has been an underperformer:
The latest technical chart from Petmed Express Inc reveals a double bottom:
I see no reason to expect a big miss from PetSmart, but traders might want to study its charts a bit more closely. It will also be interesting to listen in on the earnings call to see how PetSmart's plans for increasing revenue and staying ahead of the competition are working out.
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