), a leading pet specialty retailer, seems to have been caught in a
downward spiral. The company has posted lower-than-expected
revenues for sometime now. Tough consumer environment and
escalating competition has made the situation very difficult.
If we look at fiscal 2013, PetSmart's revenues missed the Zacks
Consensus Estimate in all the four quarters by 0.5%, 0.3% 0.5% and
1.2% respectively. In the first quarter of fiscal 2014, revenues of
$1,729.1 million also missed the Zacks Consensus Estimate by 2.4%.
Even comparable-store sales (comps) dipped 0.6%, with a 2.2% slip
in comparable transactions. Comps were adversely affected by
currency translations and inclement weather conditions.
Anticipating sales trends to remain under pressure, management
provided a tepid outlook for the ongoing fiscal. The company
anticipates a low-single digit rise in sales with relatively flat
comps. This triggered a massive estimate revision as analysts'
became less constructive on the stock.
Over the last 60 days, the Zacks Consensus Estimate for fiscal 2014
and 2015 fell over 3.1% and 6.7% to $4.33 and $4.72 per share
However, to bail itself out, PetSmart has launched a powerful
turnaround. The company is focused on driving up consumable sales,
expanding omnichannel reach and vigorously promoting brand
awareness to boost its top line. Though initiative looks promising,
we believe it will take some time for the company to put itself
back on the growth trajectory.
Currently, PetSmart carries a Zacks Rank #5 (Strong Sell). We will
not be constructive on the stock, until we see signs of
improvement. Other better ranked retail stocks worth consideration
Barnes & Noble, Inc.
Five Below, Inc.
). All these have a Zacks Rank #2 (Buy).
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