PetSmart, Inc. 1
PetSmart, Inc.
Company Research Paper
PetSmart, Inc. 2
PetSmart, Incorporated
PetSmart started out in 1986 as PetFood Warehouse selling pet food and supplies to those in the
Phoenix, Arizona area. By 2005 the company had rebranded itself into PetSmart, still selling pet
food and supplies, but also expanding into other areas of pet ownership. They know had onsite
veterinarians with Banfield Pet Hospitals, Day care for Dogs, and had added a charitable arm,
PetSmart Charities, Inc. All of this strengthened their position in the market place and made
them a front runner in the pet supply market. Their closest completion is Petco which is a
privately held company, with big box stores and grocery stores following behind. When it
comes to understanding the needs of pet owners and their pets PetSmart seems to really have a
firm grasp on what they want and need. With more households having pets and with the average
American spending more on their pets then they do on their retirement, PetSmart has maintained
their position thru clear strategic placement of stores and the layout of those stores. All of this
leads to a successful company that will continue to exceed the expectations of their customers in
the coming future.
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With their initial public offering in 1993 of roughly $10 per share the stock for PetSmart has
seen a steady growth. This is with exception to the financial trouble of 2000-2002 where they
saw a dramatic decrease like every other stock on the market but they have steadily climbed
since then and remain a healthy stock. PetSmart (PETM) current stock price is sitting at $70.51.
This is an increase of 73 cents, or 1.05% since the last report on May 10th, 2013. The highest
stock price in the last 52 weeks was $72.75, with the lowest being $55.06. The type of stock
sold by PetSmart is the common stock. There are currently 105,330,000 shares of common stock
outstanding on the market today. The dividends paid to the holders of these stocks has remained
steady for the last three years. In 2010, the dividend was $0.48. While 2011 saw a slight increase
to $0.55 and 2012 saw another slight increase to $0.64. This says to me that while they do make
profit that the company is choosing to use the majority of the profit to better the business and
strengthen their market position while understanding that they do need to give the stock holders
some sort of small incentive.
The data in their 2012 financial statements paints a picture of a company that knows who they
are and where they are going. They include information on the Statement of Operations Data
that lets the investor know where money is going for the advancement of the day to day business.
This information includes Net Sales, Gross Profit, Operating & General & Administrative
Expenses, Operating Income, the Gain on sale of equity investment, Interest expense & Net, and
Equity income that they receive from Banfield Pet Hospital. They also provide information on
Earnings per Common Share Data. This is Basic and Diluted share information, dividends
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declared per common share, and the weighted average shares outstanding, both basic and diluted.
Selected Operating Data is another data set on the financial statement for PetSmart. This tells
the investor how many stores were open at the end of the period, the square footage of the total
stores, Net sales per sq. foot, Net sales growth, and the Increase in comparable store sales. The
final section is the Selected Balance Sheet Date. This is merchandise inventories, average
inventory per store, working capital, total debt, total stockholders’ equity, current ratio, longterm debt-to-equity, and total debt-to-capital. The total debt listed for 2012 was $1,413,390.
Operating expenses used $653,010,000 of the cash flow listed for 2012. While Financing and
Investing both posted loses. Financings loss was $545,910,000 and Investing posted a loss of
$114,610,000. The most significant internal event that resulted in a negative effect on the cash
flow was the issuance or retirement of stock and debt to net income. They didn’t list any other
significant issues for the 2012 filling year. For the past three years the income and revenue
numbers have risen for PetSmart. In 2010, those numbers were $239,870,000 for income and
$5,693,800,000. In 2011 the numbers rose to $290,240,000 for income and $6,113,300,000 for
revenue. 2012 saw the largest increase with income rising to $389,530,000 and revenue going
up to $6,758,240,000. The current ratio for 2012 is 1.74 with the profit margin being .058.
These are healthy considering the market and the size of the company.
PetSmart relies on selling their products and services thru their stores and website. In the store, a
pet owner can easily navigate each store as they are all roughly set up the same. Each with their
own grooming, Banfield Pet Hospital, Boarding and Doggie Day Care. The areas for each type
of pet are clearly marked. The marketing arm of PetSmart makes sure that the pet owner has
everything they need to insure the health and well-being of their pet and also keeps in mind the
PetSmart, Inc. 5
peace of mind of the pet owner themselves. The website is as easy to navigate as the stores with
everything clearly marked. The pet owner just needs to enter their zip code to find the closest
store and the address and phone numbers are clearly listed. They hire friendly, knowledgeable
staff. They make sure that there is signage for the PetSmart Chartities so that people are aware
of that arm as well. By doing all of this they have increased their position. They offer not only
pet food and supplies as they did in the beginning but offer a wide range of options from
training, to behavior aids, toys, and diet supplements all aimed at giving pets a longer and
healthier life. Their marketing campaigns are aimed less at the amount of savings but at what
they can do for the pet and pet owner. Most of their advertising is done to promote adoptions or
some other health related activity for the pet.
The management summary expects the growth of PetSmart to increase at a rate of 2 to 4% and
from what I have learned from shopping at the store and doing this research I do believe that they
will see this growth. I think that this may also be on the conservative side as more and more
people become pet owners. They feel that the growth will be fueled by a culture of innovation
and diffentitation which I think we are already seeing in the marketplace. Each day there is
something new coming out that in geared towards our pets, from a new type of toy to beds that
offer more orthopedic support for older joints. They view these new innovations as a way to
empower pet parents to help their pets live longer, healthier, happier lives. By having this type
of company mindset they are setting themselves up as being there to help not just a place to
purchase dog food. Future growth opportunities would include products aimed at increased
socialization for the pets, not only toys that they can use with the owner but toys that encourage
interaction between the animals. Increasing the products aimed at nutrition will also be an area
PetSmart, Inc. 6
of growth as more research is done on what pets really need for optimum diet. By providing
onsite boarding and doggie day care they are encouraging pet owners to take care of all of their
pets needs in one place as opposed to having to go to several different places to get these
services. This also will maximize the time that the pet owner will spend in the store and
maximize the profit that each store will see. By doing this paper I learned the back story of a
place that I shop and their vision of the store. I found that it is in line with how I feel about a
place I want to shop and how I view the health of my pets. I see their stock as one that I would
like to purchase due to the fact that they are a solid business with a grounded business model.
They have a focus and they do it well.
PetSmart, Inc. 7
References
http://investing.money.msn.com/investments/stock-income-statement/?symbol=us%3aPETM
http://phx.corporate-ir.net/phoenix.zhtml?c=93506&p=irol-reportsannual
http;//en.wikipedia.org/wiki/petSmart
http://www.nasdaq.com/article/petsmart-reports-results-for-the-fourth-quarter-and-fiscal-year2012-20130306-01179
http://finance.yahoo.com/q/ks?s=PETM+Key+Statistics