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PetSmart, Inc Message Board

  • buy_buy_buy_123 buy_buy_buy_123 Mar 7, 2013 8:29 AM Flag

    My post from Seeking Alpha

    I wrote a response to some negative article on Seeking Alpha regarding Petsmart. thought I'd repost it here:
    I always hate to read and respond to a bad article giving the author his 2 cents or whatever he gets for writing it, but for the benefit of people who are reading your article I thought it prudent to point out many of your misstatements.
    1. Yes it's true. Last year management guided to 3.02 - 3.16, above analyst expectations. They then proceeded to crush those estimates and ended up at 3.55 for the year. So I don't think they generally give 'rosier guidance'. In fact they typically give conservative guidance.
    2. You twisted what Credit Suisse said from a question into a statement ("Hey, things are going to be a little bit slower that we'll be more conservative for 2013"). BTW - Here is what Credit Suisse says in their new analyst report today "The bottom line after analyzing Q4 results and listening to last night’s conference call is that we believe that PETM is one of the more intriguing growth stories in our space. As we have seen before, sometimes due to misunderstandings or misperceptions, there are good opportunities to own great companies at attractive prices. That seems to be the case with PETM as the market appears to be overreacting (based on last night’s aftermarket sell-off) to guidance that in our
    view seems reasonable and exceedable." They mantained their $78 price target. They don't seem to pessimistic to me.
    3. You also said management spoke of weaker traffic in the quarter. In fact what they said is it started off slow and has picked up every week since then. The analyst even said "Okay, that's helpful. That sounds very familiar to actually a number of retailers. ".
    4. In your other article you said Operating Margins might start to decline. They haven't. They were up 120 basis points on the quarter and 100 basis points Y/Y. They are guiding for flat to slightly up for 2013.

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    • And here what ML said:

      PetSmart, Inc.: Favorable LT prospects outweigh 4Q volatility; Buy
      3/7/2013 4:02 AM.
      We remain positive on PETMs company and industry fundamentals. Despite 4Q sales volatility, trends remain solid, and we continue to believe further macro improvements will provide upside. Reit Buy with $80 price target.

    • I agree, I have been upset with Seeking Alpha before, they tend to get the drum and start beating it without the facts. A lot of the writers are just like you and me and they like to think they have some grasp of the market and stock technicals,etc. But, my complaint is that there is no one to rebut what they say. They have free rein to spew BS and if it cost investors money no one cares. They should be help accountable if they are wrong and they aren't. You can't respond to them unless you join Seeking Alpha and who wants to do that. They are just practicing to be real journalists so you have to forgive them.

    • (continued)

      For 1st Q they guided their high end above analyst expectations. You might also want to note that with the planned management transition after the next quarter they are likely being extremely cautious in their guidance. They also mentioned that they achieved overall profitability in their Pets Hotels business. Another sign contrary to what you say that their high margin service businesses don't have much room to run. In addition to opening 45-50 full size stores they will also be opening 12 'micro' stores (around 6 - 7.5k sq. ft) which will have less SKU's but have the other services like grooming, pet training, and adoptions.

      You also mention in your other article that due to the payroll tax reversion people are probably trading down to stores like Walmart, Target, etc. I doubt that's true, but it certainly wouldn't explain why people continue to trade up to Premium and Super Premium foods at Petsmart. Also if anyone believes that the economy is in a recovery phase and not heading back to recession, Petsmart is a great way to play a job and housing recovery (management even alluded to being helped by higher housing sales).

      So anyway, this will be my first and last post on this article, but I just thought I'd give those reading it the other side of the story (also the story that doesn't contain statement taken out of context by the author).

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