PetSmart shares rise on strong 3rd-quarter results

PetSmart shares rise after retailer reports strong 3rd-qtr results, tops Street expectations

Associated Press

NEW YORK (AP) -- PetSmart Inc.'s shares jumped on Thursday after the pet retailer reported strong third-quarter results and raised its full-year outlook.

THE SPARK: PetSmart's third-quarter net income rose 46 percent, helped by a 9 percent increase revenue increase, as shoppers bought more goods and services in the pet products retailer's stores.

THE BACKGROUND: It was the third-quarter in a row that PetSmart has beat analyst expectations. But the news wasn't all positive, as company CFO Chip Molloy said he would leave the company next year.

THE ANALYSIS: Analysts praised the quarter and the company's cost controls and consistency but noted that the CFO leaving and increased competition from Amazon might be drags in the future. Nomura analyst Aram Rubinson said Molloy was the architect behind PetSmart's cost controls, and without him there might be little room for cost cuts left.

"The PetSmart story has remained strong, but (we're) beginning to take the e-commerce threat a bit more seriously," he said in a note to clients. "It is premature to be overly worried, but our positive view on Amazon suggests it may be able to sustain aggressive investments longer than Petsmart might like."

SHARE ACTION: Shares rose $2.86, or 4.4 percent, to $67.71 in midday trading. The stock has traded between $45.27 and $72.75 in the past 52 weeks.

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