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PetSmart shares fall on Nomura downgrade

NEW YORK (AP) -- Shares of PetSmart Inc., the pet food and supplies seller, fell after a Nomura analyst downgraded the company's shares, citing increased competition from Internet retailer Amazon.com.

THE SPARK: Nomura analyst Aram Rubinson downgraded PetSmart shares to "Reduce" from "Neutral." He also cut the stock's price target to $55 from $72.

THE ANALYSIS: Rubinson said in a note to clients that Amazon.com Inc. may become more of a competitor to PetSmart as shipping costs fall. Pet food can be heavy and usually costs more to ship. Amazon.com has been cutting shipping costs by building distribution centers closer to consumers, said Rubinson. That could push customers to buy pet food online.

Amazon.com also sells many products from third party sellers, said Rubinson. "With such a wide product offering, Amazon is likely to steal market share," he said.

PetSmart declined to comment on the analyst note.

THE SHARES: Down $6.23, or 8.9 percent, to $63.76 in afternoon trading Monday. Shares are down nearly 12 percent since hitting a 52-week high of $72.75 in September.