Petsmart Reports Increase in Net Income, Sales for Q3

The pet specialty retailer reported net income of $38.1 million on net sales of $1.29 billion for the third quarter of 2009, compared to a net income of $35.8 million on net sales of $1.25 billion in the year-ago period.

Comparable store sales — sales in stores open for at least one year — increased 0.3 percent over the year-ago period.

"Our ability to deliver positive comp sales, while still battling a challenging retail environment and a difficult inflationary comparison, continues to show the strength of the Petsmart brand and the loyalty of our customers even in tough times," said Bob Moran, Petsmart CEO and president.

Pet services sales increased 8 percent to $136.7 million in the third quarter. During a conference call with investors on Nov. 18, Senior Vice President and CFO Chip Molloy said the increase was primarily due to the continued strength in grooming. PetsHotel and training sales "remain a bit weak," he said. Heading into the holiday season, Molloy said the company "feels good" about its PetsHotel bookings, which he said were in line with last year's bookings.

The company, which has 1,149 store locations, continues to slow unit growth. In the third quarter, Petsmart opened seven new stores and five PetsHotels. In the year-ago quarter, the company opened 32 new stores and 11 PetsHotels, according to Molloy.

Company officials said hardgood sales are seeing a slight recovery after resetting key categories, including dog toys, containment, collars and leads, and waste management.

On the consumable side, Petsmart recently relaunched its Authority pet food brand. Moran said early response has been positive and unit sales have increased significantly.

Petsmart continues to remain engaged in hosting adoption events and recently held its 4th annual national in-store adoption event, which resulted in the adoption of 17,000 pets, according to Moran. The company plans to increase adoption events in 2010. Moran said such events are "vital to the success of the company" as they generate new and life-long Petsmart customers.

Moran also expected Martha Stewart's new line of pet products, slated to hit Petsmart shelves in the first half of 2010, to have a positive impact as it will allow the company to connect with Martha Stewart's customer base. The new line encompasses a range of pet products, including apparel, collars, leashes, bedding, grooming supplies and toys.

Looking ahead, Moran said the company is "cautiously optimistic" about the fourth quarter and fiscal year 2010. He said management plans to continue to focus on three strategic priorities: leveraging customer insights, improving merchandise capabilities and engaging customers.