Analyst Raises PetSmart To 'Buy' From 'Neutral'

NEW YORK (AP) — PetSmart Inc. climbed Monday as an analyst upgraded the pet food and products retailer, saying the company will likely benefit when discretionary spending picks up with an potential 2010 economic recovery.

The recession prompted many pet owners to tighten their spending and limit their purchases more to necessities such as pet food and to cut out extraneous purchases like toys.

David Strasser of Janney said in a client note that easier comparisons and pet adoption programs will also help Phoenix-based PetSmart's gross margin next year. A shift toward hardgoods merchandise, which includes pet supplies such as collars, leashes, grooming and beauty aids, toys and apparel, from consumables, such as food and treats, is also expected to benefit gross margin.

Strasser boosted PetSmart to "Buy" from "Neutral."

The chain's stock gained 86 cents, or 4.1 percent, to $21.70 in morning trading. The shares have traded in a range of $13.27 to $24.22 over the last year.