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Pet supply retailer
PETM) has a big trend pushing at its back in 2013. Americans love their pets, and to show it, they're spending more on Fido and Whiskers than ever before. That higher per-capita pet spending has been translating to bigger sales numbers at PetSmart's 1,250 big box stores.
PetSmart sells pet food, supplies, services and even small pets at its locations. As pets get treated more and more like full fledged family members, so is their allotment of the family budget. That's drastically changed the sales mix at stores like PetSmart, as more emphasis on higher-quality all natural pet foods and more expensive and elaborate toys and grooming products fill the shelves. That focus on quality also translates to higher margins for PETM. More than half of sales come from consumables such as food and treats, which means repeat business.
Another important margin driver is services. Grooming, boarding, and training only make up around 11% of PetSmart's total sales, but they're rich in margin and tend to be sticky. After all, pet owners are less likely to switch their boarding to unfamiliar places purely for cost. Analysts are turning bullish on PetSmart from a sentiment standpoint this week, so we're betting on shares.
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-- Written by Jonas Elmerraji in Baltimore.