. (NASDAQ:PETM) today announced financial results for the second quarter of 2014, and affirmed guidance for fiscal year 2014. The Company also announced a definitive agreement to acquire Pet360, the premier online pure play pet specialty retailer, for $130 million with the possibility of additional performance-based payments totaling up to $30 million by the end of 2016.
Second Quarter Results
Earnings of $0.98 per share were up 10.1% compared to $0.89 per share in the second quarter of 2013. Net income increased 5.1% to $98.1 million, compared to $93.4 million in the prior year period.
Net sales for the second quarter of 2014 increased 1.4% to $1.7 billion. Comparable store sales, or sales in stores open at least one year, including online sales, decreased 0.5%, with comparable transactions decreasing 2.6%. Services sales, which are included in net sales, grew 4.7% to $214 million.
In the second quarter, the company generated $92 million in cash flows from operating activities, invested $36 million in capital expenditures, distributed $19 million in dividends, and made no purchases of PetSmart stock. The company ended the quarter with $323 million in cash, cash equivalents and restricted cash, and it had no borrowings against its credit facility.
Said David Lenhardt, President and Chief Executive Officer, “While we face many of the same headwinds affecting other retailers, we continue to deliver extraordinary value to our customers and achieve strong earnings and cash flows. We are focused on leveraging our competitive strengths, including superior customer focus and loyalty, and capitalizing on the continued growth of the specialty channel. We have already begun implementing a broad range of performance improvement initiatives following the Board’s detailed review of our business over the last several months.”
Acquisition of Pet360
Commenting on the Pet360 transaction, Lenhardt said: “We are delighted to announce our planned acquisition of Pet360, the most comprehensive online resource for pet parents. This transaction is a smart and efficient way to make PetSmart a leader in the online retail space. As discussed previously, although online sales are still a relatively small part of the pet products industry, we expect them to become a more relevant source of revenue in the future. Combining PetSmart’s unparalleled strengths in traditional outlets with Pet360’s established digital footprint will perfectly position PetSmart to capitalize on this evolution and enhance our ability to serve pet parents across all distribution channels.”