PetsMart Net Rises 21%

Grooming revenue is strong.
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PetsMart

(PETM)

announced a 21% jump in second-quarter profits, beating Wall Street's expectations, citing strength in demand for its pet services, including grooming.

The top dog in pet supply store chains, based in Phoenix, reported net income of $34.1 million, or 23 cents a share, for the quarter, up from $28.1 million, or 19 cents a share, in the same quarter last year. The results included a tax benefit of roughly $8 million and other special items, such as a charge for the retirement of assets, a foreign exchange expense and an increase in insurance reserves.

On the top line, PetsMart added 11%, reporting net sales of $806 million, compared with $724.9 million for the same period in 2003, but its same-store sales cooled, growing 5.4%, down from last year's 7.9%.

On an operating basis, the company beat expectations, with earnings of 24 cents a share, up from the consensus forecast of 21 cents a share, according to Thomson One Analytics.

PetsMart said its main growth driver was pet services sales, which jumped 23.4% to $62.1 million. Its gross margins reached 30.4%, up 61 basis points from last year, thanks to a "continued mix shift toward higher-margin goods."

During the quarter, the company opened 19 new stores and closed five locations, and it purchased 530,377 of its shares at an average purchase price of $29.36, completing its $35 million authorization for the year.

Going forward, PetsMart expects third-quarter earnings of 24 cents a share, with same-store sales rising 5% to 6%, and for the full year, it's forecasting earnings of $1.17 to $1.18 a share on same-store sales growth of 7%.

The stock was recently down $2.55, or 8.5%, to $27.27.