PetSmart Slumps as Deutsche Bank Slaps With 'Sell'

NEW YORK (TheStreet) - PetSmart (PETM) shares were sinking 2% on Monday after Deutsche Bank analyst Mike Baker slapped a sell rating on the pet goods retailer over concerns that the growing acceptance of online pet supplies and goods purchases at cheaper outlets will eventually cut into sales at the Phoenix-based company's business.

Baker reduced his rating to "sell" from "hold" in a Jan. 6 research note to clients over concerns that this increased competition from places like Amazon's (AMZN) wag.com and others like PetFlow.com is resulting in slowing customer traffic at PetSmart stores.

"We were cautious on PETM heading into 2013 and remain cautious going forward as well," Baker writes. "While we continue to believe that PETM is a very well-run company and is the best in class operator in the space, we continue to see industry headwinds that should create a difficult comp environment in 2014 and beyond. We continue to see ecommerce as a threat. But, we also believe a slowing growth rate on super premium food will impact traffic, and coupled with minimal inflation will weigh against total comps as well."

Baker reduced his earnings estimates for 2014 and 2015 to $3.95 and $4.39, respectively, below consensus levels.

Analysts, according to Thomson Reuters, expect the company to post earnings of $3.97 a share for the full year ending in January. The average analyst expects earnings of $4.49 a share for the January 2015-ending year.

He also cut his 12-month price target by $8 to $65.

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