PetSmart Announces First Quarter 2014 Results

  PetSmart Announces First Quarter 2014 Results

           Earnings up 6.1% to $1.04 per Share; Total Sales up 1.1%

                    Updates Guidance for Fiscal Year 2014

Business Wire

PHOENIX -- May 21, 2014

PetSmart, Inc. (NASDAQ: PETM) today announced financial results for the first
quarter of 2014, and updated guidance for fiscal year 2014.

First Quarter Results

Earnings of $1.04 per share were up 6.1% compared to $0.98 per share in the
first quarter of 2013. Net income increased 1.3% to $104 million, compared to
$102 million in the first quarter of 2013.

Net sales for the first quarter of 2014 increased 1.1% to $1.7 billion.
Comparable store sales, or sales in stores open at least one year, including
online sales, fell 0.6%, with comparable transactions decreasing 2.2%.
Services sales, which are included in net sales, grew 4.5% to $200 million.

The company generated $137 million in cash flows from operating activities,
spent $32 million in capital expenditures, distributed $20 million in
dividends, and repurchased $130 million of PetSmart stock. The company ended
the quarter with $301 million in cash, cash equivalents and restricted cash
and zero borrowings on its credit facility.

“We are pleased with the company’s ability to achieve earnings per share
growth of 6.1% while continuing to drive earnings before tax margin expansion
during the first quarter,” said David Lenhardt, President and Chief Executive
Officer. “However, we did not achieve our sales goals, which were impacted by
a challenging and volatile consumer environment and a competitive market.”

Updated Fiscal Year 2014 Guidance

Based on the Company’s year-to-date results and updated assumptions for the
remainder of the year in light of the consumer environment and competitive
market, the Company updated its fiscal year 2014 outlook.

  *Comparable store sales relatively flat
  *Net sales growth in the low-single digits
  *Earnings per share between $4.29 to $4.39
  *Operating cash flow between $600 to $625 million

Second Quarter 2014 Guidance

  *Comparable store sales growth flat to slightly down
  *Earnings per share of $0.92 to $0.96

Conference Call Information

PetSmart management has scheduled a teleconference for 10:00 a.m. EDT on May
21, 2014 to discuss results for the first quarter 2014. This teleconference
will be webcast live for all investors at www.petm.com. The webcast will be
available until the company announces results for the second quarter of 2014.
In addition, you can listen to the call live by dialing 866-814-1933 (within
the United States and Canada) or 703-639-1365 (for international callers),
code 1637996.

A phone replay will be available through June 21, 2014, 11:59 p.m. EDT, at
888-266-2081 in the United States and Canada, or at 703-925-2533 for
international callers, code 1637996. The announcement will also be archived at
www.petm.com.

About PetSmart

PetSmart, Inc. (NASDAQ: PETM) is the largest specialty pet retailer of
services and solutions for the lifetime needs of pets. The company employs
approximately 53,000 associates and operates more than 1,340 pet stores in the
United States, Canada and Puerto Rico, 200 in-store PetSmart^® PetsHotel^® dog
and cat boarding facilities and is a leading online provider of pet supplies
and pet care information (http://www.petsmart.com). PetSmart provides a broad
range of competitively priced pet food and pet products; and offers dog
training, pet grooming, pet boarding, PetSmart Doggie Day Camp^SM day care
services and pet adoption services. Through its in-store pet adoption
partnership with PetSmart Charities® and PetSmart Charities® of Canada,
PetSmart has helped save the lives of more than 5.7 million pets since 1994.
PetSmart Charities, Inc. and PetSmart Charities of Canada (collectively
“PetSmart Charities”) are independent, nonprofit organizations that save the
lives of homeless pets and reduce shelter intake through spay and neuter
efforts. In 2013, nearly 440,000 dogs and cats found homes through PetSmart
Charities’ adoption centers in all PetSmart stores and by sponsoring community
adoption events. PetSmart Charities is the leader in granting money to help
pets in need, with more than $34 million given in 2013 throughout North
America.

Forward-looking statements

This news release contains forward-looking statements concerning our
expectations for future performance, including the statements comprising our
2014 guidance. These "forward-looking statements" are based on currently
available information, operating plans and projections about future events and
trends. They inherently involve risks and uncertainties that could cause
actual results to differ materially from those predicted in such
forward-looking statements. Such risks and uncertainties include, but are not
limited to: changes in general economic conditions; conditions affecting
customer transactions and average ticket including, but not limited to,
weather conditions or other seasonal events; our ability to compete
effectively; disruption of our supply chain; our ability to effectively manage
our growth and operations; changes in our cost structure; and changes in the
legal or regulatory environment. Undue reliance should not be placed on such
forward-looking statements as they speak only as of the date hereof, and we
undertake no obligation to update these statements to reflect subsequent
events or circumstances except as may be required by law. For additional
information on these and other factors that arise when investing in PetSmart,
please see our filings with the Securities and Exchange Commission, including
our most recent annual report on Form 10-K and subsequent reports on Forms
10-Q and 8-K.

PetSmart, Inc. and Subsidiaries
Condensed Consolidated Statements of Operations
(in thousands, except per share and store data)
(Unaudited)
                                                              
                       Thirteen Weeks Ended          Thirteen Weeks Ended
                       May 4, 2014     % of          May 5, 2013     % of
                                       Sales                         Sales
                                                                     
Merchandise sales      $ 1,519,006     87.8   %      $ 1,509,372     88.2   %
Services sales           200,155       11.6   %        191,577       11.2   %
Other revenue           9,971        0.6    %       9,647        0.6    %
                                                                     
Net sales               1,729,132    100.0  %       1,710,596    100.0  %
                                                                     
Cost of                  1,051,644     60.8   %        1,037,114     60.6   %
merchandise sales
Cost of services         136,679       7.9    %        134,089       7.8    %
sales
Cost of other           9,971        0.6    %       9,647        0.6    %
revenue
                                                                     
Total cost of           1,198,294    69.3   %       1,180,850    69.0   %
sales
                                                                     
Gross profit             530,838       30.7   %        529,746       31.0   %
                                                                     
Operating,
general, and            359,080      20.8   %       362,228      21.2   %
administrative
expenses
                                                                     
Operating income         171,758       9.9    %        167,518       9.8    %
                                                                     
Interest expense,       (13,183   )   -0.8   %       (13,168   )   -0.8   %
net
                                                                     
Income before
income tax expense
                         158,575       9.2    %        154,350       9.0    %
and equity income
from Banfield
                                                                     
Income tax expense       (58,592   )   -3.4   %        (55,547   )   -3.2   %
                                                                     
Equity income from      3,783        0.2    %       3,612        0.2    %
Banfield
                                                                     
Net income             $ 103,766      6.0    %      $ 102,415      6.0    %
                                                                     
Earnings per
common share:
Basic                  $ 1.05                       $ 0.99      
Diluted                $ 1.04                       $ 0.98      
                                                                     
Weighted average
shares
outstanding:
Basic                    99,205                        103,305
Diluted                  99,844                        104,583
                                                           
Stores open at
beginning of each        1,333                         1,278
period
Stores opened            7                             13
during each period
Stores closed           -                           (2        )
during each period
Stores open at end    1,340                   1,289       
of each period
                                                                     
                                                                     

PetSmart, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
(In thousands, except par value)
(Unaudited)
                                                        
                          May 4,             February 2,        May 5,
                          2014               2014               2013
                                                                
Assets
    Cash and cash         $ 230,102          $ 285,622          $ 252,988
    equivalents
    Short-term              -                  -                  7,455
    investments
    Restricted cash         71,226             71,226             71,226
    Receivables, net        65,944             72,685             66,272
    Merchandise             792,140            740,302            738,568
    inventories
    Deferred income         71,940             71,945             62,859
    taxes
    Prepaid expenses
    and other current      81,314           76,463           81,041     
    assets
                                                                
        Total current       1,312,666          1,318,243          1,280,409
        assets
                                                                
    Property and            949,167            952,955            972,679
    equipment, net
    Equity investment       29,272             33,577             28,426
    in Banfield
    Deferred income         102,316            110,408            100,601
    taxes
    Goodwill                41,510             41,140             43,914
    Other noncurrent       62,124           65,645           48,155     
    assets
                                                                
        Total assets      $ 2,497,055       $ 2,521,968       $ 2,474,184  
                                                                
Liabilities and
Stockholders' Equity
    Accounts payable
    and bank              $ 244,114          $ 255,251          $ 257,628
    overdraft
    Accrued payroll,
    bonus, and              136,310            160,008            132,705
    employee benefits
    Accrued occupancy
    expenses and            70,298             81,867             69,626
    deferred rents
    Current
    maturities of           68,858             66,887             63,180
    capital lease
    obligations
    Other current          280,633          230,332          246,431    
    liabilities
                                                                
        Total current       800,213            794,345            769,570
        liabilities
                                                                
    Capital lease           450,538            451,597            462,436
    obligations
    Deferred rents          63,563             65,932             71,565
    Other noncurrent       111,400          116,312          119,352    
    liabilities
                                                                
        Total              1,425,714        1,428,186        1,422,923  
        liabilities
                                                                
    Stockholders'
    Equity:
    Preferred stock;        -                  -                  -
    $.0001 par value
    Common stock;           17                 17                 17
    $.0001 par value
    Additional              1,537,707          1,515,333          1,441,863
    paid-in capital
    Retained earnings       2,257,308          2,173,005          1,913,209
    Accumulated other
    comprehensive           (1,277     )       (2,159     )       4,510
    (loss) income
    Less: Treasury         (2,722,414 )      (2,592,414 )      (2,308,338 )
    stock
                                                                
        Total
        stockholders'      1,071,341        1,093,782        1,051,261  
        equity
                                                                
        Total
        liabilities
        and               $ 2,497,055       $ 2,521,968       $ 2,474,184  
        stockholders'
        equity

Contact:

PetSmart, Inc.
Investor Relations, 623-587-2025
 
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