Pet supplies leaders report 2Q growth

DSN Retailing Today, Sept 12, 2005 by Doug Desjardins

The nation's largest pet supply chains reported positive second-quarter results but warned that the remainder of the year could be tougher than expected due to high gas prices and slow customer traffic.

Market leader PetsMart reported a 4.2% increase in same-store sales for the second quarter and earnings of $35.7 million compared to $29.1 million during the same period last year. The 700-store chain also reported an 11.6% rise in revenue of $899.1 million for the quarter.

"Despite a tough climate and some softness on our top line, we continued to generate meaningful gross margin expansion and we overachieved on the bottom line," said PetsMart ceo Phil Francis in the company's earnings report.

Looking forward, PetsMart is expecting same-store sales to grow in the 4% range with earnings of $1.25 to $1.26 per share, numbers slightly below the estimates of analysts. Francis said the company "remains cautious of the overall economy and the outlook for retail" for the rest of 2005.

Petco had a similar story to tell on its earnings call Aug. 25. The chain reported net earnings of $18 million for the second quarter compared to $19.3 million last year and a 2.5% increase in samestore sales. "Weaker customer traffic led to second-quarter sales and results that did not meet our expectations," according to Petco ceo Jim Myers.

The 750-store chain expects sluggish sales to continue in the third quarter, with same-store sales expected to be flat or up 2% for the quarter and 2% to 4% for 2005. One bright spot for the second quarter was pet services, which increased 22% compared to last year.

DOUG DESJARDINS

ddesjard@dsnretailingtoday.com