Petmed Express Inc (PETS): Could This Online Pet Supplier Join the Seattle Web Giant’s Empire?

In its latest fiscal year, PetSmart, Inc. (NASDAQ:PETM) reported another year of solid growth, with increases in revenue and operating income of 10.6% and 29.4%, respectively, versus the prior year. The company’s sales growth benefited from strong comparable store sales, up 6.3% for the period, as well as the addition of 46 stores to its national network. In addition, PetSmart’s operating efficiency hit a five-year high, leading to a big gain in operating cash flow and the ability to repay shareholders in the form of large share repurchases.

Looking ahead, PetSmart is clearly cognizant of the challenges presented by Amazon and other online channels that can compete favorably on price. The company has been proactively transitioning its food selections to premium and exclusive brands, as well as focusing its employee base on the sale of services. Most stores in its network offer grooming, training, and day care services, which accounted for 11% of revenue during the period and provide a competitive advantage against the online sales channels.

The bottom line

Amazon has a lot on its plate, with its overall mission to dominate every sector that it chooses to participate in. An acquisition of PetMed Express would likely be a value-enhancing move, and the price would be a small hit to its multi-billion dollar cash position. While a larger Amazon might be detrimental to PetSmart’s overall sales growth, PetSmart is positioning itself as a multi-faceted product and service provider to its customer base, which should continue to make it an indispensable outlet in the pet products sector. Since acquisitions are inherently uncertain, investors should probably take a pass on Petmed Express Inc (NASDAQ:PETS), but put PetSmart and Amazon on their watchlist for “pet-friendly” investments.

The article Could This Online Pet Supplier Join the Seattle Web Giant’s Empire? originally appeared on Fool.com and is written by Robert Hanley.

Robert Hanley owns shares of Amazon and PetSmart. The Motley Fool recommends Amazon.com and PetSmart. The Motley Fool owns shares of Amazon.com. Robert is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.

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