Petco’s Profit Declines 36%; Sales Rise

Retailer Petco Animal Supplies Inc. said Wednesday that fiscal first-quarter profit fell 36%, as higher sales could not lift earnings weighed down by stock option expenses and lower margins.

The company also forecast second-quarter earnings below analysts’ estimates.

Net income for the period ended April 29 was $11 million, or 19 cents a share, compared with $17.2 million, or 29 cents, a year earlier.

Analysts on average were expecting 18 cents a share, according to Reuters Estimates. In March, Petco forecast fiscal first-quarter earnings of 17 cents to 19 cents.

Total sales for the quarter rose to $521 million from $479.6 million a year ago, as sales at stores open at least a year grew 2.2%.

Margins in the recent quarter were hurt by expenses related to accelerated store openings as well as higher utility costs and supply chain investments, Petco said.

San Diego-based Petco said it “continues to maintain a cautious outlook given the current state of the overall retail environment.” For the current quarter, it forecast sales growth at stores open at least a year, a key measure of retail health, of 2% to 4% and earnings per share of 23 cents to 25 cents.

Analysts on average were expecting 31 cents a share, according to Reuters Estimates, or 30 cents excluding items.

For the full fiscal year, Petco affirmed its earnings outlook of $1.32 to $1.36 a share.

Petco shares fell to $21.31 after the earnings release, after closing down 16 cents at $21.81.