PetSmart, Inc. (PETM) has closely aligned with the upscale customer by offering products and services that cannot be replicated at mass merchants or online retailers, positioning the company well for potential market volatility, says R.J. Hottovy, Global Director of Consumer Equity Research and Senior Restaurant and Retail Analyst at Morningstar.
“There are some names in the specialty categories, like PetSmart, that we like. Those are names that we still think are undervalued and think that they still represent something consumers are interested in spending money on. There is an inherent need for some of those products that should keep them somewhat protected from potential market volatility in the back half of the year,” Hottovy said.
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Hottovy points out that consumers are willing to spend money on pets even in tightening economic situations, and that PETM is offering products and services targeted toward the more upscale customer that cannot be replicated by mass merchants or online retailers.
“To their credit, they have also done a good job in merchandizing, and essentially I’d say all in all moving that product to someone more upscale. So they have more closely aligned themselves to that upscale consumer, but it is also something that consumers overall believe needs to be purchased. A lot of times it’s not a product that can be easily shipped, either, so there is not as much online competition. So I think that’s a very interesting name in terms of it’s protecting itself from mass merchants and online retailers of the world,” Hottovy said.
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