At the PetSmart store in Cambridge, Mass., Damon Letourneau -– a Belmont resident who has a Chihuahua named Lupa and a finicky cat named Bruschi who has a very particular preference in kitty litter – is a regular shopper.
“I really like the variety they have,’’ Letourneau said. “The prices are really good.’’
It’s not just pet supplies and pet services that generate a steady business, but also veterinary and pet grooming services and an area where people can look for rescue pets to adopt.
A large, loyal, and big-spending stream of customers like that has led a group of private equity investors to put up $8.7 billion to buy PetSmart and take it private. The company has traded on the Nasdaq under the ticker symbol “PETM.” The offer is worth $83 a share in cash, and culminates a superb six-month run for PetSmart stock, which closed at $55 in late May and began rising steadily through the company’s announcement that it was putting itself up for sale in in early July. Monday shares closed up $3.30 a share, or 4.25 percent, at $80.97 a share.
Among those turning a nice profit was Crestwood Advisors in Boston, which bought PetSmart stock about 11 months ago. Crestwood director and analyst Matthew Morse said the firm, which has about $1.2 billion in assets under management, was attracted by the trend known as “the humanization of pets."
Morse explained the concept, saying, "Households [are] increasingly treating pets as a member of the family, and what that has done is create very steady 7 percent annual growth in pet supply spending.’’
Pressure from Wall Street to maximize profits, however, has led PetSmart to hold back its expansion. Of PetSmart’s roughly 1,350 stores, 47 are in New England, including 21 in Massachusetts, 11 in Connecticut, 8 in New Hampshire, 3 apiece in Maine and Rhode Island, and one in Vermont.
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Morse said he expects the new owners to look for under-performing stores to close, and maybe competitors to buy. He is also looking to make up efforts to beef up higher-margin online sales.
“As a private company, they don't have to worry about the next three months of growth, because they're able to take the longer view and make decisions that are going to drive growth maybe one or two years out -- as opposed to one or two quarters out,’’ Morse said.
With video editor Lauren Kleciak and videographer Abbas T. Sadek
