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PetSmart Inc (NAS:PETM)
Gross Margin
29.45% (As of Oct. 2014)

Gross Margin is calculated as gross profit divided by its revenue. PetSmart Inc's gross profit for the three months ended in Oct. 2014 was \$512 Mil. PetSmart Inc's revenue for the three months ended in Oct. 2014 was \$1,739 Mil. Therefore, PetSmart Inc's Gross Margin for the quarter that ended in Oct. 2014 was 29.45%.

PetSmart Inc had a gross margin of 29.45% for the quarter that ended in Oct. 2014 => Competition eroding margins

The 5-Year average Growth Rate of Gross Margin for PetSmart Inc was 0.00% per year.

Definition

Gross Margin is the percentage of Gross Profit out of sales or Revenue.

PetSmart Inc's Gross Margin for the fiscal year that ended in Jan. 2014 is calculated as

 Gross Margin (A: Jan. 2014 ) = Gross Profit (A: Jan. 2014 ) / Revenue (A: Jan. 2014 ) = 2115.9 / 6916.627 = (Revenue - Cost of Goods Sold) / Revenue = (6916.627 - 4800.69) / 6916.627 = 30.59 %

PetSmart Inc's Gross Margin for the quarter that ended in Oct. 2014 is calculated as

 Gross Margin (Q: Oct. 2014 ) = Gross Profit (Q: Oct. 2014 ) / Revenue (Q: Oct. 2014 ) = 512.2 / 1739.117 = (Revenue - Cost of Goods Sold) / Revenue = (1739.117 - 1226.954) / 1739.117 = 29.45 %

* All numbers are in millions except for per share data and ratio. All numbers are in their own currency.

A positive Gross Profit is only the first step for a company to make a net profit. The gross profit needs to be big enough to also cover related labor, equipment, rental, marketing/advertising, research and development and a lot of other costs in selling the products.

Explanation

Warren Buffett believes that firms with excellent long term economics tend to have consistently higher margins.

Durable competitive advantage creates a high Gross Margin because of the freedom to price in excess of cost. Companies can be categorized by their Gross Margin

1. Greater than 40% = Durable competitive advantage
2. Less than 40% = Competition eroding margins
3. Less than 20% = no sustainable competitive advantage
Consistency of Gross Margin is key

PetSmart Inc had a gross margin of 29.45% for the quarter that ended in Oct. 2014 => Competition eroding margins

Be Aware

If a company loses its competitive advantages, usually its gross margin declines well before its sales declines. Watching Gross Margin and Operating Margin closely helps avoid value trap situations.

Related Terms

Historical Data

* All numbers are in millions except for per share data and ratio. All numbers are in their own currency.

PetSmart Inc Annual Data

 Jan06 Jan07 Jan08 Jan09 Jan10 Jan11 Jan12 Jan13 Jan14 Jan15 Gross Margin 31.28 30.89 30.75 29.52 28.47 29.06 29.52 30.51 30.59 30.30

PetSmart Inc Quarterly Data

 Oct12 Jan13 Apr13 Jul13 Oct13 Jan14 Apr14 Jul14 Oct14 Jan15 Gross Margin 29.61 31.58 30.97 30.20 29.79 31.36 30.70 29.78 29.45 31.18
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