UPDATE: ISI Group Initiates Coverage PetSmart with Neutral Rating as Strong Execution is Reflected in The Multiple

In a report published Wednesday, ISI Group analyst Oliver Wintermantel initiated coverage on

with a Neutral rating. In the report, Oliver Wintermantel noted, “PetSmart is a controversial, but intriguing growth story in Hardlines. PETM stock has outperformed the market over the last four years, but has been a laggard so far this year. Consistently positive traffic, a disciplined capital allocation strategy, growing service elements, and margin rich channel exclusive consumables in a stable and growing industry differentiate PetSmart from many other Hardlines retailers. That said, decelerating traffic and concerns over declining merchandise margins keep us on the sidelines for now. We believe shares are appropriately valued trading at 18x this year's earnings.” PetSmart closed on Tuesday at $72.45.