The market will continue to support both chains, wrote retail analyst Alan Rifkin, as both companies keep growing. This year PetSmart, which operates more than 700 stores, expects to open 90 units. Petco, also with over 700 stores, does not even have presence yet in 20 of the top 100 US markets.

Sales are also strong at both chains. Petco has posted 47 consecutive quarters with year-over-year same-store sales gains, while PetSmart expects a Q4 year-on-year gain of 7%.

Meanwhile, Lehman also released a report on the softlines sector this week. More than half of Gap Inc.'s 140 store closures are expected to take place during this quarter, it said. The company is running clearance sales at its Old Navy chain that, in some cases, reach up to 75% off.