PetSmart shares seen rising up to 29 pct - Barron's

* Spending on pets is expected to rise 5 percent in 2009

* Shares trade below market average ratio

NEW YORK, July 5 (Reuters) - Specialty pet retailer PetSmart Inc's (PETM.O) shares could climb 29 percent in the next year due to improved profit margins, a strong cash flow and an unmatched range of products, Barron's said.

The company -- which offers boarding, grooming and training services for pets -- could benefit as American households are expected to spend $45 billion on their pets this year, up 5 percent from 2008, even as the country struggles with the worst recession in decades.

In addition, the stock looks cheap, the weekly business publication said in its July 6 edition. PetSmart's shares have not followed the stock market rally since March, and now are trading at 14 times the expected earnings for next year, below the market multiple of 16 times future earnings.

PetSmart posted better-than-expected profit in the first quarter, helped by a 9 percent jump in its merchandise sales and tight cost-controls. It raised its earnings outlook and recently increased its dividend.

The Phoenix, Arizona-based company plans to drive growth by investing in existing stores and opening new ones. The company, which expects to add about 40 stores per year, will also focus on increasing returns on capital, maintaining expense discipline and improving its store base.

PetSmart's shares closed at $21.27 on Friday on the Nasdaq. (Reporting by Juan Lagorio; Editing by Maureen Bavdek)