Petsmart 2005 Annual Report Download - page 22

United States own a pet. This results in approximately 91 million cats and 74 million dogs. The APPMA also
estimates 63% of United States households own a pet and 45% of those households own more than one pet.
The pet product industry can be divided into the following categories: food, supplies/medicines, veterinary
care, pet services (such as grooming or boarding) and purchases of pets. The APPMA estimates that dog food, cat
food and treats are the largest volume categories of pet-related products and, in 2005, approximated $14.5 billion, or
40% of the market. Many premium pet food brands, which offer higher levels of nutrition than non-premium brands,
are not currently sold through supermarkets, warehouse clubs and other mass and retail merchandisers due to
manufacturer’s restrictions, but are sold primarily through superstores, specialty pet stores, veterinarians and farm
and feed stores.
Pet supplies and medicine sales account for approximately 25%, or $8.8 billion, of the market. These sales
include dog and cat toys, collars and leashes, cages and habitats, books, vitamins and supplements, shampoos, flea
and tick control and aquatic supplies. Veterinary care, pet services and purchases of pets represent approximately
24%, 7% and 4%, respectively, of the market.
Competition
Based on total sales, we are the largest specialty retailer of pet food, supplies and services in North America.
The pet food and pet supply retail industry is highly competitive and can be organized into five different categories:
• Supermarkets, warehouse clubs and other mass and retail merchandisers;
• Specialty pet supply chains and pet supply stores;
• Independent pet stores;
• Catalog retailers; and
• Internet retailers.
We believe the principal competitive factors influencing our business are product selection and quality,
convenience of store locations, store environment, customer service, price and availability of pet services. We
believe we compete effectively within our various markets; however, some of our supermarket, warehouse club and
mass and retail merchandise competitors are larger in terms of overall sales volume and have access to greater
capital.
We are currently the only major specialty pet retailer that markets to customers through stores, a catalog and
the internet, and we believe this gives us a competitive advantage. In addition, we believe our pet services business
is a competitive advantage which can not be easily duplicated.
Our Strategy
Our strategy is to be the preferred provider for the lifetime needs of pets. Our primary initiatives include:
Add stores in existing multi-store, new multi-store and new single-store markets. We believe there is a
potential for at least 1,400 PetSmart stores in North America. Our expansion strategy includes increasing our share
in the top 60 existing multi-store markets, penetrating new multi-store and single-store markets and achieving
operating efficiencies and economies of scale in distribution, procurement, marketing and store operations. During
fiscal 2005, we opened 100 net new stores, and in fiscal 2006, we expect to open approximately 90 net new stores,
primarily in multi-store markets.
Provide the right store format to meet the needs of our customers. We completed the conversion of our store
base to our new specialty store format in fiscal 2003. We believe our reformatted stores, combined with our other
strategic initiatives, contribute to higher comparable store sales growth, profitability and return on investment. We
continually evaluate our store format to ensure we are meeting the needs and expectations of our customers, while
providing a return on investment to our shareholders. In fiscal 2004, we completed the roll out of an upgraded
in-store sign package to better serve the needs of our customers. In fiscal 2005, we tested a new store refresh
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