Petsmart 2005 Annual Report Download - page 30

any interruption of our information systems for any reason for a significant period of time could disrupt our business
and harm our sales and profitability.
We continue to invest in our information systems. There can be no assurance that the costs of investments in
our information systems will not exceed estimates or that they will be as beneficial as predicted. If we are unable to
realize the benefits of improved systems, our results of operations could be harmed.
If we accidentally disclose sensitive customer information, our business could be harmed.
We routinely possess sensitive customer information such as credit card numbers, and a failure in our security
procedures and operational controls could result in a release of that information. We could experience losses from
lawsuits and negative publicity that may affect our business.
A decline in consumers’ discretionary spending could reduce our sales and harm our business.
Our sales depend on consumer spending, which is influenced by factors beyond our control, including general
economic conditions, the availability of discretionary income, weather, consumer confidence and unemployment
levels. We may experience declines in sales during economic downturns. Any material decline in the amount of
discretionary spending could reduce our sales and harm our business.
Our results may fluctuate due to seasonal changes associated with the pet food and pet supply retailing
industry and the timing of expenses, new store openings and store closures.
Our business is subject to seasonal fluctuation. We typically realize a higher portion of our net sales and
operating profit during the fourth fiscal quarter. As a result of this seasonality, we believe that quarter-to-quarter
comparisons of our operating results are not necessarily meaningful and that these comparisons cannot be relied
upon as indicators of future performance. Controllable expenses, such as advertising, could fluctuate from
quarter-to-quarter within a fiscal year. Sales of certain products and services are seasonal. Because our stores
typically draw customers from a large trade area, sales may also be impacted by adverse weather or travel
conditions, which are more prevalent during certain seasons of the year. Finally, as a result of our expansion plans,
the timing of new store openings and related preopening expenses, the amount of revenue contributed by new and
existing stores, and the timing and estimated obligations of store closures, our quarterly results of operations may
fluctuate.
The pet food and pet supply retail industry is very competitive, and continued competitive forces may reduce
our sales and profitability.
The pet food and pet supply retail industry is very competitive. We compete with supermarkets, warehouse
clubs and other mass and retail merchandisers, many of which are larger and have significantly greater resources
than we have. We also compete with a number of pet supply warehouse or specialty stores, smaller pet store chains,
catalog retailers, Internet retailers and pet stores. The industry has become increasingly competitive due to the
expansion of pet-related product offerings by certain supermarkets, warehouse clubs or other mass and retail
merchandisers and the entrance of other specialty retailers into the pet food and pet supply market, some of which
have developed store formats similar to ours. There can be no assurance we will not face greater competition from
these or other retailers in the future. In particular, if our supermarket, warehouse club or other mass and retail
competitors seek to gain or retain market share by reducing prices, we would likely reduce our prices in order to
remain competitive, which may result in a decrease in our sales and profitability and require a change in our
operating strategies.
The loss of any of our key vendors, a decision by our vendors to make their products available in supermar-
kets or through warehouse clubs and other mass and retail merchandisers, or the inability of our vendors to
provide products in a timely or cost-effective manner, could harm our business.
We buy from several hundred vendors worldwide and, together, our two largest vendors accounted for
approximately 15.1% of our total sales for fiscal 2005. Sales of premium pet food for dogs and cats comprise a
significant portion of our revenues. Currently, most major vendors of premium pet foods do not permit their
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