Petsmart 2005 Annual Report Download - page 31

products to be sold in supermarkets, warehouse clubs or through other mass and retail merchandisers. If any
premium pet food or pet supply vendors were to make their products available in supermarkets or through
warehouse clubs and other mass and retail merchandisers, our business could be harmed. In addition, if the grocery
brands currently available to such retailers were to gain market share at the expense of the premium brands sold only
through specialty pet food and pet supply outlets, our business could be harmed.
We purchase a substantial amount of pet supplies from a number of vendors with limited supply capabilities.
There can be no assurance that our current pet supply vendors will be able to accommodate our anticipated needs or
comply with existing or any new regulatory requirements. In addition, we purchase a substantial amount of pet
supplies from vendors outside of the United States. There can be no assurance our overseas vendors will be able to
satisfy our requirements including, but not limited to, timeliness of delivery, acceptable product quality, packaging
and labeling requirements. Any inability of our existing vendors to provide products in a timely or cost-effective
manner could harm our business. While we believe our vendor relationships are satisfactory we have no long-term
supply commitments from our vendors, and any vendor could discontinue selling to us at any time.
We depend on key personnel and may not be able to retain or replace these employees or recruit additional
qualified personnel, which could harm our business.
Our success is largely dependent on the efforts and abilities of our senior executive group and other key
personnel. The loss of the services of one or more of our key executives or personnel, or the increased demands
placed on our key executives and personnel by our continued growth, could adversely impact our financial
performance and our ability to execute our strategies. In addition, our future success will depend on our ability to
attract highly skilled store managers and qualified services personnel such as pet trainers and groomers. There is a
high level of competition for these employees, and our ability to operate our stores and expand our services depends
on our ability to attract and retain these personnel. In addition, there historically has been a shortage of qualified
veterinarians. If Banfield cannot attract and retain a sufficient number of veterinarians, Banfield’s ability to provide
veterinary services in our stores and increase the number of stores in which Banfield provides veterinary services,
may be impacted.
Our international operations may result in additional market risks, which may harm our business.
We entered the Canadian market in 1996 and operated 30 stores in Canada as of January 29, 2006. As these
operations grow, they may require greater management and financial resources. International operations require the
integration of personnel with varying cultural and business backgrounds and an understanding of the relevant
differences in the legal and regulatory environments. Our results may be increasingly affected by the risks of our
international activities, including:
• Fluctuations in currency exchange rates;
• Changes in international staffing and employment issues;
• Tariff and other trade barriers;
• The burden of complying with foreign laws, including tax laws; and
• Political and economic instability and developments.
Our business may be harmed if the operation of veterinary hospitals at our stores is limited or fails to
continue.
We and MMI Holdings, Inc (MMIH), the third party operator of Banfield, The Pet Hospital, are subject to
statutes and regulations in various states and Canadian provinces regulating the ownership of veterinary practices,
or the operation of veterinary hospitals in retail stores, that may impact our ability and MMI’s ability to operate
veterinary hospitals within our facilities. A determination that we or MMI are in violation of any of these applicable
statutes and regulations could require us or MMI to restructure our operations to comply or render us or MMI unable
to operate veterinary hospitals in a given location. If MMIH or MMI were to experience financial or other operating
difficulties that would force it to limit its operations, or if MMIH were to cease operating the veterinary hospitals in
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