Petsmart 2007 Annual Report Download - page 17

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A disruption, malfunction or increased costs in the operation, expansion or replenishment of our distribution
centers or our supply chain would impact our ability to deliver to and effectively merchandise our stores or
increase our expenses, which could harm our sales and results of operations.
Our vendors generally ship merchandise to one of our distribution centers, which receive and allocate
merchandise to our stores. Any interruption or malfunction in our distribution operations, including, but not limited
to, the loss of a key vendor that provides transportation of merchandise to or from our distribution centers, could
harm our sales and the results of our operations. We seek to optimize inventory levels to operate our business
successfully. The mismanagement of merchandise inventory levels or an interruption in the supply chain could
result in out-of-stock or excess merchandise inventory levels that could harm our sales and the results of operations.
We operate two fish distribution centers and have two fish distribution centers that are operated by a third-party
vendor, and an interruption or malfunction in these operations or in the fulfillment of fish orders could harm our
sales and results of operations. Operating the fish distribution centers is a very complex process, and if we lose the
third-party operator, we can make no assurances that we could contract with another third-party to operate the fish
distribution centers on favorable terms, if at all, or that we could successfully operate the fish distribution centers
ourselves. In addition, our growth plans require the development of new distribution centers to service the
increasing number of stores. If we are unable to successfully expand our distribution network in a timely manner,
our sales or results of operations could be harmed.
If our information systems fail to perform as designed or are interrupted for a significant period of time,
our business could be harmed.
The efficient operation of our business is dependent on our information systems. In particular, we rely on our
information systems to effectively manage our financial and operational data and to maintain our in-stock positions.
We possess offsite recovery capabilities for our key information systems and take measures to prevent security
breaches and computer viruses. The failure of our information systems to perform as designed, loss of data or any
interruption of our information systems for a significant period of time could disrupt our business.
We continue to invest in our information systems. Enhancement to or replacement of our major financial or
operational information systems could have a significant impact on our ability to conduct our core business
operations and increase our risk of loss resulting from disruptions of normal operating processes and procedures that
may occur during the implementation of new information systems. We can make no assurances that the costs of
investments in our information systems will not exceed estimates, that the systems will be implemented without
material disruption, or that the systems will be as beneficial as predicted. If any of these events occur, our results of
operations could be harmed.
If we fail to protect the integrity and security of customer and associate information, we could be exposed
to litigation and our business could be adversely impacted.
The increasing costs associated with information security, such as increased investment in technology, the
costs of compliance with consumer protection laws and costs resulting from consumer fraud, could adversely
impact our business. We also routinely possess sensitive customer and associate information and, while we have
taken reasonable and appropriate steps to protect that information, if our security procedures and controls were
compromised, it could harm our business, reputation, operating results and financial condition and may increase the
costs we incur to protect against such information security breaches.
The disruption of the relationship with or the loss of any of our key vendors, a decision by our vendors to
make their products available in supermarkets or through warehouse clubs and other mass and retail
merchandisers, or the inability of our vendors to provide quality products in a timely or cost-effective
manner or risks associated with the suppliers from whom products are sourced, could harm our business.
Sales of premium pet food for dogs and cats comprise a significant portion of our net sales. Currently, most major
vendors of premium pet food do not permit their products to be sold in supermarkets, warehouse clubs or through other
mass and retail merchandisers. If any premium pet food or pet supply vendor was to make its products available in
supermarkets or through warehouse clubs and other mass and retail merchandisers, our business could be harmed.
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