Petsmart 2007 Annual Report Download - page 32

administrative expenses, $18.3 million; income before income tax expense and equity in income from investee,
$16.0 million; net income, $9.8 million; and diluted earnings per common share, $0.07.
(2) Net sales per square foot were calculated by dividing net sales, excluding catalog and e-commerce sales, by
average square footage.
(3) Retail stores only, excludes catalog and e-commerce sales in all periods. For 2007, the 53 weeks of the fiscal
year are compared to the previous 53 weeks.
(4) Represents borrowings under credit facility and capital lease obligations.
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Except for historical information, the following discussion contains forward-looking statements that involve
risks and uncertainties. Our actual results could materially differ from those discussed here. Factors that could
cause or contribute to such differences include, but are not limited to, those discussed in this section, as well as in
the sections entitled “Competition,” “Distribution” and “Government Regulation” included in Item 1 Part I and
Risk Factors included in Item 1 Part 1A of this Annual Report on Form 10-K.
Overview
Based on our 2007 net sales of $4.7 billion, we are North America’s leading specialty provider of products,
services and solutions for the lifetime needs of pets. As of February 3, 2008, we operated 1,008 stores, and we
anticipate opening 104 net new stores in 2008. Our stores carry a broad and deep selection of high-quality pet
supplies at everyday low prices. We offer more than 10,500 distinct items, including nationally recognized brand
names, as well as an extensive selection of private brands across a range of product categories.
We complement our extensive product assortment with a wide selection of value-added pet services, including
grooming, training, boarding and day camp. All our stores offer complete pet training services, and virtually all our
stores feature pet styling salons that provide high-quality grooming services. In 2005, we began a national roll out of
the PetsHotel concept at selected locations. PetsHotel provides boarding for dogs and cats, 24-hour supervision, an
on-call veterinarian, temperature controlled rooms and suites, daily specialty treats and play time as well as day
camp for dogs. As of February 3, 2008, we operated 97 PetsHotels.
We make full-service veterinary care available through our strategic relationship with certain third-party
operators. As of February 3, 2008, full-service veterinary hospitals were in 685 of our stores. MMIH operated 673 of
the veterinary hospitals. The remaining 12 hospitals are located in Canada and operated by other third-parties.
Executive Summary
• Fiscal 2007 included a 53
rd
week.
• Diluted earnings per common share for 2007 were $1.95 on net income of $258.7 million, compared to
diluted earnings per common share of $1.33 on net income of $185.1 million in 2006. The 53rd week
increased diluted earnings per common share by approximately $0.07.
• Net sales increased 10.4% to $4.7 billion in 2007 compared to $4.2 billion in 2006 due to new store openings,
a 53rd week of sales and an increase in comparable store sales. The 53rd week increased sales by
approximately $89.7 million.
• We added 100 net new stores during 2007 and operated 1,008 stores at the end of the year.
• Comparable store sales, or sales in stores open at least a year, increased 2.4% during 2007 compared to a
5.0% increase during 2006.
• Services sales increased 22.0% to $458.7 million, or 9.8% of net sales, for 2007 compared to $376.0 million,
or 8.9% of net sales, during 2006. The 53rd week increased services sales by $8.4 million.
• The Board of Directors approved a program authorizing the purchase of up to $300.0 million of our common
stock through the second quarter of 2009. We used a portion of the authorization to complete a $225.0 million
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