Petsmart 2007 Annual Report Download - page 8

The Pet Industry
The pet industry serves a large and growing market. The American Pet Products Manufacturers Association, or
APPMA, estimated the calendar year 2007 market at approximately $41.2 billion, an increase of more than 140%
since calendar year 1994. Based on the 2007/2008 APPMA National Pet Owners Survey, more than 71 million
households in the United States own a pet. In total, there are approximately 88 million cats and 75 million dogs in
the United States.
The pet industry can be divided into the following categories: food, supplies and medicines, veterinary care,
pet services (such as grooming or boarding) and purchases of pets. The APPMA estimates that food and treats for
dogs and cats are the largest volume categories of pet-related products and, in calendar year 2007, approximated
$16.2 billion in sales, or 39.3% of the market.
Pet supplies and medicine sales account for approximately 23.8%, or $9.8 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, other pet services and purchases of pets represent
approximately 24.5%, 7.3% and 5.1%, respectively, of the market.
Competition
Based on total net sales, we are North America’s largest specialty retailer of products, services and solutions
for the lifetime needs of pets. The pet products retail industry is highly competitive and can be organized into six
different categories:
• Supermarkets, warehouse clubs and other mass and general retail merchandisers;
• Specialty pet supply chains and pet supply stores;
• Independent pet stores;
• Veterinarians;
• Catalog retailers; and
• E-commerce 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 other services. 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 general retail merchandisers due to manufacturers’
restrictions, but are sold primarily through specialty pet stores, veterinarians and farm and feed stores. We believe
our pet services business is a competitive advantage that cannot be easily duplicated. We believe we compete
effectively in our various markets; however, some of our supermarket, warehouse club and other mass and general
retail merchandise competitors are larger in terms of overall sales volume and may have access to greater capital.
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. Our expansion strategy
includes increasing our share in existing multi-store markets, penetrating new multi-store and single-store markets
and achieving operating efficiencies and economies of scale in distribution, information systems, procurement,
marketing and store operations. During 2007, we opened 100 net new stores, inclusive of the acquisition of 19 store
locations resulting in 18 net new stores in Canada, and in 2008, we expect to open 104 net new stores. In 2009, we
plan to slow our store growth by about 20% as we work to balance between investing for the future and maximizing
our greatest opportunity to deliver consistent stockholder returns.
Provide the right store format to meet the needs of our customers. We completed the conversion of our store
base to a specialty store format in 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
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