Petsmart 2009 Annual Report Download - page 19

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 mer-
chandisers, 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, warehouse clubs and other mass or 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,
and two of our largest vendors account for a material amount of products sold. We can make no assurances that we
will be able to find new qualified vendors who meet our standards, or 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. Effective global sourcing of
many of the products we sell is an important factor in our financial performance. We can make no assurances that
our international vendors will be able to satisfy our requirements including, but not limited to, timeliness of
delivery, acceptable product quality, and accurate packaging and labeling. Any inability of our existing vendors to
provide products meeting such requirements in a timely or cost-effective manner could harm our business. While
we believe our vendor relationships are good, we have no material long-term supply commitments from our
vendors, and any vendor could discontinue selling to us at any time.
Many factors relating to our vendors and the countries in which they are located are beyond our control,
including the stability of the political, economic and financial environments where they are located, their ability to
operate in challenging economic environments or meet our standards and applicable legal requirements, the
availability of labor and raw materials, merchandise quality issues, currency exchange rates, transport availability
and cost, inflation and other factors. In addition, Canada’s and the United States’ foreign trade policies, tariffs and
other impositions on imported goods, trade sanctions imposed on certain countries, the limitation on the import of
certain types of goods or of goods containing certain materials from other countries and other factors relating to
foreign trade are beyond our control. These factors affecting our vendors and our access to products could adversely
affect our operations and our financial performance.
Our expanded offering of proprietary branded products may not improve our financial performance and
may expose us to product liability claims.
We offer various proprietary branded products, for which we rely on third-party manufacturers. Such third-
party manufacturers may prove to be unreliable, or the quality of the products may not meet our expectations. In
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