Petsmart 2009 Annual Report Download - page 31

of this additional week resulted in the following increases: net sales, $89.7 million; gross profit, $34.4 million;
operating, general and 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 the year ended February 3, 2008,
includes sales through week 52.
(4) Represents merchandise inventories divided by stores open at end of period.
(5) Represents borrowings under credit facility and capital lease obligations.
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
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 2009 net sales of $5.3 billion, we are North America’s leading specialty provider of products,
services and solutions for the lifetime needs of pets. As of January 31, 2010, we operated 1,149 stores, and we
anticipate opening 40 to 42 net new stores in 2010. Our stores carry a broad and deep selection of high-quality pet
supplies at everyday low prices. We offer approximately 10,000 distinct items, including nationally recognized
brand names, as well as an extensive selection of private label 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. Our PetsHotels provide boarding for
dogs and cats, which includes 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 January 31, 2010, we operated 162
PetsHotels, and we anticipate opening approximately 18 PetsHotels in 2010.
We make full-service veterinary care available through our strategic relationship with certain third-party
operators. As of January 31, 2010, full-service veterinary hospitals were in 752 of our stores. Banfield operated 740
of the veterinary hospitals. The remaining 12 hospitals are operated by other third parties in Canada.
The principal challenges we face as a business are the highly competitive market in which we operate and the
recent changes in the macroeconomy. However, we believe we have a competitive advantage in our solutions for the
Total Lifetime Care
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of pets, including pet services and proprietary brands, that we believe cannot easily be
duplicated. Additionally, we have been able to generate cash flow from operations sufficient to meet our financing
needs and continue to have access to our credit facility. We expect to continuously assess the economic environment
and market conditions to guide our decisions regarding our uses of cash, including capital expenditures, invest-
ments, dividends and share repurchases.
Executive Summary
• Diluted earnings per common share for 2009 increased 4.6% to $1.59 on net income of $198.3 million
compared to diluted earnings per common share of $1.52 on net income of $192.7 million in 2008.
• Net sales increased 5.4% to $5.3 billion in 2009 compared to $5.1 billion in 2008 due to new store openings
and an increase in comparable store sales, or sales in stores open at least one year.
• Cash, cash equivalents, and restricted cash increased $230.2 million, or 182.3%, to $356.5 million in 2009.
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