Petsmart 2011 Annual Report Download - page 22

ances 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 perform-
ance. We can make no assurances that our international vendors will be able to satisfy our requirements includ-
ing, 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 their political, economic and financial environments, their ability to operate in challeng-
ing economic environments or meet our standards and applicable U.S. and local legal requirements, the avail-
ability of labor and raw materials, labor unrest, merchandise quality issues, currency exchange rates, trade
restrictions, 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
such event, we may have increased exposure for quality-related claims or losses caused by such products. In
addition, our proprietary branded products compete with other manufacturers’ branded items that we offer. As we
continue to evaluate the number and types of proprietary branded products that we sell, we may adversely affect
our relationships with our vendors, who may decide to reduce their product offerings through us and increase
their product offerings through our competitors. An increase in our proprietary branded product offerings also
exposes us to risk that third parties will assert infringement claims against us with respect to such products, and
we may be unable to fully protect our intellectual property rights on our proprietary branded products. Finally, if
any of our customers are harmed by our proprietary branded products, they may bring product liability and other
claims against us. Any of these circumstances could have an adverse effect on our business and financial
performance.
Food safety, quality and health concerns could affect our business.
We could be adversely affected if consumers lose confidence in the safety and quality of vendor-supplied
food products and hard-good products. All of our vendors are required to comply with applicable product safety
laws, and we are dependent upon them to ensure such compliance. Adverse publicity about these types of con-
cerns, whether valid or not, may discourage consumers from buying the products in our stores or cause vendor
production and delivery disruptions. The real or perceived sale of contaminated food products by us could result
in product liability claims against our vendors or us, expose us or our vendors to governmental enforcement
action or private litigation, or lead to costly recalls and a loss of consumer confidence, any of which could have
an adverse effect on our sales and operations and financial performance.
We depend on key executives, store managers and other personnel and may not be able to retain or replace
these employees or recruit additional qualified personnel, which could harm our business.
Our success is largely dependent on the efforts and abilities of our senior executive group and other key
personnel. The loss of the services of one or more of our key executives or personnel could adversely impact our
financial performance and our ability to execute our strategies. In addition, our future success depends on our
ability to attract, train, manage and retain highly skilled store managers and qualified services personnel such as
pet trainers and groomers. There is a high level of competition for these employees and our ability to operate our
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