Petsmart 2011 Annual Report Download - page 23

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stores and expand our services depends on our ability to attract and retain these personnel. Competition for quali-
fied management and services personnel could require us to pay higher wages or other compensation to attract a
sufficient number of employees. Turnover, which has historically been high among entry-level or part-time asso-
ciates at our stores and distribution centers, increases the risk associates will not have the training and experience
needed to provide competitive, high-quality customer service. Our ability to meet our labor needs while control-
ling our labor costs is subject to numerous external factors, including unemployment levels, prevailing wage
rates, changing demographics and changes in employment legislation. If we are unable to retain qualified asso-
ciates or our labor costs increase significantly, our business operations and our financial performance could be
adversely impacted.
Our international operations may result in additional market risks, which may harm our business.
We operate stores outside of the United States. As these operations grow, they may require greater
management and financial resources. International operations require the integration of personnel with varying
cultural and business backgrounds and an understanding of the relevant differences in the cultural, legal and
regulatory environments. Our results may be increasingly affected by the risks of our international activities,
including:
• Fluctuations in currency exchange rates;
• Changes in international staffing and employment issues;
• Tariff and other trade barriers;
• Greater difficulty in utilizing and enforcing our intellectual property rights;
• Failure to understand the local culture and market;
• The burden of complying with foreign laws, including tax laws and financial accounting standards; and
• Political and economic instability and developments.
Our business may be harmed if the operation of veterinary hospitals at our stores is limited or fails to
continue.
We and Banfield, the third-party operator of Banfield, The Pet Hospital, and our other third-party operators
are subject to statutes and regulations in various states and Canadian provinces regulating the ownership of
veterinary practices, or the operation of veterinary hospitals in retail stores, that may impact our ability to host
and Banfield’s ability to operate veterinary hospitals within our facilities. A determination that we, or Banfield,
are in violation of any of these applicable statutes and regulations could require us, or Banfield, to restructure our
operations to comply, or render us, or Banfield, unable to operate veterinary hospitals in a given location. If
Banfield were to experience financial or other operating difficulties that would force it to limit its operations, or
if Banfield were to cease operating the veterinary hospitals in our stores, our business may be harmed. We can
make no assurances that we could contract with another third-party to operate the veterinary hospitals on favor-
able terms, if at all, or that we could successfully operate the veterinary hospitals ourselves. In addition, due to
our equity investment in Banfield, any significant decrease in Banfield’s financial results may negatively impact
our financial position.
We face various risks as an e-commerce retailer.
We may require additional capital in the future to sustain or grow our e-commerce business. We have
engaged a third-party to maintain our e-commerce website and process all customer orders placed through that
site. Business risks related to our e-commerce business include our ability to keep pace with rapid technological
change; failure in our, or any third-party processor’s, security procedures and operational controls; failure or
inadequacy in our, or any third-party processor’s, systems or ability to process customer orders; government
regulation and legal uncertainties with respect to e-commerce; and collection of sales or other taxes by one or
more states or foreign jurisdictions. If any of these risks materialize, it could have an adverse effect on our busi-
ness.
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